With the growth in competitive business environment, the organizations may face different issues, which can impact the operations and revenues of that company. These issues may be related to different aspects, like; competition, deficiency in operations, dissatisfaction of employees and lower employee morale etc. Sometimes, it may happen with the organizations, which are well-established in the market. For this analysis, the issue of Nokia Company is taken into consideration. Nokia was a well-established name in the mobile phone industry for a long time. With the launch of Smart Phones, the organization had confronted different issues.
Purpose of Report
The major objective of this report is to discuss a major issue, which has been handled by the company and that has been already resolved. This report is prepared to analyze the issue and solutions, implemented by company utilizing decision making and problem solving theories. Another objective of the task is to recommend alternative approach, which could have brought better solution to the company.
This report will first provide the description about the organization selected for this analysis, i.e. Nokia and then it will include the issue, confronted by the company. Moreover, it consists of the decision, which this organization has made to resolve that issue. Following will be the critical analysis of the approach by evaluating theories and recommend an alternative approach to get a better solution. These suggested solutions using the theory will be briefly included by the use of objective setting framework that will conclude the goals of the report.
Company, Problem and Approach Used to Solve
Company Introduction
Nokia is the international information technology, communications and consumer electronics organization, which was established in the year 1865. The company is headquartered in Espoo, Uusimaa in Helsinki metropolitan area. As of 2016, the company has provided employment to around 101,000 people in more than 100 nations and operated its business in over 130 countries. Moreover, it has reported the yearly revenues of € 23.6 billion. It is a public company that is listed on New York Stock Exchange and Helsinki Stock Exchange. This organization has had several sectors in its history of 152 years (Carral & Kajanto, 2008). For many years, Nokia has been worked as a market leader in the mobile phone industry. In the year 2013, the company was acquired by Microsoft and its mobile phone business was owned by this company.
The Issue (The Down fall and Rebirth of Nokia, 2008-2013)
With the emergence of smart phones information technology industry, Nokia Corporation had confronted various issues in the competitive business environment. The major issue, which was faced by the organization, is its downfall due to introduction of smart phone operating system, Android that is released by Google in the year 2008. At that time, it was became a new market transformation. The storm of smart phones directed by Android and iPhone has demonstrated to become market majority (Ali-Yrkkö, et al, 2013). That was the first time, when Nokia did not occupy top position in the mobile phone industry. It has affected market share of the company in the year 2011, which was declined from 33% in the year 2010 to 14% that was lower than Samsung and Apple.
According to the Mobile user’s behavior research survey, 2012, published by CNNIC, 53% users of Nokia planned to purchase the smart phone in the future. From them, 43.3% selected Android System and 28.6% chose IOS system by Apple. This customer switching indicated that market share of the company will be declined more in the future. In this situation, the company was not only faced how to strive for new mobile users, but also how to retain existing users (Anderson et al, 2015).
Reasons behind Nokia’s Downfall
There are so many reasons, which cause the downfall in Nokia’s lifespan. These factors are the major reasons, why there was decline in the sales of Nokia’s mobile phones and its market share. These reasons are stated below;
Executives at Nokia were unable to grasp the market:
There were changes in the demands and preferences of customers, but the executives of Nokia were unable to understand the market. Still, it had adopted the product oriented and technology oriented strategies. For instance, the company was attempting to make its phones hard to broken and introduced new ways to enhance its battery’s life. Thus, they have ignored the needs and taste of customers by considering different characteristics (Borhanuddin and Iqbal, 2016). The decision making, which was not done on the basis of demand of customers, led Nokia to isolate itself from the industry.
Deviation in the business tactics of organization:
There was the deviation in the marketing tactics of the Nokia Company. It means the company should pay attention on the customer needs, but Nokia just valued the hardware business and avoided the software business (Carral & Kajanto, 2008). The operating system of this mobile phone was Symbian. This system was old and not compatible.
Lack of Teamwork at Nokia:
The major mistake of the company was that it had denied co-operating with other mobile phone producers in business operations. There are so many Android camp companies’ cooperation was not sufficient to compete with Nokia.
Analysis
Critical Evaluation of Approach Used by the Organization
To deal with the issues, Nokia has implemented various approaches and theories. The major approach, which is used by the company, is strategic partnership approach with Microsoft. To deal with the situation, Nokia made the decision to sell its mobile phone segment to Microsoft Corporation for $7.2 billion in the year 2013 (Ciesielska, 2017). This collaboration between both the organizations enhanced. In February, 2011, the organizations declared the plans to develop a wide strategic partnership, which would utilize their expertise and strengths to create an innovative global mobile eco-system. The companies made this decision to adopt Windows Phone Operating System like the major smartphone platform for the company’s devices.
Under this approach, The Head of Microsoft Business division restructured the Executive Management Team and all over hierarchy of company, piercing Services & Devices business unit into Mobile Phone and Smart Devices units. This department of the company clearly let to new strategic direction (Doz, and Wilson, 2017). It assisted the organization in regaining the effective leadership in the market of Smart Phones and for retaining at the top position in mobile business segment. It has reformed its operational structure.
Focus on Growing Markets
After this approach, the company had discontinued the MeeGo and Symbian platforms. After that, Nokia had introduced its first Windows Phone smartphone in the year 2011 under its brand name, i.e. Lumia for directly competing with the Android devices and IOS of Apple. After 2 years of this collaboration, in 2013, the firms announced that Microsoft will buy all the services and devices unit of Nokia, its patents, license and mapping services of the company. This strategic partnership with Microsoft assisted Nokia in obtaining success with the assistance of this cooperative development. This was the rebirth of Nokia after the collaboration (Ferrell and Fraedrich, 2015). This introduction of new phone assisted the company in making its brand recognition again.
But this had not paid off yet that can be seen by considering company’s Q1 earnings. However, it was a better relationship in the documents, but it was very late over two years after introducing the Android and iPhone picked up the market steam. After implementation of this critical approach, the company moved very slowly in the Smart Phone market and it did not deal with the competition at the lower end of industry (Fu, 2010).
Like other smartphone manufacturers, Nokia had seen the revolution coming, but after some time, it fell, when Apple overturned the mobile sector upside down by introducing iPhone. Other mobile phone companies, such as; Huawei, ZTE and HTC have attacked this company from lower end in emerging countries, like; China. Still, the organizations did not use innovation in the mobile phones and in other smart devices. It is said that nothing is permanent. And whatever goes up should come down. However, it does not deny the fact that Nokia stays a huge part of mobile phone market history, which cannot be forgotten (Goodwin and Wright, 2014).
Improvements Suggested in the Approach Used
There are some recommendations, which could be assisted to Nokia for improving its approach, i.e. strategic partnership with Microsoft. This partnership with the company was good for the company, but it was not that much successful to become competitive in the smart phone industry. The Windows operating system was not successful as it was not user friendly. It was very difficult to operate as compared to Android operating system. In the place of Windows, the company should have adopted android system, as windows platform is not more competitive, because they slowly included features after other systems have, for instance; full Bluetooth assistance (Yi, 2011). Nokia can still cover the market by making better smart phones and utilize Android Operating System. In this way, the company can improve its approach, when it was facing the issues.
Other Available Approaches
As discussed above, the company has gone under the strategic partnership and collaboration approach to rise again in the Information Technology industry. From the above analysis, it can be understood that company is confronting these issues due to lack of innovation in the mobile phones and technology. The company has made focus on the product technology and did not incorporate innovations in its mobile phones.
There are some other decision making and problem solving approaches, which could be used by Nokia under the situation of downfall. Although, the growth of company was very slow after this, but somewhere it assisted the organization in establish its brand identity again (Jia, & Yin, 2015). After looking at the above reasons behind downfall, the organization should make changes in its marketing, leadership and management process. Apart from this strategic partnership and other practical approaches, the company should go ahead with the theoretical approaches.
Research:
Marketing research is a systematic approach that can be used to understand the current market trends and needs and preferences of the customers. It assists the organization in gathering the information about the target market and customers. The organization can use this approach as an effective business strategy.
If Nokia adopted this approach, then they would have been able to understand the needs of people. There was a need of grasping the market trend accurately. By this, organization would have been able to understand the current market trends. They could understand that in the mobile industry, the demand of customers has shifted from durability and functionality to entertaining and intelligence. The company could have better understanding about the market changes by conducting market research to get the latest data of changes in the customer demands (Laamanen, Lamberg, Vaara, 2015).
This approach will assist the organization in understanding the mobile phone users. It will enable the organization in seeking for developing the software and the emphasis will be shifted from quality of calls to different applications and operation simplicity (Yi, 2011).
Appropriate Business Tactic Development:
Business tactics refer to the action, which a company takes to create their advantages and develop space for growth and survival. Under this, the company considers the merits and demerits in competitive business environment.
Under this situation, Nokia should leave the programs, which are not appropriate for the company’s project quickly. Like; the company was unable to meet the customer demands and smart phone needs with the Symbian system. The company should learn from the strategies of Samsung as it adopted the android operating system (Pal Singh, 2014). The company should understand that it should implement an effective tactic to deal with the situation.
This approach will assist the organization in regaining the leading position in the mobile phone industry (Lee, 2013).
Cooperative Approach:
The organization must use co-operative approach than competitive approach. By co-operating with other companies in the industry, an organization can have various advantages, like; increase in market share and revenues.
In mobile phone industry, there are various players with Android system, who grabbed the market share of Nokia. So, the company should cooperate with other mobile phone providers to extend the whole cell phone industry. It should implement the win-win tactic (Pettigrew, 2014).
By using this approach, the company will be able to increase the share of profits. Implementation of win-win tactic will assist the organization in preserving them in competitive business environment and it will create strategic partnerships to seek assistance for future growth.
The Best Approach
From these approaches, the best and most appropriate approach is marketing research that can assist the company in offering maximum satisfaction to the customers. To understand the expectations and changing tastes of the customers, Nokia can conduct marketing research. When Google and Apple have introduced their operating systems, i.e. Android and iOS respectively, there was decrease in the sales of Nokia mobile phones (Proctor, 2014). The people have shifted towards more entertainment and application-oriented phones. It can use questionnaire to know about the taste of customers. The company should have implemented this approach effectively. It could have helped the company in retaining its customers.
Stock Market Analysis
Reaction of Investors to Problem and Solution
As discussed in introduction section, Nokia Corporation is listed on New York Stock Exchange and Helsinki Stock Exchange. When the organization was facing the issue related to products and innovation, it had affected the market value of the company on share market also. Till 2008, Nokia was the 5th most valuable brand in world (Surowiecki, 2013). Under this event, the politicians argued that nation required a new Nokia.
Most of the mutual funds decreased to make investment of shares of their funds in Nokia. Shares of the company started to collapse, when the first iPhone was launched in 2007 and the company does not own any product, which is close to their product. The decline in the share price at share market shows that investors of the company have sold their shares by looking at the problem of Nokia. They have withdrawn their interest and shares from Nokia, which have declined the market value of the company during the period of 2008 to 2013. When the company has partnered with the Microsoft, it has enhanced the brand recognition of Nokia among investors, but it has also affected their response to the Microsoft’s shares during that period.
Trend Analysis of Share Price during the Period
As the investor’s response towards Nokia’s shares was negative, it has affected the market value of the company adversely. The company has faced a sharp decline in the share prices, which can be seen by looking at the below-given graph;
The graph indicates that in the period of 2008-2013, the share prices at stock market are decreasing. In the 2007, Apple had introduced its iOS operating system and furthermore Google had introduced Android. It affected the business and sales of Nokia mobile phones, which are not with attractive and entertaining applications. The share price of the company had declined from 10.55 in 2009 to 6.79 in 2013 (Taylor, 2013). There was a major decrease in the figures. After 2013, it can be seen that share prices started to increase after Nokia’s collaboration with Microsoft. It had installed Window operating system in its phones. Thus, the issue affected the position of company on share market adversely. By using new approaches, it would have been able to enhance it again (Vuori, and Huy, 2013).
Conclusion
From the above analysis, it can be concluded that Nokia has confronted a major issue due to launch of Android and iOS operating system. This problem has declined the sale of its mobile phone and affected its position in the market. The company had implemented an approach, which was not more profitable to the company. There are some suggestions for the company, which can improve the applied approach of Nokia. By using these approaches, company would be able to enhance its performance in the smart phone market. The company can go ahead with different approaches, like; market research, Appropriate Business Tactic Development and Co-operative approach. The analysis concludes that the best approach for Nokia can be market research, which would have helped it to overcome the issue.
Recommendations
It is hereby recommended that company should have implemented some other approaches, i.e. marketing research, co-operative approach etc. to overcome this situation. The paper includes some other approaches to handle the situation. It will assist Nokia to get its leading position in mobile phone market. In addition to this, the company should develop the smart phones with the android operating system, which is user friendly and offers different features to its customers.
For the readers, it is recommended that they should understand the case problem and its solutions carefully. The given and suggested approaches can be used by the readers in further studies and resolving the related cases for other organizational issues. This analysis will assist the readers in understanding the issues and ways for implementation of decision making and problem solving techniques.
References
Ali-Yrkkö J. et al., 2013, Microsoft Acquires Nokia: Implications for the Two Companies and Finland. ETLA Brief no 16. Retrieved from https://www.etla.fi/en/publications/microsoft-acquires-nokia-implications-companiesfinland-2/.
Anderson, D.R., Sweeney, D.J., Williams, T.A., Camm, J.D. and Cochran, J.J., 2015. An introduction to management science: quantitative approaches to decision making. Cengage learning.
Borhanuddin, B. and Iqbal, A., 2016. Nokia: An Historical Case Study. Electronic Journal of Computer Science and Information Technology: eJCIST, 6(1).
Carral R., Kajanto M., 2008, Nokia: a case study in managing industry downturn. Journal of Business Strategy, Vol. 29, No. 1, pp. 25-33.
Ciesielska, M., 2017. NOKIA ON THE SLOPE: THE FAILURE OF A HYBRID OPEN/CLOSED SOURCE MODEL. The International Journal of Entrepreneurship and Innovation.
Doz, Y. and Wilson, K., 2017. Ringtone: Exploring the Rise and Fall of Nokia in Mobile Phones. Oxford University Press.
Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases. Nelson Education.
Fu, Z.S., 2010, Nokia Smart Phone Satisfaction Is Not High Operating System Closed or the Main Reason. Communication Information.
Goodwin, P. and Wright, G., 2014. Decision Analysis for Management Judgment 5th ed. John Wiley and sons.
Jia, J. & Yin, Y., 2015, Analysis of Nokia’s Decline from Marketing Perspective, Open Journal of Business and Management.
Laamanen, T., Lamberg, J. A., Vaara, E., 2015, Explanations of success and failure in management learning: What can we learn from Nokia’s rise and fall? Academy of Management Learning and Education.
Lee, D., 2013, Nokia: The Rise and Fall of a Mobile Giant, Retrieved from https://www.bbc.com/news/technology-23947212.
Pal Singh, N., 2014. Microsoft acquired nokia in unipolar operating system market. Independent Journal of Management & Production, 5(3).
Pettigrew, A.M., 2014. The politics of organizational decision-making. Routledge.
Proctor, T., 2014. Creative problem solving for managers: developing skills for decision making and innovation. Routledge.
Surowiecki, J., 2013, Where Nokia Went Wrong, Retrieved from https://www.newyorker.com/business/currency/where-nokia-went-wrong.
Taylor, D.W., 2013. Decision making and problem solving. Handbook of organizations, pp.48-86.
Vuori, T.O. and Huy, Q.N., 2016. Distributed attention and shared emotions in the innovation process: How Nokia lost the smartphone battle. Administrative Science Quarterly, 61(1), pp.9-51.
Yi, M., 2011, When Nokia Met Apple. Business Management, 12, 60-62.
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