Nokia - in the Face of Avid Competition and Declining Sales - Research Paper Example

Nokia- in the face of avid competition and declining sales Name Institution Background information Nokia corporation provides equipment in telecommunication, internet services, applications, music, digital media and digital map information. The company is located in Finland as its headquarters. Nokia Corporation has always enjoyed a huge market share in the manufacture and sale of mobile phones under the Nokia brand globally. The company has an employee base of more than 100000 people spread over 120 different nations across the globe. The revenues of the company in the fiscal year 2012 were recorded at 30 billion Euros, a decline from the previous year. The company has an asset and equity base of 30 million Euros and 8 million Euros respectively. Currently, the company is being faced with a possible 7 billion dollars acquisition from Microsoft Inc after decline in the volume of its sales and revenues. Business problem For the past five years, Nokia Company has been observing a worrying trend of decline in its volume of sales and revenues. Despite that fact that the company’s products have a large market presence and market share, the company seems to have lost its competitive edge. One of the major reasons for this decline has been brought about by the great level of competition that the brand has faced from other telecommunication companies such as apple, Samsung and HTC. The new hype in the mobile market and the advent of smartphones running on the android operating system has led to a huge drop in the volume of sales of Nokia mobile phones. People are now rushing to buy phones that run on android system. The android operating system has the capacity to run multiple applications on one device and this has made phones running on the system become more appealing. Efforts by the Nokia Company to produce smartphones to march those in the market have proved futile. Apple Corporation continues to grow stronger despite not using android because it has an appeal to a select market. Nokia on the other hand has to compete with other mobile phone manufacturers for the already flooded market. The results of financial data recorded in the last five fiscal years for the company have shown a declining trend. The company intends to analyze the future of the company using the research that will be carried out here. It will use the findings to make a decision on whether to go on with the acquisition plan from Microsoft or find another way to fight back and regain its competitive advantage. Research questions The following sentences detail a list of research questions that will be used to steer the research in this paper. How much is the decline of the volume of sales of Nokia Inc in the last decade? What are the strategies that have already been put in place by the Nokia Company to reverse this decline? What are the competitors of the Nokia Company doing that is adversely affecting the sales and market share of Nokia Corporation? Research objectives The research questions leads to the formation of the research objectives. The research objectives for this research study have been formulated in the following sentences. To find out the percentage decline in the volume of sales that Nokia Company has experienced in the last decade. To identify the various strategies that have been laid down by the Nokia Company to reverse a decline in the sales volume in the last decade. To investigate what the competitors of the Nokia Company are doing that is adversely affecting the sales and market share of the Nokia Corporation. Literature review Mobile phones have reinvented the way people interact with each other across the globe. Communication is a vital component of the livelihoods of every person in the world. People need to relate in some form or other. Before the emergence of mobile phone devices following a break - through in wireless technology, this aspect relied entirely on old and sometimes unreliable and very time consuming measures to deliver information between two parties (Koski & Kretschemer 2005, p. 90). The radio, TVs and the mail were the prominent forms of communication in the 19th and 20th century. Today, this seems to be a thing of the past. The development and improvement in telecommunication technology has become so advanced such that people no longer believe they had survived for so long without mobile phones (Mason 2007, p. 2; Varadarajan 2010, p.119). Numerous companies in the telecommunication field, Nokia Included, emerged in a bid to capture this overwhelming market. Nokia Company has in the past enjoyed a larger market share in the telecommunication market because of a number of strategies employed by the company as the following sentences formulate. Nokia has maintained a record of consistency in its quality all along (Nokia website 2013). People who bought the original releases of the Nokia Corporation mobile phones had good reviews of its capacity to deliver and the durability of the Nokia phones. The cost of the Nokia mobile phones was also structured to fit in the various market differentials the company target. For instance, the mobile phones which were shipped and sold to markets such as the USA and Canada were priced differently from those meant for the African market (He 2012, p. 48; Sherif 2006, p. 73). The differences lay in the economic endowment and the capability of the target market to afford such products. Revenues from the corporation were admirable and with numerous sales points and distribution centers across the world, the company was a market leader in the telecommunication and mobile technology industry. Internet technology came along and this lead, in one way or the other to the transition from the dull market era where a mobile phone was just used to make and receive call and send text messages to other advanced features. The technological savvy generation in the twenty first century demanded more and more from a hand held device (Wolf & MacKinnon 2002, p.2). People wanted to do with their phones what they could do with their computers and with internet, this was almost everything and anything one thought of. In a bid to clinch this market gap and deliver according to the demands of the new form of market, other companies came up with mobile phones that were described as being smart. Falaki (2010, p. 1) offers a definition of a smart phone as a mobile phone that has more capabilities in form of connectivity as well as computing capabilities than a normal feature phone. A feature phone has the capacity of making and receiving calls as well sending and receiving text messages as the basic features. A smartphone has those capacities too but can also do other very many activities depending on the operating system (Vehovar et al 279). Husso (2011, p.26) thinks that the operating system that a mobile phone uses to be able to do the various computing activities is the single most important thing that differentiates a smartphone from a basic feature phone. Koskia & Kretschmerb (nd, p. 4) agree with this thought and continues to argue that the various players in the mobile and telecommunication market are struggling to acquire very advanced operating systems that have the capacity to support the numerous applications and uses of smartphones. A basic smartphone has the capacity to hold and conduct a minimum of 60000 applications (Giachetti & Lampel 2010, p. 348). Singh (1998, p.4) states that earlier, the competition in the mobile technology and telecommunication market was regulated by a number factors which included government boards and even capital resources. Investing in the communications industry requires massive resources and a lot of investment in research and design. Today, companies have adopted a capitalist approach where they compete aggressively for the market of their products and services without much regulation apart from the forces of demand and supply. Other major players in this category are Samsung, Blackberry, HTC and Apple (Ahmed & Hassan, 2010, p.18). In a bid to keep up with the demands of the modern clientele, mobile phones manufacturing companies have adapted a system of investment into research and design to come up with new products each and every time (Anderson & Jonsson, p. 6). Mesnard (2010, p.1) argues that the greatest investment that mobile and telecommunication companies have made in the last decade lies in the research and design. It is through a continuous process of offering solutions to the humankind problems that have made these companies make such great strides into the development of smartphones. According to Prasad & Sahoo (2011, p. 16 ) and He (2012, p. 48), the future of mobile technology can only get more interesting pointing to the massive investments in innovation, research and design. It has become hard to please the current generation of consumers and because of this, only the best in the market appeals to them. Being in mind that mobile and telecommunication business is in a very dynamic industry, it is important for the various players to keep themselves abreast with the needs of the contemporary client (Benzoni et al 2011, p. 128). Findings The literature reviewed in this paper has provided some findings as the following paragraphs detail. The loss in the market share of the Nokia Corporation has been as a result of the increased competitiveness and aggressiveness of its competitors. The mobile and telecommunication market today is comprised of large companies who have the necessary resources and market presence to offer a great competition to the Nokia Corporation. A good example has been offered here in Samsung and Apple. In a bid to cope with this, Nokia Corporation has employed massive advertising and marketing strategies so that they can increase their market leadership gap, bring a stop to the revenues declining and maintain their competitive advantage. The insurgence of smartphones in the market is another factor that has been found as contributing to the declining sales of the Nokia Corporation (Nokia website 2013). Smartphones have captured the attention and the imagination of the modern consumer. There are billions of smartphones in the world today and the market is still huge. Samsung, HTC and Apple were the pioneer manufactures of these form of mobile devices. Because of this, they had the advantage of capturing the market earlier than Nokia Corporation. People want to own a mobile phone that has a capacity of supporting multiple features and a direct internet connectivity feature. This led to some people who were originally users of Nokia mobile devices to shift to smartphones shifting to other phones and subsequently reducing the market share of Nokia Corporation. Nokia came up with its own form of smartphones later to curb this competition. The Nokia Lumia line of mobile phones that have gained much ground and demand have stemmed from his effort. In their aggressiveness, many mobile phone manufacturers have managed to produce mobile phones that are not only price sensitive but also designed as smartphones. This has enabled even the low- income earners to afford a smartphone (Taylor 2005, p. 745). Due to this price sensitivity and differential, more and more people have moved away from the conventional basic feature phones that were the mark of Nokia Inc to affordable smartphones. This transition and shift in demand has sent the levels of sales of the Nokia feature phones down, making them have declining revenues in the last decade. Investments in research and design have been the turning mark of the various mobile phone manufacturers in the world today (Romaniuk & Sharp 2004, p. 329). There are billions of applications out there in the market and they have cropped out of the investment made in research and design. Most of these applications have to be synchronized so that they may be able to run in different mobile devices. Some applications may run in some devices and not run in other devices. The Android operating system is the most common operating system in this market, with a capacity of supporting an infinite number of applications. For this reason, many smartphones users have shifted to the phones that use android operating system. Most of the Nokia smartphones use Symbian as their operating system and sometimes this filters many basic applications making people opt to use cheap smartphones from other companies. Analysis of findings The findings in this paper relate to the research questions that have been formulated in an earlier portion of this paper. The findings have related the decline in the volume of sales of the Nokia Company to competition and aggressiveness of the other players in this industry such as Samsun, HTC and Apple. Innovations in research and design have led to the development of a whole new market and technological awareness in the contemporary third generation consumer. People want more features and more computing capabilities in their mobile devices. This is also coupled with the concept of pocket friendliness. The smartphones being produced in the world today cater for the needs, both feature and pocket wise of both the up-market as well as the low income earners. Another decline has been attributed to the operating system that runs in most Nokia smartphones. Unlike android, symbian operating system filters what users can do with a specific smartphone and the kind of applications they can run in a device. Most people prefer using android because of its unrestrictive capacity as opposed to symbian. This has led to the decline in volume of sales. The findings show that a counter approach, Nokia has invented Lumia smartphone to take care of its ‘smart’ customers. Research methodology For the conduct of this research, the methodology and approach to data collection has been highlighted below. Most data will be collected from secondary sources. These sources are books, articles, journals, online publications, magazines and other literary published works. To be able to collect comprehensive data, the researchers will divide themselves into focus groups. One group may focus on the competition of Nokia, another may focus on how Nokia is reacting to this competition. This method is effective because breaking down into focus groups will allow more data to be collected faster and with more precision. The scope of the research is the whole world. Nokia is a multinational corporation with branches all over the world. It is therefore likely that if one branch is affected, the whole company becomes affected. This forms the basis to conduct research on an international scope. References Ahmed, R & Hassan, A 2013, ‘Competition Strategies between Five Cell Phone Service Providers in Pakistan’, International journal of multidisciplinary sciences and engineering, vol. 4, no. 4, pp. 18-22. Anderson, M & Jonsson, M, E ‘The Mobile Handset Industry in Transition’, viewed 16 November 2013, http://www.jamieandersononline.com/uploads/The_Mobile_Handset_Industry_in_Transition.pdf Falaki et al 2010, ‘Diversity in Smartphone Usage’, MobiSys’ vol.10, pp.15–18. Husso, M 2011 ‘Analysis of Competition in the Mobile Phone Markets of the United States and Europe’, viewed 16 November 2013, http://epub.lib.aalto.fi/en/ethesis/pdf/12638/hse_ethesis_12638.pdf Koski, H & Kretschmer, T nd, ‘Entry, standards and competition: firm strategies and the diffusion of mobile telephony’, viewed 16 November 2013, http://dev3.cepr.org/meets/wkcn/6/699/papers/kretschmer.pdf Mason, R 2007, ‘The external environment’s effect on management and strategy, A complexity theory approach’, Management Decision Journals, vol.45, no.1, pp. 10-28. Mesnard, L 2011,‘More Firms, More Competition? The Case of the Fourth Operator in France’s Mobile Phone Market’, International Journal of Production Economics, vol. 130, no. 2, pp. 186-195. Milne et al 2013, ‘Microsoft in 5.4bn Euros deal with Nokia’, viewed 16 November 2013, http://www.ft.com/cms/s/0/c8204b3c-1446-11e3-9289-00144feabdc0.html#slide0 Nokia website 2013 ‘about us’, viewed 16 November 2013, www.nokia.com Prasad, V & Sahoo, P, K 2011, ‘Competitive advantage in mobile phone industry-Focus on Value Chain and Core Competency’, International Journal of Computer Science and Communication, vol. 2, no. 2, pp. 615-619. Romaniuk, J, & Sharp, B 2004, ‘Conceptualizing and measuring brand salience’, Marketing theory, vol. 4, no. 4, pp. 327-342. Sherif, K 2006, ‘An adaptive strategy for managing knowledge in organizations’, Journal of Knowledge Management, vol. 10, no.4, pp. 72-80. Singh, K 1998, ‘Guided Competition in Singapore's Telecommunications Industry’, industrial and corporate change, vol. 7, no. 4, pp. 585- 599. Taylor, D 2005, ‘Value chain analysis: an approach to supply chain improvement in agri-food Chains’, International Journal of Physical Distribution & Logistics Management, vol. 35, no. 10. pp. 744 -761. Varadarajan, R 2010,‘Strategic marketing and marketing strategy: domain, definition, fundamental issues and foundational premises’, Journal of the Academic Marketing Science, vol.38, pp. 119–140. DOI:10.1007/s11747-009-0176-7. Vehovar, V, Sicherl, P, Hu sing, T & Dolnicar, V 2006, ‘Methodological Challenges of Digital Divide Measurements’, The Information Society, vol. 22, pp. 279–290. Wolf, L & MacKinnon, S 2002, ‘What is digital divide?’ TechKnowLogia, pp.1-9. Read More