The Changes at Nokia - Case Study Example

Running Header: Case Study on Nokia Student’s Name: Name of Institution: Instructor’s Name: Course Code: Date of Submission: Table of Contents Table of Contents 2 Executive Summary 3 Introduction 4 The Smart Phone Market 5 The Changes at Nokia 6 Nokia’s Main Competition 7 Management Challenges and Strategic Management Decision at Nokia 8 Conclusion 11 Executive Summary In any organization today, change is bound to occur. These organizational changes might be experienced in the form of technological changes, strategic changes, missionary changes, changes in attitudes and behaviors of personnel and operational changes which may include structural changes (Sadowski and Dittrich 2003, 125). Organizational change management approaches and processes have been designed by scholars and researchers to help organizations to manage change well and still remain effective while undergoing major or minor changes. Change has become a crucial phenomenon that needs to be addressed by the management teams in many organizations today (Afuah 2000, 390). Organizations that manage their changes have proven to be more effective and efficient in service delivery and performance. It is usually impossible for any organization to ignore change. Organizations are also faced with numerous organizational challenges that they need to address. These challenges may range from fading away in the market as a result of competition, labor shortage, high staff turnover, cultural and workforce diversity, mergers and acquisitions, corporate social responsibility, employee engagement and strategic management among many others (Taylor and Hansen 2002, 1225). All these management challenges need to be addressed and countered by proper strategic management decisions so as to ensure that a business continues to thrive despite the many problems it faces. Strategic management decisions are a crucial part in managing the change process in any organization and in addressing management challenges. This paper is a business report that reflects the findings of a case study done on the Nokia Corporation addressing the challenges faced in the smart phone market. This essay outlines the implications that management challenges may have to the Nokia Corporation and strategic management decisions that Nokia can consider so as to effectively deal with the change processes that it is currently undergoing (Nokia 2007). Introduction The Nokia Corporation is a multinational communications company of Finnish origin that dates back to 1865 and has its headquarters in Keilaniemi, Epsoo, which is a city in Finland, next to its capital Helsinki. Nokia deals with the manufacture of mobile devices and is also a key player in communications and internet industry. Currently, Nokia operates in over 120 countries worldwide and has employed over 132, 000, personnel in these countries. The global annual revenue of the Nokia Corporation stands at € 42 billion. Its operating profit as of 2010 was € 2 billion as a result of the sales that it makes to over 150 countries worldwide. Nokia is currently ranked the world’s largest mobile phone manufacturer and its global device market share during the fourth quarter of 2010 stood at 31%. However, during the first quarter of 2011, this figure dropped to below 30%. Nokia specializes in the production of mobile phone devices for every recognized market segment and also produces mobile devices for major protocols such as W-CDMA (UMTS), CDMA and GSM. There are numerous internet services offered by Nokia including music, maps, applications, messaging through its Ovi platform and games among others. The Nokia Corporation has a subsidiary called the Nokia Siemens Networks which is responsible for the production of telecommunication network equipment, services and solutions. Nokia provides free information about digital maps and other navigation services through its other subsidiary, Navteq. Symbian Corporation, an England based company, manufactures mobile operating systems and develops applications software that are mobile based for Nokia. Through its distribution channels, Nokia has been the highest selling vendor of mobile phones over the past few years (Haikio 2002, 13). According to Haikio (2000, 34), over the years, Nokia has been facing stiff competition from other key players in the industry on some of its key products. In this particular case study, it has been reported that Nokia has been fading in the smart phone market that it thrived in and dominated for quite some time. Stephen Elop, Nokia’s new Chief Executive Officer, has been engaged in tireless efforts that have been aimed at turning this situation around (Conner 1998, 57). Nokia has for the longest time been the world-leader in the handset and smart phone market but it is now ailing because of the decline that has been noticed in the smart phone market that was once booming. The root of the problems experienced at Nokia has been identified as its continuous eroding and weak position in the smart phone market. The CEO has set up numerous strategies which Nokia is now struggling to implement so as to retain its cherished top position in the mobile device industry (Merriden 2001, 37). The Smart Phone Market Business analysts have predicted that by the end of this year, more than 420 million smart phones would have been sold to users from all over the world. This is because the market for these smart phones has continued to boom ever since their inception. Annual smart phone sales have been predicted to top the list of one billion devices to be bought by the year 2016. This accounts for one out of every two mobile handsets that are bought by clients. In the global mobile handset market, smart phones currently account for close to 28 percent of these handsets. This has been partly attributed to the fact that more and more affordable smart phones have been introduced at different entry levels in the market. More people have been able to afford these phones and acquire them at a high rate. Reports by the IMS research have revealed that the boom in markets for smart phones has seen different outcomes for their vendors, Nokia included. Smart phones entered the mobile device market with a bang and many consumers soon got themselves one because of the high demand of these devices. However, not all manufacturers have been able to keep up with these trends since not all of them are at equal positions to capitalize on this smart phone market. The Nokia Corporation recorded a decrease in smart phone sales down to 16.7 million, which was a 34 percent decline from 2010. The Changes at Nokia Nokia predicted that it might not realize its usual profits because of the decline in sales of their smart phones. This decline has mainly been as a result of the stiff competition from its rivals such as Apple and Samsung which took over the top spot. As a result of this, Nokia has had its share values drop to the lowest levels ever and its sales levels have also been threateningly low. Over the last four years alone, Nokia has lost 75% of its market value, owing to the drastic decline in sales of mobile devices, mostly the smart phone. Nokia changed drastically from the largest technological and mobile device company in Europe. Analysts such as Josh Bullita with the IMS, note that traditional market leaders such as Nokia got comfortable with dominating the market for too long and soon failed to recognize and adjust to the fast growing smart phone market. Some of the reasons that were cited as leading to Nokia’s failures were unsatisfactory user interfaces, poorly designed and made devices and products that do not have portfolios with differentiated features. Newer entrants into the market have taken competitive advantage of this situation and capitalized on these weaknesses so as to get to the top market spots that they are now enjoying. Nokia’s smart phones have not been comparable to those of their competitors such as Android phones and Apple’s iPhone. The quality of Nokia’s smart phones has been disappointing and that is why the company has not been able to dominate the smart phone market despite being the market leader in other mobile phone devices for very many years (Merriden 2001, 102). Nokia’s Main Competition Nokia has been facing stiff competition from other committed smart phone manufacturers and vendors in the market. Ironically, some of these major competitors are not even known since they are merely bottom end manufacturers. These manufacturers provide mobile handsets to customers in India, China and a majority of developing countries. Nokia has for the longest time dominated the market in terms of more basic and cheaper mobile phones that are still user friendly. However, this situation is fast changing, owing to the stiff competition that Nokia now faces from the Chinese mobile handset manufacturers. The middle market is also giving Nokia very stiff and tough competition. This includes mobile device companies such as LG and Samsung. Such companies are employing the strategy whereby they respond very quickly to the slightest new feature in mobile handsets that proves to be popular and desirable among the consumers (Black and Hal 2009, 89). These companies have been said to be better placed at benefitting in future from the growth that is projected in the smart phone market. The Study conducted by IMS revealed that the company which has flourished the most in the smart phone market is Apple. In the second quarter of this year alone, the company sold over 20 million smart phones and the figures are projected to take an upward trend owing to the satisfactory nature of their products. Despite the very stiff competition, Apple is also projected to remain very influential in the market. In fact, Apple now enjoys a market share of 19%, meaning that it has stripped Nokia of its top position in terms of dominating the mobile handset market. Samsung Electronics Company Limited has also moved ahead of the Nokia Corporation in the mobile device market, especially the smart phone sector, with the launch of the Samsung Galaxy smart phone which has already passed the 5 million mark in terms of sale. Other android powered mobile handset devices have also given the Nokia Corporation stiff competition. Ever since the android platform was released in 2008, many companies embraced this technology and have managed to remain on top of the smart phone market. The Nokia Corporation did not embrace this technology and it is now that it is struggling to do so with the aims of making a comeback into the market (Adner and Levinthal 2004, 80). Management Challenges and Strategic Management Decision at Nokia Strategic management decisions are those that are concerned with the entire business environment that a company operates in, its resources and personnel. This process helps in the formulation of effective organizational goals. This process involves the planning and implementation of organizational strategies as well as making of crucial management decisions that are meant to enhance performance. Change management on the other hand has been described as the systematic approach that deals with the changes that may occur in an organization during its operations. Change management in many organizations is addressed at both individual and organizational levels. One major management challenge that Nokia has been experiencing is that the demand for Symbian based mobile platforms has drastically gone down. This has been caused by the advent of newer and improved mobile device platforms such as the android which have become more popular among consumers. The Symbian operating systems have now become outdated and Nokia is seeking new ways to ensure that it also keeps up with its competitors. It has to adjust by undertaking different strategies that are aimed at returning it to its original position. One strategic management decision undertaken by Nokia is the partnership that it entered with Microsoft in February. This partnership was aimed at allowing the Nokia Corporation to get rid of the Symbian operating system that is commonly used in Nokia mobile devices and manufacture new smart phones that make use of Windows software as their operating systems. This strategic management decision came in the right time because Nokia has never had a Windows phone device before. This would ensure that it manufactures smart phones that are one of their kinds in the market. Microsoft also said that it is eager to see the first of Nokia’s Windows phone products. This move is a step in the right direction because Nokia seriously requires a new, different and unique breed of products. Nokia is committed to launching these brands by the end of this year (Axelrod 2000, 34). Another strategic management decision that has been taken by the Nokia Corporation is the drastic cut in prices of its products. This was mainly because of the stiff competition faced by the company from Chinese and European mobile phone manufacturers. Nokia was forced to cut its prices so as to encourage and motivate consumers to acquire their handsets in preference to the other handsets from other companies. The Nokia CEO noted that the major problems experienced at the Corporation were mainly as a result of competition from Google’s android platform and operating systems. It is however highly recommended that Nokia continues to strategize on how to survive in the highly competitive market because no matter how hard it is trying to remain competitive and profitable, other companies are also not sleeping either. For example, the HTC has recently joined the Mango platform by Windows and is bound to give Nokia stiff competition. The company has launched smart phones that are even using the Windows 7 platform. This means that Nokia will face stiff competition from other key players in the market who are using equally strong strategies. The Nokia CEO should also encourage investment in the organization in the form of shares sold to the general public. These share prices should be made in such a way even ordinary citizens are made to invest in the company. The other phone manufacturing industries have gotten to the point of making phones that are embraced by the younger generation globally. Nokia phones are normally made to satisfy consumers with basic phone needs so there is need to come up with ideas that may help the phone brands to be accepted by the younger generation, who make up for a huge percentage of the world’s population. Embracing such ideas could help the company’s innovativeness be welcomed by the general public. This in turn could help the company get back on top (Adner and Levinthal 2004, 75). Another strategic management decision that will help Nokia to manage the changes in the market is the planning shedding of 7,000 jobs so as to save over € 1 billion by the year 2013. By shedding off these employees, the company can only retain a few employees that are effective and reliable in fulfilling the company’s mandate. Just like any other great business, Nokia must have the ability to see weak points and react to these problems quickly. This is the only way that the company can maintain a competitive edge over the rest (Kotter and Dan 2002, 75). Conclusion The mobile device sector is today a highly competitive and fast-paced sector. Nokia has made many mistakes over the years such as losing touch with the customers by maintaining products that have been surpassed with time and products from other countries. The new CEO, Mr. Elop, joined the Nokia Corporation as a former executive from Microsoft. The CEO has brought in new strategies that were used at Microsoft to ensure the success of the Nokia company. Mr. Elop has also facilitated the partnership between Nokia and Microsoft that will see Nokia use Windows software for their smart phones and other mobile phone softwares (Haikio 2002, 98). References Adner, R. and Levinthal, D. A. 2004. ‘What is not a real option: considering boundaries for the application of real options to business strategy.’ Academy of Management Review, 29(1): 74 – 85. Afuah, A., 2000. How much do your co-competitors’’ capabilities matter in the face of technological change? Strategic Management Journal, Special Issue, 21, 387–404. Axelrod, R. H. 2000. Terms Of Engagement: Changing The Way We Change Organizations. San Francisco, California: Berrett-Koehler Publishers, Inc. Conner, D. R. 1998. Leading At The Edge Of Chaos: How To Create The Nimble Organization. New York: John Wiley & Sons, Inc. Haikio, M. 2002. Nokia: The Inside Story. 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