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Nokia is a Finnish multinational communications, information technology and consumer electronics company that was founded in 1865 by Fredrik Idestam, Leo Mechelin and Eduard Polon. It is mostly known for the production of mobile phones. For almost more than a decade it dominated the phone industry, but then, all of a sudden, its market share has plunged from 46.7% to just 9.5% in 7 years (Sam Oliver, apple insider). What caused such dominant firm to lose its market share that quickly? During the same year, Nokia met its new competitor, Apple.
In 2007 Steve Jobs, founder of Apple, introduced to the world a new phone called iPhone. Was this the main reason of Nokia's failure? What did the Apple do that Nokia did not? Is it a failure of the Nokia brand, or maybe a result of a bad corporate strategy? This essay aims to find the main causes that caused Nokia to fail.
In 2007 Nokia's phone market share was as high as 49.4% according to Gartner's research.
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From that year onwards, Nokia's market share has been decreasing every year to 43.7% then 41.1% and 34.2% until it reached 9.5% in 2014 (BBC). Apple, as well as Samsung were definitely one of the main causes leading to that failure. Both companies just took over the phone market share. Nokia was falling behind as they rocketed. Why is Apple so successful? There are many reasons why Apple is so successful compering to its competitors. One of the reason is that Apple's approach is towards creation of products is different. Often engineers create something because they can, whereas Apple engineers are creating their products for themselves.
When Steve Jobs was alive, he represented the "real consumer" of Apple products. What is more, Steve Jobs was innovative, he was able to see the future unlike his competitors. During his announcement of the first iPhone he showed the world how easy his product is to use which actually had a huge impact on its success. Also, apple keep making things simple. Unlike the majority of phone makers Apple has just one product, in this case iPhone. Thanks to that it minimizes the decision making for the consumers. This may seem limiting given the number of smartphones available to users however, the truth is the revers. According to Tim Bajarin "Our company has done consumer research for over 30 years, and consumers constantly tell us that while choice is nice, in reality they want the process of choosing a tech product to be simple and not complicated by a plethora of choices." Furthermore, Apple was not inventing new products but they were recreating existing products they just made smartphones better and were at least two years ahead of the competition. They had the vision of future smartphones. They were innovative which undoubtedly was the major key of their success.
We already know that Apple and Samsung crushed Nokia, but are they the only reason why Nokia failed? Did Nokia's corporate strategy fail? What were Nokia's decisions during that period. In order for a company to work it must analyse the behaviour of competitors, or evaluate the company's share price or consider different ways to expand the business. A company must seek for strategic long-term activities of their business which is known as strategic management. The firm needs to have competitive advantage which are the various factors, such as lower costs or a better product (like Apple), that give a firm an advantage over its rivals. It also should take into account internal strategic analysis, what stages or activities should company take to help to create product value (value chain). Such as marketing and sales, service etc. (ECON BOOK)
Apple and Samsung obviously have surpassed Nokia, however Nokia at a time was surprisingly an adaptive company. They were not falling behind with technology, they created their first smartphone back in 1996. They also spent huge amount of money on research and development, however what they were struggling with is to transform all their spending of research and development into something that people might actually want to buy. Nokia lacked innovation. They could not see the future of smartphones and what is more, they are more of a hardware company rather than a software company meaning that its experts building physical devices like etc. but not programs that could run those devices. (the new Yorker). Because of that Nokia did not see how important software will be in future so in did not increase its research in this particular field. On the contrary, Apple saw both hardware and software as really important and that they need to work together in order to create the perfect product, the product wanted by consumers. Phones were changing to quickly and Nokia could not keep up with it, it started to fall behind as it underestimated the transition to smartphones. Furthermore, Nokia overestimated its brand, it thought that it could easily catch up with their lateness in the smartphone game. They thought that thanks to their hardware design customers would stay loyal to them. For some reasons Nokia could not progress with the technology and when it moved from Symbian software to Windows in 2011 it was already considered too late since Apple and Samsung took over the market. (the new Yorker) Another problem that caused Nokia's failure according to Quy Huy, was the inside misunderstanding between top managers and middle managers. Middle managers were afraid to disappoint top managers with their ideas. Historically, the top managers were not really liked by the middle ones. They had a bad reputation and regularly shouted at people. Because of that middle managers did not propose new ideas or if something was going in the wrong direction and everyone knew about it they wouldn't tell it to the top managers. (Who killed nokia).
Nokia and Apple saw the world differently. Nokia's goal was to create the best speaking devices, whereas Apple's goal was to reinvent the phone through the revolutionary touch interface. By that time Nokia was one of the biggest company and Apple was at its edge. Apple needed a break-through product since that was its last chance to stay in the game and in order to do that they had to change the game. Nokia, on the other hand, had everything. It was an amazing manufacturing company focused on the product and features and its quality as well as prices and features of their mobile phones were unbeatable. However, they didn't focus on consumers' needs, felt too confident and stick to their Symbian operating system instead of trying to improve, push forward. In 2002 Nokia produced a similar device to the iPhone but there wasn't much about the product other than the fact that it had a touchscreen, allowed users to browse the web, find restaurants and play games. Two years after, in 2004 Apple begun the creation of iPhone by employing one thousand people to work on a secret "Project Purple". Apple really believed that they could change the world. (Daniel Hodges)
The biggest phone company that dominated the market share for over ten years has collapsed due to new competition as well as bad decision making and inner problems. In 2007 Apple revolutionised the phone market by introducing the iPhone that is way smarter than any smartphone and very easy to use. Since that year Nokia's market share has been decreasing each year. Nokia lacked innovation. Its competitions were progressing so fast that they could not catch up with it, so they started to fall behind. Unlike Apple, Nokia did not have the vision of future smartphones and focused just on making best speaking devices. They underestimated the importance of the transition to smartphones and failed to recognize the increasing importance of software. Even with all the research and development Nokia was unable to fulfil consumers' needs. And the inner conflict between the top and middle managers was an obstacle for Nokia to progress. The brand itself could not harm Nokia's market share. Nokia, as I mentioned before was already the pioneer in the phone industry, however lack of innovation as well as bad corporate strategy led to an unfortunate failure.
The Main Causes That Caused Nokia to Fail. (2024, Feb 02). Retrieved from https://studymoose.com/the-main-causes-that-caused-nokia-to-fail-essay
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