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Corporate Strategy of Smartphone: A Case of Nokia Smartphone

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Corporate Strategy of Nokia Smartphone

Introduction

The continual globalization of market shares equity makes the opportunities for industries and firms like Nokia to reduce organizational and information cost which can make contribution on higher business values (Bekaert and Harvey, 2000; Stulz 1999, 1996). Different forms of acquisitions, strategic alliance and merger are brought recently due to the extraordinary rapid changes of technology (Fernandex, 2010). Business operation and activities are influenced and affected by the emergence of smartphone industry in the world market. Operating system is the prime features of a smartphone which affected by another operating system of another smartphone organizations. Microsoft and Nokia have made an alignment to make revolution in the world smartphone market and to regain the previous market position of Nokia. Different strategies, organizational operation structure, culture, leaderships and competitiveness in the global market will be discussed on following sections.

Smartphone industry competitiveness

The nature of the industry competition being faced by Nokia from new mobile operating Systems (OS) that are entering the market, example iOS and Android

Smartphone is generally different than normal mobile phone. It is a mobile device or phone that is able to perform multitasks at a time (Fernandex, 2010). Nokia was the supreme power in the smartphone market early 21th century with the using of Symbian operating system. Google and Nokia run the whole smartphone business in the world before emergence of Android operating system in global market. Nokia will now use Windows Operating System in their smartphone as primary operating system after the completion of alignment between Nokia and Microsoft in 2011 (Rao, 2014). Most of the Android operating systems are free due to the rapid development of Android, whereas Windows operating system is paid operating system. Apple is one of the top used operating system producers who launched iOS operating system. iOS is much more privileged and advanced operating systems than Windows operating system. Apple is launching iOS 8 and in similar duration Windows launching Windows 10. Amazon is producing smartphone with getting help from another renowned operating system producers Fire operating system (Rao, 2014).

Figure: Global market share of smartphones (source: Nokia Corporation, 2010).

iOS was the first smartphone operating system with downloadable apps  and also the best environment for application development, which is still better than Windows operating system. iOS was facilitated with smartphone battery, improved functionalityand can manage easily and quickly every aspects of the phone. iOS has solid user security protocol than Windows which app store contains more than 750000 applications. The important aspects of iOS are, iOS can compete with all devices, where Windows apps are not fit to all devices.

Many new and old smartphone organizations are coming to the global smartphone market to gain advantages from intensive competition. Nokia phone was operated by the Symbian operating systems and starting to use Windows operating system for mobile phone, these Windows operating system is not strong in global market, they have only 4 percent smartphone share in global smartphone market. Emergence of new smartphone apps and operating system producing organization take the competition with treats into higher level. Latest inclusion of smartphone operating system developer is Fire operating system (Nokia Corporation, 2010) and Google trying to develop better Android continuously like iOS of Apple. Symbian is less intensive and less competitive than these kinds of developed Android mobile phone operating systems.

Impact of global smartphone industry competition on Nokia’s smartphone markets share and income from 2006 to 2010

Global Scale

Global scale of production refers the process of production by which production of different devices to reduce the cost as much as possible. Due to the intensive competition in the global smartphone market Nokia is started to follow global scale production, they have already made their production plant in Vietnam, Hungary and India etc. Smartphone industries are facing enormous competition nowadays. Among the competition of Nokia, Samsung, Apple, Blackberry, Huawei, LG and HTC etc., Samsung is leading among all smartphone industries in the world. Besides that some growing industries are emerged from developing countries (Rao, 2014). Karbon and Micromax from India, Xiaomi and Symphony from China are also presence in the competition in the global smartphone market recently.

Among all smartphone industries in the world Android has got the prime one, whereas Symbian from Nokia got 17% of market share, iOS of Apple got 15% and others like Windows phone, Blackberry phone got limited portion of global smartphone market (Nokia Corporation, 2014). Some Android organization like Google is trying developing better and feasible operating systems for smartphone without cost to the users, which makes the smartphone with Android more popular than previous any time. Google developed Android and has also declared that they will introduce Android L (Android Lollipop) with more facilities and apps for smartphone users and will be treat for all giant competitors of Android in global market.

Global market share hold by Nokia smartphone

Figure: Global market share hold by Nokia smartphone from 2006 to 2010 (source: Microsoft, 2014)

Global market share hold by Nokia smartphone

Figure: Global market share hold by Nokia smartphone from 2007 to 2013 (source: Microsoft, 2014)

Economic Impact

Previous graph and chart shows that there was a significant depletion of shareholding by Nokia  in 2009, due to the newly emerged and some more qualified and facilitated smartphone produced by different organization during that time and there is a significant increase of competition among smartphone producing organization like Nokia, Samsung, LG, Blackberry and HTC etc in the global smartphone market.

Nokia has experienced with losses in six consecutive quarters of production and marketing from global market. In the market of United States Nokia has lost their position in 2004 due to the unwillingness to customize according the demand and conditions of market.  Nokia losses about €1.4 billion and sales dropped by 19% to €7.54 billion and thus the sales of smartphone which were 34% to €1.54 billion in the month of April to June of 2012 from global market. After the losses Nokia was able to gain some profits during the period of Q4 form the network arm of Nokia Siemens. Nokia was expecting they could sell more expensive smartphone in that period, but they were totally failed to achieve their desired goal (The Verge, 2013).

These losses happened due to the decreasing significantly the market share after launching the iPhone from Apple in 2007. Realizing the rapid development and marketing of smartphone globally, Stephen Elop CEO of Nokia Corporation told that, Nokia Corporation are in a very dangerous condition, they have to change their organization culture and behavior to survive in the global smartphone market competition. These thinking of CEO of Nokia show the bad affecting situation of Nokia with the introducing two new operating system from Google and Apple, which were globally accepted and used significantly. Nokia Symbian operating system run mobile “Nokia Asha” sales dropped rapidly globally, which causes failure to Nokia in the competitive market. This failure to capture market can be got from the research and competitive advance innovation in the global smartphone market by Nokia (Nokia Corporation, 2014).

Strategic alliance and global competitiveness

2 (a) Critical assessment of terms ‘strategic alliances (SA)’ and ‘merger and acquisitions (M&A)’ in the context of Nokia’s ambition to sustain the competitive advantage in the global Smartphone market

Strategic alliance refers a partnership or alignment where two or more business organizations work unitedly to achieve their goals and those achieved goals will be distributed equally among all the business organization under the alignment ( De Wit and Meyer, 2014). Wienstein stated that in 2004, strategic alliance is the place where a common thing called critical importance of two firm’s id presence and it is created by two firms to fulfill the desired goals of both parties. In the present world of business it is very difficult and sometimes impossible to survive in global market without taking cooperation and help from other firms. Business organization tries to enter in an alliance to get the advantages from another organization’s innovation and strategies (Wit and Meyer, 2014). So far, partnership provides the opportunities of less cost in research and development activities. There are some successful partnerships presence partnership between Disney and Hewlett-Packard, partnership between Sony and Apple, AT&T and Apple etc.

Nokia and Microsoft has made their partnership to achieve their business goals. Nokia losing their market share from smartphone industry which can be achieved with help of Microsoft. Nokia is expecting to recover the damages. On the other hand Microsoft has no capture on the smartphone market, which can be achieved with the help of Nokia, because all the Smartphone of Nokia will be operated by Windows operating system. This partnership is referred as Umbrella branding strategy which comes to reality by the alignment between Nokia and Microsoft. Now Nokia has made their concentration on the production of more smartphone with Windows named as Lumia and this partnership will help to regain the losing market of Nokia in smartphone market. Nokia has focused to sustain their smartphone share in the global market through using the opportunities of the partnership between Nokia and Microsoft. Nokia wants get the competitive advantages from the smartphone market. Competitive advantage refers the advantages state, where a firm crosses their annual turnover than other firms in the same type of industry (Nokia Corporation, 2014). Nokia was the leader of smartphone for many years and which was sustainable before the introduction of iPhone in 2007 and Google Android. Sustainable competitive advantages refer the advantages which hold by a firm for a long period of time and get the major portion of market share. Nokia was leading the smartphone market and always want to leading market again and again.

Merger

When a business organization has an intension to create a new organization through acquiring another business organization then the combination of two business organization referred as merger (De Wit and Meyer, 2010).  The assets of both organizations combined together which creates the better base assets of newly developed business organization. Merger has three ways of merging, they are; vertical merger where firms from different business enters into contract, horizontal merger where firm merge from same industry and conglomerate merger where two unrelated different businesses enter into contracts.

Figure: Three ways Merger

Acquisition

Acquisition refers a situation when a business organization buys more than 50% rights of voting the parents organization of a subsidiary business organization and the managerial decision of the business organization involves (Johnson, 2005). Business organization run their business as a separate legal entity, no legal entities between the partnerships is created.

In the partnership case between Nokia and Microsoft, both business organization run their business separately, but Microsoft is helping with their Windows to capture the losing smartphone market of Nokia and CEO of Nokia has hold his position even after the contract of $7.2 billion (Nokia Corporation, 2014). But the partnership between the two will help to regain the losing market share of Nokia with the help of using feature of Microsoft and these will also help to gain the competitive advantages from the smartphone market.

2 (b) Discussion on how Nokia’s alliance with Microsoft in February 2011 helped Nokia in stopping decline of the market share in the Smartphone industry

Besides iOS, Android and Smartphone operating systems the newly created partnership between Nokia and Microsoft helps to make third platform for smartphone industries in the global market. CEO of Nokia is very intelligent and well known about present trends and status of mobile market and smartphone in the world. It was a great decision to make the partnership with Microsoft which makes them different in terms of other smartphone companies. Nokia’s declining market share of smartphone will be made by the collaboration of world’s renown software organization. The prime cause of partnership between two giants in world technology is the differentiation between the two organizations. Nokia wants to take the advantages of Microsoft to produce and capture market of smartphone which is the goal of Nokia ( Nokia Corporation, 2014). Android is the default Smartphone operating system which leads the patent war between Apple and Google. It is also regarded as a success by the lawsuits between Google and Apple as well as Apple and Samsung for Nokia.

Microsoft can play a vital role for making a revolutionary change which is different than other smartphone organization as; all smartphone organization has Android, but Nokia launch Windows phone which is different than any other smartphones. Another important reason for losing the smartphone market of Nokia was the inability to forecast the revolutionary change using the operating systems for smartphone. Nokia was less focused on software development which causes the decline of market share. Windows has a reputation for operating system which can be vital for Nokia to regain the losing market share. Chris Weber, head of Nokia subsidiary stated in August 2011that, if Nokia is successful with Windows phone in the world not in North America, it does not make any matter, North America is the priority home for Nokia due to key market of Windows in North America.

Market share of Symbian, Windows mobile and Windows phone

Figure: Market share of Symbian, Windows mobile and Windows phone 7 among US smartphone owners from Q1 to Q2 2012.

Nokia announced in July 2013 that, Lumia developed smartphone by Microsoft and Nokia sales were 7.4 million, which was in 2nd quarter of that year and a record high of sales. Nokia replaced a new CEO who is expert in software development, which was a prime focus for the development of smartphone. New CEO helps Nokia to produce developed and rich software for the customers to use in smartphone. Another importance tasks is done by Nokia for the development of the business, they divide Nokia into two parts, one is for ordinary or normal mobile phone production unit and another is highly developed smartphones to achieve the desired goal. Developed countries people like Europe, America and Australia want to use smartphone and low and developing economic countries have higher demand of ordinary mobile phone. Another change is happened in the executive teams. Low and developing economic countries have huge population. Due to the skilled and redundant employees Nokia can reduce the operational cost effectively. After changing Elop Nokia’s about 10000 staffs were laid off.

Elop emphasized on the accountability of executive rather than innovation and research. But new CEO gives higher emphasize on the innovation and development. Thus the decline of market share has stopped. Observation and monitoring other smartphones also help to aware about anysudden unexpected situation. This newly employed employees give their best to find out and research the available opportunities from the market.

Organizational culture, leadership and competitiveness

Critique of the statement based on the organizational structure, culture and disruptive innovation at Nokia.

Organizational culture is very essential to develop a business in global market special for smartphone industry through competing with other giant organizations. Horizontal type is the organizational culture of Nokia which is tremendously dynamic and flexible for all (Nokia Corporation, 2014). This organizational structure allows Nokia to make communication channel with different organizations.

Leadership

Leader at Nokia like Elop is failed to achieve the goal of organization as well as causes the decline of market share of smartphone. Nokia has failed to launch umbrella branding system which will introduce unique product system through releasing subsequent model each and every year. Using this umbrella branding strategy Apple launches iPhone series and Samsung launches Galaxy S series through better communication with the people. Nokia has also some complacency in success of leadership. Nokia has failed to detect and recognize the possible threat of smartphone from the market with less focus on the market. It has another problem of Headquarters in Helsinki which is less efficient than the Palo Alto headquarters.  Bureaucracy in leadership played a vital role for unsuccessfully leadership in Nokia and the innovations were shifted while other organization turns into smartphone industries.

Figure: Organizational culture

(source: De Wit and Meyer, 2010)

Corporate Structure

Nokia corporate structure is designed with Devices & Services, NAVTEQ and Nokia-Microsoft alliance.  Devices & Services launched in January 2008 with the combination of Mobile phones, Enterprise solution and Multimedia. NAVTEQ Corporation formed in July 2008 which is leading for providing digital map and locational information for automatic navigation system. Nokia Siemens Networks launched April 2007 jointly owned by Nokia and Siemens for doing Radio Access, Broadband connectivity solution and Converged core etc. In 2011 Nokia and Microsoft create an alliance to launch Windows smartphone named Lumia to capture the losing market share of smartphone.

Figure: Organizational Structure of Nokia (source: Nokia Corporation, 2014).

Nokia’s organizational culture is overloaded by the top level management traffic. This large number of top management members makes the complexity among team members and causes loses to Nokia. Bureaucratic problem arises due to this reason and business platform is damaging as well as Nokia is less focused on innovation and development.

(source: Nokia Corporation, 2014).

Due to the separation among top level management leads the inefficiency and also causes very slow down in the smartphone market. These will led a serious damages to the organization.

Figure: Sole individual at top management

(source: Nokia Corporation, 2014)

Nokia top management is characterized by sole individual top decision takers, which will leads more wrong decision and causes to the organization. That was done by sole management of Elop. Sole top management affects the steadiness and solidity of the production and above all functionality ( Friend and Hickling, 2005). It arises bureaucratic and inefficient development problem.

Organizational culture

Android and Windows smartphone ecosystem is trying get back the broken organizational culture of Nokia. The organization culture of Nokia and collaboration among the leaders is questionable. This culture does keep focused on the ecosystem which is the internet system. This culture also ignores flash video, java and others.  The change from MeeGo to MeToo does not seem to be a successful one. Elop also realize the unnecessary development of MeeGo rather he started to fire employees and management to capture the market. Where other organization is capturing the smartphone market (Hartley, 2011). Due to the introduction of Golden Parachute for the managers the employee’s performance leads to high for getting fear. At the same time for lack of confidence they started to make thing complex for the organization.

Disruptive Innovation

Smartphone are the disruptive innovation of phone and personal computer not an evolution of mobile phone.

Figure: S-curve theory

(source: Bower and Christensen, 1995).

Market share loss can be explained with help of S-curve theory. The theory reveled that at the initial stage technological advancement become slow, but after the breakthrough performance it raises rapidly form the low level. Nokia is activated with the S-curve by hardware and feature phones, when the introduction of multimedia phone began, Nokia responded lately and after that Lumia has less applications for the users (Nokia Corporation, 2014). Due to the less interest on research and development as well as software innovation Nokia became failure in the smartphone market. Nokia wanted to make them different in terms of other smartphone organization s but failed.

Personal reflections on learning

Impact of the assessment on personal understanding of the global smartphone industries competition

 The strategic alliance and partnership among different international smartphone organization help to achieve the desired goals of organization. With the help of proper direction giving corporate leaders help to acquire the objectives of a firm (Mixtsberg, et al, 1998).  Nokia gave less importance on the innovation and development which leads them decline in market share of smartphone. Nokia after realizing their poor condition on the smartphone world they started change their culture to regain their position from the market. Sustainable competiveness can be achieved with the strategic alliance, research and development ( Lunch, 2006). Nokia makes alliance with Microsoft which was a good decision to compete with other organizations. This will help Nokia to regain their losing market position in global smartphone market.

Recommendation and conclusion

MeeGo running handset got good review from the customers. Nokia has to focus on customer based and up to date smartphone which will make them different than others. They can produce more Windows phone and Intel specialized operated mobile phone or smartphone to achieve the market. Nokia has a reputation that, their product is usually sustained than others. They have to use these opportunities through providing more facilitated features smartphone with Microsoft. Nokia can reduce their production smartphone based on Symbian operating system to reduce the loss. Nokia has to keep in policy about the growing demand of smartphone market specially developing and underdeveloped countries, they need to focus on the efficient and effective smartphone production with less price. So that customers can make the Nokia different than others. Nokia should extend the partnership with Microsoft after 5 years contract. They need to make long term plan to execute the market. Nokia needs to introduce more and more android Windows smartphone like Nokia X and Nokia XL, which brought great success and thus Nokia expected to regain their market position in smartphone market.

References

Books

  1. De Wit, B. and Meyer, R. (2014) Strategy, An International Perspectives, 5th Edition, Cengage Learning.
  2. De Wit, B. and Meyer, R. (2000) Strategy Process, Content and Context International Perspectives, 4th Edition, Cengage Learning.
  3. Johnson, G., Scholes, K. and Whittington, R. (2005) Exploring Corporate Strategy: Text and Cases, 7th Edition, Financial Times Prentice hall.
  4. Lynch, R. (2006) Corporate Strategy, Fourth Edition, Financial Times Prentice hall.
  5. Mintzberg, H., Ahlstrand, B. and Lampel, J. (1998) Strategy Safari, Financial Times Prentice hall.
  6. Weinstein, A. (2004). Handbook of market segmentation: strategic targeting for business technology firms, Routledge.
  7. Friend, J. and Hickling, A. (2005). Planning under pressure: the strategic choice approach, Elsevier?Butterworth Heinemann.

Journals

  • Rao, A. S. (2014). Nokia-Microsoft alliance: Joining force in the smartphone wars. Strategy: An International Perspectives.
  • Fernandex, J. (2010). Nokia’s core strengths are best smartphone defence. Marketting week, pp. 5
  • Bower, J. L. and Christenson, C. M. (1995) Disruptive Technologies: Catching the Wave, Harvard Business Review Article: January- February 1995
  • Stulz, R.M. (1996) Does the cost of capital differ across countries? An agency perspective. European Financial Management2,
  • Bekaert, G. and Harvey, C.R. (2000) Foreign speculators andemerging equity markets. Journal of Finance 55, 565–613.
  • Useem, M. (1998) Corporate leadership in a globalizing equitymarket. Academy of Management Executive 12, 43–59.

Websites

  • Nokia Corporation, (2014). Anout us. [online]. Available at <http://www.nokia.com/>[ [Last accessed date 6th Nov ember 2014]
  • Nokia Corporation, (2010). Annual Results 2010. [online] Available at http://www.nokia.com/results/Nokia_results2010Q4e.pdf [Accessed on 11th November 2014].
  • Hartley, M. (2011). O&A with Nokia CEO Stephen Elop [online] Available at http://business.financialpost.com/2011/04/01/qa-with-nokia-ceo-stephen-elop/ [Accessed on: 8th November 2014].
  • Microsoft, (2014). About us [online] Available at <http://www.microsoft.com/>  [Accessed on 10th November 2014].
  • The Verge, (2013). Nokia finally reports profits after six quarters of losses: made $585 million profits in Q4 on $10.73 billion in revenue [online] Available at: <http://www.theverge.com/2013/1/24/3910528/nokia-q4-2012-financial-report-lumia-sales> [Accessed on: 11th November 2014].

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