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Nokia – Business Model and Strategy

Title of the Course: Perspective in Organization

Name of the Instructor: Dr Neelima Watve

Written By: Sebastian

Introduction:

Nokia is a Finnish communication and IT corporation, which is founded in 1865.Initially they

started as a ground wood pulp mill. By the end of the century Nokia expanded their business by
adding electricity generation. In 1967 the Nokia Corporation was founded by merging the
companies.

The new company was involved in many industries, producing at one time or another paper
products, car and bicycle tires, communications cables, televisions and other consumer products.
Around 1978 Nokia started to develop a digital phone network. The first mobile network was
made in Scandinavia in 1981; this was initially for the car phones. In 1994 Nokia introduce the
2100 series, it goes on to sell 20million phone worldwide

Business Model:

Nokia has dramatically transformed in the face of changing environmental dynamics. The most
notable changes occurred in the period of 1985-1995, when the corporation's market focus
expanded from the original focus on paper, rubber, and cable industries to the field of consumer
electronics – which was eventually replaced by a focus on mobile telecommunications: mobile
telephones and mobile telecommunication networks.

Moreover, the changes in the corporate action patterns were just as dramatic. For instance,
periods of organic growth alternated with spells of frantic M&A activity. Also, the corporate
culture changed from a slow-moving conglomerate to a strategically agile and focused
telecommunications market leader.

The Growth of the Mobile Giant:

Nokia truly entered a new age GSM cell phone time with their Nokia 1011 model which was
launched in 1992.

During this time, Finland was undergoing a severe economic meltdown and Nokia was also in a
severely crunched economic situation.

In 1994, Nokia launched their 2100 series phones which were the first phones with the now
famous Nokia ringtone in them. Nokia had planned a target to sell 400,000 of these phones which
was a big number at that time, but they got lucky and it turned out to be such a huge success that
they sold over million devices worldwide.
WHAT WENT WRONG?

Strategy:

Symbian OS was created by Symbian Ltd., which was a joint venture between Psion, and phone
manufacturers Ericsson, Motorola and Nokia. Symbion was the most popular smartphone OS on
a global average till Q4 2010 with Nokia having Symbian as the OS in its all flagship phones. In
June 2008, Nokia acquired Symbian Ltd. under a decision to make the Symbian OS open-source
platform so that more developers can use it to develop their mobile apps.

In February 2010, it was officially made available as open source code. But it was a little too late
as Android, which was already open-source and freely available, and iOS has already started to
eat into Symbian market pie with their advanced platforms & a huge number of support
applications on the smartphones. On February 11, 2011 Nokia announced partnership with
Microsoft and carry their OS i.e. Windows OS in their smartphones.

Technology:

Nokia was a pioneer of technology in mobiles and cellphones.

Nokia came a long way to reach that state, but only due to aging staff and technology could not
stand to the new wave of competition.

Nokia had the Mobira series from 1982-1990 which were very popular during its times. From
1990- 1999, Nokia sold the Original series of phones, which also saw the inclusion of a newly
developed GSM technology.

Nokia later went forward to production color screen phones, digital camera featured phones and
even music capable phones. Nokia also had a gaming series of phones which were selling like hot
pancakes amongst teenagers.

People:

We have mentioned above the various CEOs of Nokia and their valuable contribution to the
company.

In September 2010, it was announced that Elop would take Nokia's CEO position, replacing Olli-
Pekka Kallasvuo, and becoming the first non-Finnish director in Nokia's history.
 On 11 March 2011 Nokia announced that it had paid Elop a $6 million signing bonus,
“compensation for lost income from his prior employer," on top of his $1.4 million annual salary.

As soon as Stephen Elop took over he sent an internal memo to his employees which got leaked
to the press.

The memo dubbed as ‘Burning platform’ was one of its kind and regarded as one of the most
ridiculous corporate memo. Below is a glimpse of its content.

Wrong Decisions:

While the entire smartphone OS industry was evolving, manufacturers moved on and adopted
various operating systems like Android, Windows, Bada, Meego, et cetera, Nokia decided to stick
to Windows OS only.

As Android and iOS became more popular, Nokia and its windows phones failed to attract any
attention. Though the new technologies developed by Nokia were ground breaking, they were not
promising enough.

Results:

During the 3 years Elop was Nokia CEO, Nokia revenues fell 40%, Nokia profits fell 95%, Nokia
market share collapsed in smartphones from 34% to 3.4%.Nokia's credit rating went from AAA
to junk, Nokia's share price dropped 60% in value and Nokia's market capitalization lost a
minimum of $13 Billion in value.