Nokia was previously the undisputed leader in the mobile handset market but lost significant market share to competitors like Samsung that introduced smartphones running Google's Android OS while Nokia stuck to its Symbian OS. As a result, Nokia has seen declining profits, job cuts, and falling stock prices. It launched the Lumia series in an attempt to compete with Android and iOS devices but these efforts did not reverse its declining market share. Nokia is now focusing on new features, apps, and an improved user experience as it partners with Microsoft for the Windows mobile OS.
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Nokia- Connecting People or Disconnecting Customers (2012), A case study on Nokia
1. Page | 1
Jindal Global Business School
O.P. Jindal Global University
REV: SEPTEMBER 26, 2012
Maneesh Garg
Nokia: “Connecting People” or Disconnecting Customers
This case is written solely to provide material for class discussion. The authors do not intend to illustrate either
effective or ineffective handling of a managerial situation. The authors may have disguised certain names and
other identifying information to protect confidentiality. Any form of reproduction, storage or transmittal
without the written permission from author is strictly prohibited. To request permission to reproduce materials,
contact Maneesh Garg at 11jgbs-mgarg@jgu.edu.in
Introduction: A decade ago, Nokia was the undisputable leader in India and globally in
the mobile handset market. But Samsung Electronics shook the market and created the
market competition through its flagship Android based phones.
Nokia was relying on its existing strategy when there was product innovation needed (both
in terms of hardware and software). Nokia chose to stick to existing attributes like
‘Symbian’ operating system and quality (in terms of hardware) of the product. It did not
anticipate the power and potential of Android which opened new opportunities for its
users. When Nokia realized its mistake it was very late, the market was already been
occupied by the likes of Apple (iOS) and Samsung, HTC, Motorola, etc. To catch up the
losing market share, Nokia then decided to concentrate on the features in phones like dual
sim, high resolution camera, touch screen etc. It also decided to partner with Microsoft for
windows operating system on its mobile phones, thus introducing the Lumia series. But all
these efforts were in vain, because by the time these features were introduced, these had
become the obsolete technology because competitors were offering much better features at
much lesser price.
As a result Nokia’s rivals left it behind in the rapidly growing smartphone market. Nokia’s
profit and loss account is showing operating losses of more than 3 billion euros in the last 6
quarters. As a result Nokia was bound to cut 10,000 jobs, and sell assets.1 Its stock price
1 This piece of information is taken from an article published in www.newsmax.com on 07/09/2012.
Link: http://www.newsmax.com/SciTech/nokia:smartphone:cell:phone/2012/09/07/id/451102
2. Nokia: “Connecting People” or Disconnecting Customers
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also fell down from as high as US $40 in 2007 to as low as US $3 in 2012. [See exhibit 2] In
2007, Nokia’s valuation was €110 billion as of May 2012, which remained € 14.8 billion.2
Nokia took the first position from Motorola in 1998, but in the beginning of 2012 Samsung
did the same with Nokia and became largest mobile manufacturer in the world. In this
quarter Samsung shipped 93 million phones while Nokia shipped only 83 million. [See
exhibit 3]
The big question in front of Nokia was How to tackle this situation of lacking behind due to
lack of product innovations and experimentation? How to increase the market share by
maintaining its “Good Quality” image and inserting extra features and services by adopting
more consumer centric approach? And last but not the least How to cop-up with the
competitors by powerful marketing campaigns?
Company Background:
Nokia started its journey with the merger of Finnish Cable Works Ltd, Finnish Rubber
Works Ltd, and Nokia Company.
Finnish Rubber Works started operations in 1898 with manufacturing galoshes and other
rubber products. Its founder was Eduard Polón. In the beginning of the 20th century, FRW
began using Nokia as its product brand after establishing its factories near the Nokia town.
Arvid Wickström started Finnish Cable Works in 1912, producer of telegraph, telephone
and electrical cables. It was the stepping stone of Nokia's electronics and cable businesses.
Nokia’s founder Fredrik Idestam established Nokia in 1865 which started with
manufacturing paper. In 1868, Idestam started a second mill near the town of Nokia, with
better resources for hydropower production (because of nearby Nokianvirta river). In
1871 Idestam converted and renamed the firm into a stock company.
In 1896 Idestam's retired from the management and Mechelin became the company's
chairman in 1898 and remained till 1914. Mechelin's always wanted to start the electricity
business. Hence in 1902, Nokia included electricity production in its business activities.
2 This piece of information is taken from an article “Poor Nokia isn’t even the most valuable company in
Finland anymore” published in thenextweb.com
Link:http://thenextweb.com/eu/2012/poor:nokia:isnt:even:the:most:valuable:company:in:finland:anymore
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In 1910 Finnish Cable Works acquired Nokia Company, when it was near bankruptcy (to
ensure continuous supply of electricity from Nokia’s generators), and in 1922 it acquired
Finnish Cable Works.
In 1967 these three companies were merged to form new Nokia Corporation. The new
formed company Nokia Corporation was involved in the production for many industries
like production of car tires, bicycle tires, paper products, footwear (including rubber
boots), televisions, consumer electronics, communications cables, personal computers,
robotics, capacitors, electricity generation machinery, military equipments and
communications (like M61 gas mask for the Finnish Army and SANLA M/90 device),
aluminum, plastics and chemicals.
Nokia established its 1st electronics department in year 1960, which became the beginning
of Nokia's future in telecommunication. In 1990s company decided to stop the consumer
electronics business and started focusing primarily on the telecommunications, fastest
growing segment in that era.
Further improvements and product launches:
Nokia was one of the key contributors in the development of GSM (Global System for
Mobile Communications). GSM was 2nd generation mobile technology which was designed
to carry data and voice traffic together.
Nokia’s first customer for GSM network was the Finnish operator Radiolinja in 1989.3
Prime Minister of Finland Harri Holkeri, made world’s first commercial GSM call over a
Nokia supplied network, on July, 1 1991 in Helsinki (Finland) by a prototype Nokia GSM
phone.3
Nokia introduced world's first handheld phone, the Mobira Cityman 900 in 1987.4
In 2003 Nokia launched its flagship handset Nokia 11005, with over 200 million units
shipments. It was the bestselling mobile of that time and the world's top selling product in
3 This piece of information is taken from the article "Nokia – First GSM call – The move to mobile – Story of
Nokia" published in Nokia forum on March 20, 2009.
4 This piece of information is taken from the article "Nokia – Mobira Cityman – The move to mobile – Story of
Nokia" published in Nokia forum on May 14, 2008.
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consumer electronics category.6 The new era of mobile phone started from the launch of
this product.
Nokia at present:
Now Nokia Corporation is a Public Ltd. Finnish company listed on Frankfurt, Helsinki and
New York stock exchanges. Its headquarter is in Keilaniemi, Espoo, Finland. The products
in which company deals majorly are mobile handsets and portable IT devices. Company
also offers media, music, applications, maps, games and messaging through its Ovi
platform. Through its wholly owned subsidiary Navteq it also provides digital map
information and navigation services free of charge.7 Nokia provides telecommunications
network equipment and services through its joint venture Siemens Network.
Nokia’s more than 122,000 employees spread across 120 countries. Nokia’s sales numbers
come from more than 150 countries. Their annual revenue is around € 38 billion.8 In 2012
1st quarter with market share of 22.5%9 Nokia came down to 2nd place in terms of largest
mobile manufacturer of the world by no. of unit sales (Samsung took over the 1st place).
According to the Fortune Global 500 companies list Nokia is the world's 143rd largest
company measured by 2011 revenues.10
For consecutive 14 years (from 1998 to 2012) Nokia was the world's largest manufacturer
of mobile handsets.
5 This piece of information is taken from a press release "Nokia 1100 phone offers reliable and affordable
mobile communications for new growth markets" on May 26, 2009
6 This piece of information is taken from the article "Nokia's cheap phone tops electronics chart" published in
Reuters on May 14, 2008
7 This piece of information is taken from a press release "Nokia to acquire NAVTEQ" published in Nokia
forum on October 1, 2007
8 This piece of information is taken from Nokia Corporation’s 2011 Q4 results.
9This piece of information is taken from a News article "Samsung overtakes Nokia in mobile phone
shipments" published in BBC News articles published on May, 27 2012
10 This piece of information is taken from a News article "Global 500 2011 Fortune 2011" list published in
Fortune magazine’s November 2011 issue.
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However, over the past 5 years, its market share is continuously declining because of
growth in use of smartphones, particularly the Apple iPhone and devices based on Google's
Android platform.
Corporate Structure:
Since July 1, 2010, there are three business groups in Nokia: Mobile Phones, Mobile
Solutions and Markets.11 All the 3 units receive operational support from the Corporate
Development Office.
Diagram showing Nokia’s corporate structure:
Source: nokia.com about company section Retrieved 28 December 2009.
11 "Structure". Nokia Corporation. 1 October 2009. http://www.nokia.com/about:nokia/company/structure.
Retrieved 28 December 2009.
Nokia
Mobile Solutions
Responsible for Nokia's
mobile computers and
smartphones portfolio,
including the more
expensive multimedia
and corporate:class
devices
Mobile Phones
Responsible for Nokia's
portfolio of affordable
mobile phones and a
range of utility services
that people can access
with them
Markets
Responsible for Nokia's
sales channels, supply
chains, brand and
marketing functions,
delivering mobile phones
and solutions to the
market
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Subsidiaries:
Nokia’s most significant subsidiaries as of 2009 are Navteq and Nokia Siemens Networks.12
Other subsidiaries include Qt Software, a Norwegian software company; Vertu, a British
manufacturer and retailer of luxury mobile handsets; and OZ Communications, a consumer
e-mail and instant messaging provider.
Nokia was having major stake in Symbian Ltd. till 2008. In 2008 Nokia acquired Symbian
Ltd. and created Symbian Foundation including many other companies, to distribute the
Symbian platform royalty free and as open source.
Indian Mobile Industry
Indians proved themselves very enthusiastic in adopting the Mobile culture. Indian
handset market is one of the fastest growing markets in the world. According to CMR’s 2-
part study of the India ICT Industry titled ‘India IT, ITeS and Telecom Services and Mobile
Handsets Industry Market View 2011’, Indian mobile handsets market, which included
smart phones and feature phones, was expected to grow at over 30% during 2012 to touch
approximate revenues of $18 billion (Rs 83,377 Crore). (Refer to Table).
Table 1 : Indian Telecom Services and Products Sector, Year 2010-14
Categories 2010 2011 2012 2013 2014
CAGR
2010-2014
Telecom Services 159519 184207 205454 226741 248956 11.80%
Mobile Phones
Revenue (Rs. in
Crores)
50714 64077 83377 105625 128729 26.20%
Total India Telecom
Services and Products
Market (Rs. Crore)
210233 248284 288832 332366 377685 15.80%
Total India Telecom
Services and products
Market (USD Billion)
46 54 63 72 82 15.80%
Source: Cyber Media Research (CMR), 2011
12 This data is taken from Nokia.com’s about company section "Structure". Nokia Corporation. 1 October
2009.
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Table 2: Major Drivers of Growth for Telecom Services
Launch and rollout of 3G and BWA/WiMax/LTE services and the consequent growth in
usage of high speed broadband, VAS and data services.
Smartphone Market: "Smartphones are mobile devices with evolved operating systems,
that include Symbian Series 60, Android OS, iPhone OS, Blackberry OS, Linux among others,"
according to Siddharth Neri, Analyst, Mobile Devices Research, Telecoms Practice, Cyber Media
Research. The smartphones market in India is expected grow to over 10 million units in 2011
from 6 million units in 2010. The Android Operating System will continue to gain acceptance as a
mobile operating system (OS) and 12% of all smartphones shipped in India during 2011 are
expected to be based on the Android platform.
Tablet Market: The ‘early adopter' phenomenon in media tablets will become visible in
India in 2011, but will fight shy of becoming mainstream. Cyber Media Research expects over 1,
00,000 Tablets to ship in 2011 alone, based on the current portfolio of players like Samsung,
Apple, Olive and others. However, media tablets in their present form and currently prevailing
price points are unlikely to excite the large majority of consumers. A 'game changer' in this space
could happen in late 2011 / early 2012 if a players such as Reliance Infotel introduces a 'mass
market' Tablet priced lower than Rs 10,000 per unit.
Source: Cyber Media Research (CMR), 2011
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Major contributors in Nokia’s rapid fall:
Delay in launching dual sim phones:
In the past few years, most of the Indian consumers have started maintaining multiple
mobile accounts. The reasons being the need to have separate numbers for personal and
official use, different call rates and plan costs provided by mobile operators. As a result of
this, dual SIM handsets have become very popular. Nokia has lagged behind its competitors
in bringing handsets with dual sim capacity to market.
Limited Social Networking Capability:
Indian teenagers adopted the social networking at very early stage. But Nokia was late in
realizing the need to enter in social networking arena. While on the other hand, its rival
Samsung succeeded in increasing its market share in India largely due to its early
realization and adoption of social networking enhancements started from its flagship
model Corby.
Lack of additional features:
Another reason for Nokia losing out market share is lack of additional features like
applications, games etc. Though Nokia launched its OVI store in year 2007 to fill this gap
but the main reason of lesser applications as compared to Android is Nokia’s Symbian
platform not being an open source platform.
New product strategy and focus areas:
The new products that were launched had in them inbuilt set of new features such as Nokia
suit, Music and apps download, Windows operating system, new updates for existing
operating systems, Lumia series and Asha series etc. Nokia from its past learnings
understood its needs to periodically update the customers in terms of new applications and
latest revisions of the installed softwares. The company under its new strategy focused on
consolidating features that earlier varied across its various product range. The company by
doing this ensured that it could satisfy the tech savvy population for the middle income
group and high end income group. Nokia in its products is following the similar style of
application development like its competitors (Android and iOS) and is also focused on
developing applications which are feasible now and will remain feasible in the long run.
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The MinMax strategy followed by Nokia is meant to minimize its maximum losses which it
had incurred in the past and avoiding to repeat the same in the present.
The main focus areas of Nokia at present are
New product developments
Focus on additional features like Music, Apps etc.
Added security and backup features
Enhanced user friendliness
Emerging not only as a reliable hardware provider but also an equally competent software
provider
New Product Launch:
LUMIA series:
Lumia series was launched in December 2011 in India. Lumia 820 and 920 were launched
on September 5, 2012 with colorful covers look. LUMIA drew thumbs down from many
analysts, because it lacked the "wow" factor to make big inroads against rivals” in their
view.13
In an attempt to win back market share from Samsung and Apple, Nokia cut down its
LUMIA 900 mobiles’ market price sharply from $99 to $49.99 on a condition of signing up
deal for 2 years.14
Microsoft and Nokia joined hand to boost their smartphone arsenal with two new Lumia
handsets powered by Windows 8 software. The Nokia Lumia 820 and 920 are part of the
Nokia's strategy of offering "an alternative to the faceless black and grey monoblocs that
you see out there," said Nokia president and chief executive Stephen Elop at a launch event
in New York. Lumia 920 is also having pure view camera and wireless charging kind of
features.
Nokia created "great hardware" for the Lumia line and loaded it with software that
"outdistances it in a number of areas from Google and Apple," according to the analyst Gene
13 This piece of information is taken from a news article published in NewsMax on 07/09/2012.
14 This information is taken from a news article published in BBC news.
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Munster. Actually it’s Nokia's bid to catch up with Android phones like Samsung and
Apple's iPhone.
Asha series:
Nokia Asha series was launched in the end of year 2011. This series was launched to cater
to the needs of middle class consumers who are most interested people in social
networking, internet surfing and light gaming applications. Along with this some phones in
Asha series are powered by the cloud based Nokia Browser, which compresses the web up
to 90 percent and provide higher speed and a more affordable access to the Internet. Apart
from this Touch and type feature, duel sim and gaming apps are some extra features in
Asha series. Nokia has also preinstalled Facebook Chat, Angry Birds Lite, latest version of
Nokia Maps and WhatsApp messaging for Series 40 (for selected markets).
Picture: Nokia Asha Series
Source: www.Nokia.com
Nokia Pure view:
Nokia Pure View was launched in February 2012. The 808 Pureview offers 41 megapixels
camera with Symbian operating system, enhanced low-light performance as well as
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sophisticated image compression designed to help users share pictures. Hence by
launching these kind of products Nokia strategy is to differentiate itself from its
competitors and to prove that company still has potential to innovate and drive the market.
But some analysts think that this product is not going to be Nokia’s landmark product in
terms of its utility and differentiation.
Picture: Nokia Pure View
Source: www.Nokia.com
Some interesting applications:
For starters, Exchange, Microsoft OneNote, SharePoint and Lync had already been
integrated into phone. Besides these, there was Public Transport, Doc Connect, Joiku Spot,
Broadcast, Quick Office, Shazam and Poken. The standard Nokia apps were naturally part of
the ecosystem. These included Nokia Maps, Nokia Drive, Ovi Music, Check In and Nokia
Recommends. Apart from these there is Nokia’s City Lens which is an augmented reality
(AR) application that allows users to find things to do — and get more information about a
location — simply by pointing their phone’s camera at a location. By launching these
applications Nokia is trying to follow its competitiors strategy of increasing the product
utility and revenues by sales of these applications.
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Operating systems:
Though Nokia’s main operating system Symbian is lacking behind but Nokia is releasing
frequent updates for its operating systems. Major platforms for Nokia phones are
Symbian:
Previously Nokia mobile phones had a customized Nokia OS operating system designed
particularly for Nokia phones. N90, the first Nseries device, based on older Symbian OS 8.1
platform was launched, as did the N70. From here onwards the journey of Symbian OS
started.
It is regarded as inferior to the apps and social media driven operating system. Even after
becoming two decades old Nokia did not change much in this operating system. Customers
and Apps developers are completely fed up with Nokia’s inferior operating system
especially when so many better options are available in the market. According to Nokia’s
view about Symbian approx. 200 million people use Symbian worldwide, and Nokia is
trying to modernize the platform by investing in completely new devices loaded with a lot
of new features, hardware improvements like significantly increased graphics speed and
GHz+ processing capabilities, as well as software improvements.
In 2008 Nokia took over Symbian Ltd and, created the Symbian Foundation along with
many other companies, to distribute the Symbian platform royalty free and as open source.
Until 2008 Nokia was the major shareholder in Symbian Ltd.
Windows:
Nokia started strategic partnership with Microsoft in February 2011. At this time Nokia
also announced that Symbian and MeeGo will soon be replaced by Microsoft's Windows
operating system except for mid:to:low:end devices, which would continue to run under
Symbian. Nokia’s plan was to, customize and enhance the software line for Windows Phone
7 by reducing spending on research and development.15 By this strategic partnership
Nokia’s strategy was to make Microsoft Windows phone a stronger contender against
Android and iOS.
15 This piece of information is taken from an article published in engadget.com on 11/02/2011.
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Ovi Store:
Ovi was announced on 29 August 2007 in London at the Go Play event. The public beta was
released on 28 August 2008. After last stable released version 7.1 of Nokia PC suite on
December 22, 2011 Nokia decided to discontinue PC suite and started recommending its
customers for Ovi suite. While introducing Nokia OVI suit Nokia’s main focus was on easy,
user friendly, and fast responsive interface, providing better support for software updates
and better security and backup features, one spot shop for Nokia Apps and Music, single
window for all the utilities and features, and making it “One For All” kind of application.
After launch of Ovi it has remained pretty successful. Table 3 is showing comparative
analysis of Nokia Ovi and PC suite. In July 2011 the Ovi brand was discontinued and the
services rebranded under the main brand Nokia. With over 8 million downloads a week Ovi
Store was the No. 1 app store in the country.
Table showing the comparative analysis of Nokia Ovi suite and Nokia PC suite in terms of features and utility
Table 3 : Nokia OVI Suite vs. PC Suite
Utilities/Features Services OVI Suite PC Suite
Text Message
Conversation View X
Send X
On screen notification X
Contacts
Call X
View/Edit
Import/Export
Backup/Restore
Calendar View/Add/Edit/Backup Only Backup Available
Gallery X
Music
Backup/Restore/view
Download X
Music Manager X
Video
Transfer and Conversion Only Transfer
Playback X
Video Manager X
Maps
File Manager X
Software Updates
Application Store Download/Install X
Connectivity Internet
Support Fast Service More Less
Responsiveness Slow Fast
Overall User Interface
Speed Fast Slow
User friendliness More User Friendly Less User Friendly
Security Features Automatic Backup Only Manual
Backup Customization X
Synchronization (Phone and PC)
Utility
One for all Nokia
models
Model Specific
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User Interface: Nokia PC suit and Nokia Ovi suit
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Music Store and “Comes with Music”:
In 2007 Nokia started their "Nokia Comes With Music" service, in partnership with Sony
BMG, EMI, Warner Music Group, Universal Music Group International and hundreds of
independent labels and music aggregators, which allowed customers to download fee
unlimited music for 12, 18, or 24 months with the purchase of a “Nokia Comes With Music”
edition mobile phone. Nokia stopped this service in January 2011 in 27 countries, due to its
failure to gain attraction from customers or mobile network operators.
In 2007 Nokia also launched Ovi Music store. Due to competition from iTunes Ovi music
was withdrawn from several markets globally, but in India this was not the case. Nokia
Music Store was a high success in India. Having a collection of approx. 6 million songs it
was largest online music seller of India. With approximately 2 million downloads a month
India was among the Top 3 countries in terms of online music downloads.
Nokia Messaging:
Nokia launched a beta version of "Nokia Email service", a push e-mail service, since
incorporated into Nokia Messaging on 13 August 2008.
More focus on accessories:
After analyzing the consumer and its competitors Nokia realized that the way from where
Nokia can pull more revenues is the accessories section. To cop-up with its competitors and
cover the losses through extra revenue in this section, Nokia launched a completely new
range of accessories with bright and funky colors and exciting features in the end of 2011.
Table 4 : Nokia Accessories
Carrying Case