Nokia: Smart Phones Crisis Management

Nokia is the world’s leading mobile phone provider and a leading supplier of mobile and fixed telecommunication networks involving interconnected customer services. The company’s offerings include mobile devices, communication network related services, equipment, software and services. It provides the network equipment and related services through a joint venture with Siemens. Its other major subsidiary includes NAVTEQ, which provides digital map information and is related to the position of the content based on content and services, Symbian developers, and the Symbian open-source operating system of the transferor for mobile devices. The company’s main business is in Asia and Europe. The company is headquartered in Finland and employs about 123,600 people.

In the company, top management constantly adjusts the course of action and develops track. A former president of Nokia captured the point succinctly:

“Five to ten years ago, you would set your vision and strategy and then start following it. That does not work anymore. Now you have to be alert every day, week, and month to renew your strategy.”

Indeed, strategic agility is very important for the company, now people believe it is part of the firm’s culture. This culture helps the company gain success toward ambitious objectives, but can also lead to some problems. In fact, this kind of strategy can make the company develop inertia, especially when the market crisis or some new technology appear.

Although the company’s income is decreasing, it still has a great financial performance. The figure recorded company revenues of €42.4 million ($57,157.5 million) during the fiscal year ended December 2010. The operating profit of the company was EUR2.1 billion ($1,669.4 million) in 2011 (NOKIA, 2010)

BACKGROUND

Nokia released its first touch screen mobile phone in 2003, Nokia 7710, which was based on the Nokia 7700 that was never released. It is Nokia’s first and so far onlySmartphone to run the Series 90 GUI atop the Symbian OS. This is a great success. Founded in 2003, Nokia has more than 200 million units. In November 2007, Nokia N82 announced the release of the first Nokia mobile phone with N-series xenon flash. Nokia announced their “with music” plan: Nokia equipment buyers to accept one year free use music downloads. Service becomes commercially available in the second half of 2008.

In April 2003, the company had to resort to a similar streamlined division, including job cuts and organizational restructuring. This reduced Nokia’s public image in Finland and produced a large number of court cases and a TV documentary collection criticism, Nokia.

In February 2006, Nokia and Sanyo announced a memorandum of understanding to create a joint venture for the CDMA mobile phone business processing. But in June, declared an end to the negotiations, as they couldn’t reach an agreement. Nokia also decided to pull out of CDMA research and development and continue to execute CDMA business in selected markets.

In June 2006, Jorma Ollila left his position as CEO and went to Royal Dutch Shell, thus making way for Olli-chairman Kallasvuo Pekka.

In May 2008, Nokia announced a yearly shareholders’ meeting and wanted to move into Internet business as a whole. Nokia does not want to be seen as a telephone company. Google, Apple, and Microsoft are not seen as natural competition for their new image, but they are as a very important player to deal with.

In November 2008, Nokia mobile phones in Japan announced termination distribution. The following early December, Nokia E71 distribution was canceled. Japan let Nokia global R&D planning, procurement business, and a risk of MVNO luxury mobile phone, use the new telecommunications network.

In the next few years, the company has had Sega.com, Intel company, etc., along with all the assets it also shares with other industrial giants. Immediately, on June 19, 2006, Nokia Siemens announced that the company will merge their mobile and fixed telephone network equipment enterprise and create the world’s largest Internet company, “Nokia Siemens” networks. Every company has 50% of the company’s shares, and the company is headquartered in Finland. The company’s annual sales forecast were 16 billion. Nokia announced that about 20000 employees will be transferred to the new company.

Due to a strategic alliance in February 2011, Microsoft’s Windows 7 was established in Nokia’s mobile phones.

CORPORATE GOVERNANCE AND MANAGEMENT

According to Nokia Corporation’s Brief report in April 2011, we know that:

“The Company, being the parent company of Nokia Group, is established and registered in Finland and must comply with Finnish law, including corporate laws and regulations. The Company also complies with a number of rules and regulations as required by its various stock exchange listings. In particular, as a result of the Company’s listing of its shares on the New York Stock Exchange and its registration under the US Securities Exchange Act of 1934, the company must comply with the requirements of the New York Stock Exchange, the US federal securities laws and regulations, and the Sarbanes-Oxley Act of 2002, in each case to the extent that those provisions are applicable to foreign private Issuer.”

The operations of the Company are managed under the direction of the Board, within the framework set by the Finnish Companies Act and the Articles of Association of the Company and any complementary rules of procedure as defined by the Board.

The following table shows what the organization looks like (NOKIA, 2011):

Table 1

PRODUCTS SUMMARY

Cell phones, in general, are divided into three categories: basic mobile phones, multimedia Smartphone, and telephone, from 2 G progress (the second generation) to 3 G (third generation) technology. Although smartphones accounted for only 5% of the mobile phone market, it is presently expected to reach 20% of the 1 billion mobile phones. Smart cell phones have become a new phenomenon for personal and business voice, data, electronic mail, and Internet access. They also provide the following advantages: low power consumption processor, modern operating systems, and broadband Internet access.

Yung F.C, CS, Cheng and Hao Z in their article, Smart Phone for Mobile Commerce, mentionedthat: “Smart phone is the product of convergence of regular mobile phone and PDA (personal digital assistant), which can store critical information via personal computer or notebook computer. While vocal call is the common denominator of all mobile phone, smart phone needs to be able to access Internet, e-mails, and corporate database servers. It also must be capable of SMS (short messaging service), MMS (multi-media messaging service), and IM (Instant Messaging). User interface, form factor, and weight are very critical factors for the success of a particular brand of smart phone in the market place.” This new kind of cell phones blocks Nokia’s development even though it’s still a very important part of Nokia’s products.

In sum, Nokia’s products can be classified as the following four kinds:

Smart Devices: Business unit which focuses on smart phones, and additionally on exploring next generation opportunities in devices, platforms and user experiences to support our industry position and longer-term financial performance.

Mobile Phones:our business unit focused on bringing a modern and affordable mobile experience to people around the world.

NAVTEQ:a leading provider of comprehensive digital map information and related location-based content and services for mobile navigation devices, automotive navigation systems, Internet-based mapping applications, government and business solutions.

Nokia Siemens Networks: jointly owned by Nokia and Siemens, is one of the leading providers of telecommunications infrastructure hardware, software and professional services globally.

COMPANY STRUCTURE

Nokia’s typical structure is called strategic agility, which means the company changes its business plan based on the market environment. Strategic agility results from the combination over time of three major meta-capabilities that provide its foundations: Strategic Sensitivity, Leadership Unity and Resource Fluidity.

Strategic Sensitivity (both the sharpness of perception and the intensity of awareness and attention) combines early and keen awareness of initial trends and converging forces with intense real-time sense-making in-strategic situations as they develop and evolve. Strategic sensitivity is fostered by the combination of a strong externally oriented and internally participative strategy process, a high level of tension and attentiveness, a rich, intense, and open internal dialogue.

Leadership Unity engages the ability of the top team to make brave decisions rapidly, without being swamped down in “win or lose” policies at the top. The leadership team’s unity permits decisions to be reached extremely fast once a strategic condition has been comprehended and the choices it opens or closes have been rationally acquired. These decisions stick. Commitments are not delayed by personal insecurities and political stalemates at the top; nor is their implementation subject to personal agendas and private disagreements that would slow down the attempt. Even when enthusiastic, commitments remain only as excellent as the resources inferior to them.

Resource Fluidity involves the inner ability to reconfigure business systems and redistribute resources quickly. Integrated businesses processes for operations and resource allocation, people management approaches, and mechanisms and incentives for collaboration are what make business models and activity system transformation faster and easier.

The following formulation clearly shows the relationship between the three foundations and agility:

In short, one of the early strategic insights into agility combines into a unique framework of the real potential of mobile phones in the late 1980s and early 1990s (the first phase). By chance, some new enterprise was founded to maintain a minimum of strategic sensitivity and through the various BBS created around [TRB1], start embedded NVO strategy [TRB2] in a wider sensitivity of cadres. At that time, it would have been easy for Nokia to focus entirely on the problem and the operation of the hype and confuse the conventional wisdom in the European telecommunications industry leading position of 3G standard, network, and application. Instead, although the core business, marginal NVO can maintain flexibility, and especially on the rise of the Internet. However, it puts another crisis cognitive into action. In addition to efforts to build the patient common “business infrastructure,” Nokia gradually improved resource liquidity by putting in place a differentiation and comprehensive and DuoWei organization and implemented matrix resource allocation process. Senior management personnel, however, said that due to the lack of reunification, this will continue to lead to an empty promise. The open [TRB3] provides several Nokia to take key leaders and the appointment of a new President basically is characterized by establishing the unified leadership behavior.

MARKET CRISIS

During the third quarter of 2009, the company became famous for its excellent performance for the first time in ten years, followed closely by the loss in the second quarter of 2010; profit plunged 40% year-on-year.

A brutally frank leaked memo from Nokia’s new chief executive Stephen Elop is genuine, sources have now verified.

Mr. Elop’s describes Nokia as a corporation in crisis and states that the firm has even failed to so far provide a product that resembles the first iPhone. “The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience,” Mr. Elop wrote in the letter which was spread to the Finnish company’s staff.

He added that “Android came on the scene just over two years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.”

Nokia’s market share fell by 10% in 2010, thus the company has fought to provide devices that either matches the high-end smartphones from Apple, Samsung or HTC, while also fighting to contend with less costly producers such as ZTE or Huawei. Mr Elop will employ the company’s Capital Markets Day in London to reveal a new strategy and provide a free account of the firm’s present condition. Analysts are expecting him to be sincere.

Nokia’s Symbian operating system is “an ever more hard atmosphere in which to expand to meet up the incessantly increasing consumer needs,” writes Mr. Elop. The company’s MeeGo OS, intended for high-end devices, is also not living up to expectations, he says: “by the end of 2011, we might have only one MeeGo product in the market”.

Mr Elop upholds, nevertheless, that “We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough.”

He compared Nokia’s present dilemma to that of a man standing on a fiery oil stage, however, and stated that an instant decision to leap could guarantee survival. That will stimulate obtainable conjecture that the company is preparing to develop from Symbian and MeeGo to include Android or Windows Phone 7 handsets. There are also proposals that Mr. Elop, a former Microsoft worker, will transfer Nokia’s core from Finland to America’s Silicon Valley.

“I believe we have lacked responsibility and management to line up and direct the company throughout these troublesome occasions,” wrote Mr Elop. “We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally. Nokia, our platform is burning.”

Analysts and bloggers, nonetheless, proposed that Mr Elop’s sincerity could be the greatest anticipation Nokia presently has of starting to reconfirm its supremacy.

ENVIRONMENTAL SWOT ANALYSIS

The company has a strong, obvious brand that makes it able to help consumers differentiate themselves from competitors. However, the fierce competition will continue to put pressure on the company’s operating performance and market share in the next few years.

The following chart shows the conclusion of the company’s SWOT analysis

Strengths

As a leader of the telephone market, the company has a strong brand image. In the Datamonitor research, some facts can prove it:

“The company continues to strengthen its brand equity through various marketing campaigns. Nokia’s brand was the fifth most valued brand in the world according to the top 100 best brands list compiled by Interbrand in 2009 and was the only mobile phone manufacturer in the top 10 best brands list. The company was also the leading mobile phone brand in most of the countries it operates. For instance, Nokia was ranked 19 on the list of Asia’s Top 1,000 Brands 2010 ranking, published by TNS. In particular, the company was the Asia Pacific’s top brand in the mobile phone/Smartphone sub-category. In addition, Nokia was the most trusted brand in India according to Brand Equity ‘Most Trusted Brands’ survey 2009.A strong and highly visible brand enables the company to command a premium for its products and differentiate itself from competitors.”

Weaknesses

Weak high-level products

The company’s high-level products compare with their competitors are weak. The company’s main products provide the high-level multimedia computer “n” series range. At the same time, multimedia features music player, camera products, PDA, the video game console and navigation equipment, it is less attractive touch screen and sleek design compared to products of its competitors. The competitors are SONY Ericsson and traditional rivals Motorola, touch screen products, and apple has become the main rival. In addition, as a market, there RIM, Samsung and HTC touch screen mobile phones and other brands. Nokia is also facing a significant price competition market as phones are offered to lower prices or free. And Apple is also active releasing their latest model. (McCray, 2011)

For example, Nokia N97 with a touch screen, the flagship, full QWERTY keyboard, GPS, 32 GB of memory, games, video, camera, and the overall Ovi store. However, the personage inside course of study thinks, the phone not implemented the competitor’s products. Although the company expects its touch screen will good enough to compete for these rival, it is still a long way to go.

As a leader, Nokia in a market share of 39% in 2009, but smartphone market the company’s market share fell to 44% in 2008. At the same time, edge market share growth. , up from 16.6% in 2008 to 20% in 2009 and apple’s market share reached 14%, compared to 8% in 2008.

In addition, High-level products’ embarrass situation made Nokia have to depend on the entry-level equipment to keep balance. The company’s weak high-end products will continue to affect its competitive position and business performance because in future the demand of High-level products is increasing.

North America is still a huge market for mobile devices, for example. By contrast, the company’s key competitors, Motorola, generating about $11.834 billion of the total income from the United States in 2009. Nokia will affect its market share and growth in the next few years.

Opportunity

Nokia had the opportunity through the development and implementation of meaningful leadership strategies to deal effectively with this dilemma.

New service

Nokia has also put forward a lot of new services, in recent times. At the end of 2009, the company introduced the Nokia money, a new movement of financial services. Service is gradual to launch in selected markets in 2010. This service is Obopay and leading developers work together. Through our services, people will be able to

use their mobile device to manage their personal finance, pay a product or service, and add credit mobile account. In May 2010, the company introduced Ovi life tools; it provides a wide range of information service, covers health care, agriculture, education, and entertainment, in China.

The launch of the new service will enable the company to improve its customer base, and effectively increase income in the coming years.

Alliances and partnerships

The company has formed many alliances and partnerships, in April 2010, Yahoo! And Nokia formed a strategic alliance with integrated network services In February 2010, Nokia, SAP and Giesecke and Devrient formed a new company, Original1, it provides product certification and security services in the world. In the same month, Intel’s Moblin and Maemo and Nokia merged, created MeeGo software platform, a Linux-based supported DuoGe hardware architecture that will provide a series of equipment market segment. In addition, in December 2009, Nokia together the new coalition and a part of the investment company, in Shanghai alliance, form a 50/50 investment joint venture company, Nokia Internet services company, provides alliance series of mobile services and supported local developer’s ecosystem.

In June 2009, Intel and Nokia into a long-term relationship based on Architecture-based development Intel mobile devices and chipset Architecture.

Such alliances and partnerships, further improve the company’s portfolio of income.

Strategic acquisitions

Several strategic acquisitions in recent years the company to raise its contribution. In August 2009, Nokia gained access to certain assets. In September 2009, Nokia bought a private enterprise of mobile phone software services and constructed a cloud-based sharing and the information service socialization media for the private sector. In this month, the company has also won the Dopplr mobile service providers. In the same month, Nokia helped a private company to get a Novara, based in Chicago, the company provides mobile browser and service platform. The company through the acquisition is going to use the Novarra mobile browser and service platform and thus provide enhanced network experience. In addition, in August 2010, Nokia signed an agreement to acquire Motally, an American private company. Mortally movement analysis service application tracking and reporting in-is used to help developers and publishers optimization development. The deal allows the company to further improve the in-application and mobile web browsing Ovi analysis of the service.

As the research paper said: “The company’s strategic acquisitions enhance its offering and enable it to record revenue growth from new offerings while providing a competitive advantage”.

Demand for 3G and high bandwidth infrastructure

As the third generation (3 G) and high bandwidth of infrastructure, high bandwidth application easier is expected to increase with the growing need for advanced data and video services.

3G technology offers service providers with a range of services, including high-speed mobile broadband and mobile TV, mobile video-on-demand (VoD), and so on. And the voice of the traditional mobile operator’s income by changing the market by tariffs, the increasingly fierce competition and alternative technologies, as well as other factors, operators migration to 3 G services to facilitate each user stable or average income increase ARPU. Therefore, the world within the scope of the 3 G permeability is expected to increase in the next few years.

For example, 3G permeability in developed countries such as the United States is expected to increase in 2009 nearly 43% to 60% in 2013. Also, 3G penetration in the Asia-Pacific region is expected to reach 40% by 2014. Further, the global mobile TV user growth is expected to about 45% of the compound annual growth rate of 450 million. In addition, a large number of fixed and mobile broadband subscription is expected to be about 3.5 billion, and in 2014 to 1.1 billion in 2009 too. In addition, broadband related services, such as IPTV subscription will increase in the near future. For example, the number of users in the United States IPTV will reach about 15.5 million registered users by 2013, compared with 5 million in 2009.

Nokia Siemens networks are the main provider of Siemens network infrastructure products. It provides mobile and fixed network communication network infrastructure, platform and network services and professional services, to operators and service providers.

In addition, in July 2010, Nokia Siemens networks signed an agreement; get most of the Motorola wireless network infrastructure assets of $1.2 billion in cash.

Threats

Fierce competition

Nokia faces fierce competition in the telecommunications market. At the low end of mobile equipment parts, the company has been facing competition, such as LG, Samsung, and it continues to be in competition with Motorola and Sony Ericsson, and so on. In high-level mobile equipment and Smartphone market, the company faces the fierce competition from Apple, HTC, Samsung. In addition, it also faces competition from mobile network operators to provide a mobile phone in his brand. In the map and related information based on position of the enterprise, the company’s main rivals including Google, Tom-tom, many government agencies and quasigovernmental mapping license for commercial use map data, and many outside of north American and European competitors

In the telecommunications infrastructure markets, the company’s joint venture enterprise, Nokia Siemens networks in the face of the fierce competition, to continue from other players. Its major competitors in this region include Ericsson, Cisco, Motorola, and NEC. In the telecommunications infrastructure services market competitors includes Ericsson Accenture, HP, and IBM.

Second, Samsung and Tellabs. The fierce competition affected the company’s market share and income, and price. The competition will continue to affect the company’s performance in the coming years of the market.

Exchange rate fluctuations

Nokia operates in 150 countries in Europe, America and Asia and the Pacific. Foreign exchange rate changes deeply affect it. Nokia’s business and business performance is affected again and again by changes in exchange rates, especially between the euro and other currencies.

The company reports that other currencies, such as the currency of the dollar, yen and the Chinese yuan affect the company’s income. In the end of February 2009, the rate from U.S. dollar to euro increase 6%. After that, the dollar to euro was falling to 12% by the end of 2009. In another word, the dollar rate at the end of 2009 has brought negative effects for the company. In addition, in 2009, the rate of yen to euro has an appreciation of 4.9%. After that, the rate decreases 5.5% by the end of the year. In 2009, Brazil really appreciates against the euro exchange rate already accumulative total fell 26.5%. China’s Yuan, Russian rubles and Indian rupee 6.7%, 3.8%, 2.7%. Generally speaking, emerging market currencies, would bring a negative impact. For Nokia, due to reduced operating profit income in Europe. Customers in the emerging markets of the purchasing power of the drop can bring great loss.

Exchange rate fluctuations could affect the company performance and financial status. In addition, the important changes in exchange rates can also affect the company’s competitive position.

RECOMMENDATIONS

NOKIA strategy should not give up on Symbian platform, MeeGo platform development which can accommodate WP7 platform, refused to Android platform.

The Symbian could not give up

Nokia dominates the cell phone market 12 years by Symbian platform. Improvement, optimize the performance and fashion design, excellent cross-platform graphics on Linux development tools Qt as its development environment and development framework, and will of the ecological system Symbian to Qt migration; Reconstruction of the original old interface, enhance the experience of the modern user. But on the whole, Nokia Symbian open platform is still in development, the process of ascension, Symbian Smartphone’s to less than to have a leading Apple iPhone and Android Smartphone challenge, also failed to deter Nokia output, the benefit of the serious landslide. Insist on the Symbian strategy to Nokia bring heavy pressure, but moved down or Symbian platform is NOKIA leadership team dared to risk.

Develop the MeeGo

MeeGo hardware to support a start with two solutions: one is based on the ARM of the department of low power consumption microprocessor chips, two is based on the above for the development of mobile phone Intel-based third generation Medfield (32 nm) low power consumption microprocessor chips, the former ahead of the release on the latter. Nokia has given up development by its first MeeGo operating system mobile phone, as far as I know, no give up but may postpone the release of time; NOKIA is more impossible to give up MeeGo.

MeeGo is open source, it has a huge community developer team, MeeGo has rich development tools that Qt, MeeGo integrated many of the most advanced things, such as integration including the gyroscope, inverse regression, temperature, light, and other power of perception, Of course, choose MeeGo development strategy is this the risks of MeeGo strategy, I see the true challenge is that:

(1) Must speed up the MeeGo ecological system establishment (MeeGo can meet competition and challenge, depends on the performance, fashionable appearance, user experience, and ecological system, and sound ecological system is an indispensable element).

(2) the user experience to be strengthened, speed up (as is known to all, Apple iPhone to the secret of success is the user experience of Symbian UI quite obsolete, UE is relatively backward, the way to MeeGo is Linux, no matter whether the strategic choice of the Numbers, with Qt framework for the MeeGo development of hardware, software and hardware configuration and adaptive, all should strengthen, speed up the user experience).

(3) if the Medfield Intel-based processor chips scheme (the solution in the X86 framework of low power consumption chip problems), software and hardware development and between them the adapter is a new relationship with new, increased the difficulty of the development, attentions must be paid.

CONCLUSION

Microsoft Smartphone, like Nokia that year after year gone from bad to worse, the market share of the WM last year only 4.2%, as for new WP7 (10 months before last year on the market in succession) is also performance going in. If by more than two months sales of 2 million, that WP7 magnified to see throughout the year, amount to the annual market share to 4%, but only market share so low can afford Nokia Smartphone renewal of heavy?

The Nokia CEO Stephen Elop, from last September since taking office only half a year, how to get out of a difficulty, meet the challenge, introduced new strategy, and he is to “tell the story “, not only speak, speak only Symbian MeeGo also not line (MeeGo good cannot be listed), Android is a dead end, new strategy or in the “road” for good, so in more insurance, choose WP7 platform, Microsoft and NOKIA complementary advantages is good, can promote the development of the WP7, therefore accept WP7 can is a strategic choice.

NOKIA recently to make a new strategic decision, no matter this decision and what are the similarities and differences between the point of this article, but I believe that the final success or failure have to undergo the test of practice.