NOKIA Case
1. Timeline of Nokia
Prior to becoming a popular telecommunications company, NOKIA had been into paper products, vehicle
tires, rubber boots, communication cables, plastic aluminum, chemicals, electronics, electric generation
devices, robotics, capacitors and also military equipment production.
1865 - Fredrik Idestam first started the multinational corporation, NOKIA as a ground wood pulp mill.
Later with Leo Mechelin they turned it into a shared company - Nokia Ab.
(Beginning of 20th Century, Nokia started a rubber business after Eduard Olon’s Finnish Rubber Works
(Suomen Gummitehdas Oy). It also included electricity in its business after Idestam retired. They
expanded it then to a cable and electronics business when it joined Finnish Cable Works (Soumen
Kaapelitehdas Oy).
1960 - Pres Bjorn Westerlund - established 1st electronics department leading to the birth of
telecommunication business. They focused in the radio-transmission equipment production at Finnish
Cable Works.
1967 - (Nokia Ab, Suomen Gummitehdas, Soumen Kaapelitehdas jointly owned in 1922)
merged as a conglomerate to be known as Nokia Corporation.
1970 - Nokia got more involved in producing telecommunications devices such as
network equipment and digital switches for the telephone exchange.
1982, Nokia claimed that they produced the first fully digital local telephone in Europe and first car phone
for Nordic Mobile Telephone (NMT) with a network standard of 1G.
1992 - name changed to Nokia Telecommunications, Finnish state sold its shares
company called Telefenno to Nokia Corporation
One of Nokia’s breakthroughs in telecommunication technologies was the development of a
Global System for Mobile Communications (GSM 2G), the second generation for network
standards that can transfer both voice traffic and data.
During the 1990’s - Nokia had become the world’s largest manufacturer of phones until 2012. Combined
with Siemens Network, - they led mobile broadband technology and services.
1996 - 1999
Nokia had a massive breakthrough in sales as they have developed multiple phone experiences for
consumers such as the text messaging, ringtones and the games integrated to the products. In 1997, the
famous 5110 had been sold. In 1998, nearly 41 million units of the Nokia 6100 were sold, as it was a
success compared to Motorola, and Nokia became the top mobile phone maker. By the end of 1999,
Nokia sales increased 50% year- on-year, and profits shot up nearly 75%. Their stock price reached 220%.
2000’s Nokia established component workshops and lost its product-centered approached.
Nokia manager said that they forgot that the company was actually selling mobile
phones for people; the product became characterless, standard fare devices combined together out of
basic components and not really differing one from another in any meaningful way. Innovative and
creative thinking was replaced by factory thinking
In 2008, Nokia decided to discontinue the cellular modem and
focus on the CPU and modem as one system-on-a-chip (SOC).
In 2009, consumers were getting more conscious of what apps to expect in their phones, and many
developers focused on iOS and Android platforms, moving away from Symbian.
The same year, Nokia laid off 1,700 employees worldwide. The mobile phone market had
changed direction toward Apple, Blackberry, and newcomers like HTC, LG and Samsung.
In 2010, 91% of developers were interested in developing for the iPhone, 82% for Android, 28% for
Windows Phone 7, whereas Symbian dropped to just 13%. In the same year, Samsung and Sony Ericsson
abandoned the Symbian platform.
In 2011 - Nokia joined forces with Microsoft to enhance its position in the smartphone market rival iOS
and Android
Nokia assumed that downloading apps was only done by the minority of people.
Nokia also reportedly did not understand the significance of apps, software and building an ecosystem
around the apps. Additionally, they underestimated the importance of third-party apps in smartphones.
In September 2013, Nokia sold its
Devices and Services to Microsoft, ending its many years of mobile phones reign.
2. What were the microenvironmental and macroenvironmental factors which have affected
Nokia’s performance over the years?
Microenvironmental Factors
The Company:
During the start and rise of Nokia Telecom. The research and development group of Nokia had
successfully impressed the public since they produced the 1 st digital local telephone and 1st car phone for
Nordic Mobile Telephone (NMT) with 1G network standard. Nokia’s one breakthrough was upon the
development of Global System for Mobile Communications (GSM 2G) but unfortunately, Nokia’s R&D
group wasn’t able to develop its product as they once refuse the change of their design and failure to give
importance to research to develop and adopt strategic approach to understand the needs of the market.
Nokia management just couldn't steer the huge multinational company quickly enough, they are more on
spending money on the problem instead of innovating their product.
Suppliers
Symbian Operating System or Symbian OS wasn’t able to meet on time the demand of Nokia to
compete with iOS of iPhone and Android. Also, the same thing happens with Microsoft OS, with its high
price for specifications it also fails to satisfy Nokia the quality it needs for its product which damages
customers’ satisfaction.
Competitors
Nokia was before the most competitive company in the mobile phone industry surpassing
Motorola but didn’t see the rise of iOS and Android and wasn’t able to cope up with them. They have
failed to satisfy and provide greater customer satisfaction than its competitors. Also, their failure to
identify the needs and preferences of their customers faster than to their competitors is one factor of
their downfall.
Customers
Nokia was named to be the best-selling mobile phone company in the world that impressed their target
markets with their unique features on their product, e.g. snake game, fluid system menu, text messaging
and etc. but, Nokia wasn’t able to retain their strong customer relationships. They have failed to focus on
the needs and preferences of their target markets. Customers were unsatisfied and unhappy with the
quality of their product.
PESTLE Analysis
FORCES ANALYSIS
Political forces · Lack of enough support from home country’s government
· Needs to adhere to govt’s policies
· Political unrest in China leading to the needs to shift manufacturing to higher cost
locations
Economic forces· Economic downturns limiting the customer’s buying powers
· Lack of enough economic resources i.e. capital and human resources as compared to
the competitors, leading to limited R&D and technological advancements
Socio-Cultural · Failure to understand the shift of customer’s demand for phones with functional
Forces advantages
· Inability to provide the customer with variation in product line
· Inability to address the needs of the young buyers
Technological · Use of less popular Microsoft OS over widely used Android OS lead to customer’s
Forces reluctance in buying Nokia phones
· Software glitches in Lumina 900 brought major impact upon its sales
· Inability of Nokia to come up with breakthrough technology
Environmental · Issues related to eco-friendly use and disposal of materials and wastes
Forces
· Demand for development of energy saving phones
· Need to consider the environmental influence of the company’s production plants
· Needs to address the issues related to global warming and pollution caused by
company’s production plants
Legal Forces · Adherence to EU regulations
· Compliance with laws and regulation of countries where manufacturing and
assembling plants are established
MACRO ENVIRONMENT
What were the macro environmental factors which have affected Nokia’s performance over the years?
Nokia’s performance over the years was greatly affected by the radical transformation in its business
environment. Nokia has been known worldwide and has been considered to be the top mobile phone
maker in 1998 and in early 2000. Unfortunately, in 2007 it has been incapable to adapt to changing
market conditions created by the launching of smartphones and the emergence of aggressive
competitors such as Apple, Inc. and Samsung.
The conditions of the Demographic, Economic, Natural, Technological, Political, and Cultural environment
may help us examine Nokia’s performance over the years.
Demographic Environment
The demographic environment makes up the market and with the increasing growth of the world’s
population means opportunities and challenges for Nokia as a multinational company. The changing age
structure of the population which is classified by generational groups, namely, the baby boomers,
Generation X, the Millennials, and Generation Z, is an important demographic trend which helps Nokia in
designing and promoting mobile devices to make them appealing to all the age categories, all income
categories, and different family cycles.
Baby boomers were born between 1946 and 1964. The Generation X were born between 1965 and 1976.
The Generation Y, or commonly known as Millennials, were born between 1977 and 2000. Generation Z is
the newest generation to be named. Among these four generational groups, the Millennials and the Gen
Z are the most comfortable with digital technology. Both of these generations are heavily connected to
the internet and social media. On the other hand, baby boomers were introduced to technology around
1960s – same year that Nokia started its telecommunications equipment business. Since then, Nokia has
faced new challenges in mobile telecommunication devices as the market changes with the change in
demographics.
The changing demographic environment that changes with the birth of a new era has paved the way to a
more diverse market, more opportunities, and more competitors.
Demographic trends and developments change with every generational group; thus, analyzing the
changing age and family structures, geographic population shifts, educational characteristics, and
population diversity is essential in understanding the business environment.
Economic Environment
During the latter half of the 1990s, the Finnish economy experienced extreme rapid growth which
can be partly explained by the recovery from the severe recession it underwent in the early 1990s. At that
time, the increasing demand for telecommunications equipment led Nokia to expand considerably.
Nokia reached its peak in the early 2000s, being recognized as the supplier of the 40% of the
world’s mobile phones. But as quickly it emerged, Nokia’s reign in the mobile phone industry came
crashing down, and this greatly affected Finland’s economy, coinciding with the longest recession in the
country’s history.
A growing economy leads to increasing income of the people, and with this, people will buy more luxury
goods, such as mobile phones. However, if the economy declines, average income decreases, resulting to
limited buying power in its home markets. In this case, people will have less money for luxurious goods
and will spend less on mobile phones, which would be a bad news for Nokia.
An economic downturn or a short boom are changes in the economic environment that affects income,
cost of living, interest rates, and savings and borrowing patterns. These economic variables have a huge
impact on the marketplace and to multinational companies like Nokia.
Natural Environment
Many firms are faced with problems pertaining to environmental issues that affect their inputs
and business activities. The trends in the natural environment such as growing shortages of raw materials,
increased pollution, and the effects of global warming which are prevalent worldwide are challenges for
Nokia to maintain a growing economy and a healthy environment.
It is also a challenge for Nokia to safely and economically dispose its used products properly. Since their
products contain significant amount of metals and plastics, they are responsible for the disposal and
recycle of used devices which is a potentially costly expense.
Another trend in the natural environment that affects Nokia is the increased government
intervention in natural resource management. The European government have made efforts in
addressing environmental issues, but it is always a collective effort from the commnunity, companies and
the government in order to maintain environmental sustainability. In general, companies are expected to
accept more social responsibility and respond to consumer demands with more environment-friendly
products.
Technological Environment
Changes in technological environment happen dramatically. When new technology is being introduced,
the market reacts and increases demands and expectations. In 2007, a radical change in the mobile
phone market occurred when the Apple’s first iPhone generation was introduced. At that time, Nokia was
challenged to compete a superior brand, but failed to impress customers due to many specification
differences between Nokia’s mobile phones and iPhone. Another drastic change occurred in the mobile
phone market due to the development of operating systems and the invention of apps which
transformed mobile phones from simple communication devices into handheld computers. This led
customers to prefer mobile phones which perform various tasks such as taking photographs, watching
videos, and performing business functions with convenience and ease. To join the smartphone industry,
Nokia partnered with Microsoft and upgraded specifications but was still unable to compete with the
iPhone and Samsung brands. Nokia was outperformed by other brands and later on lose its competitive
edge in the market.
The changes in technological environment could create challenges and opportunities for Nokia since its
products are technology-based. It is essential for them to keep track of the fast-paced technological
changes and the development and advancement of knowledge and research.
Political Environment
The purposes of government legislations and regulations are (1) to protect companies from each other
and prevent unfair competition, (2) to protect consumers from unfair business, and (3) to protect the
interests of society against unrestrained business behavior. The European Commission has been active in
establishing a new framework of laws covering competitive behavior, product standards, product liability,
and commercial transactions for the nations of the European Union, and this includes Finland where
Nokia is located. In 1960, Nokia focused on the production of radio-transmission equipment, and as the
European Union relaxed business regulations over telecommunication industries, Nokia further stepped
up to new challenges in mobile telecommunication devices.
Nokia lacks strong government support because it is based in a small country. However, since it is an
international company, it has capabilities to manufacture in other countries like China. But if changes in
the political environment happen in China, production may be disrupted and manufacturing capabilities
may be limited.
Cultural Environment
When Apple released the first iPhone generation in 2007, widespread adoption of smartphones and the
growing use of apps became the trend. It was a major cultural factor that shaken Nokia’s position in the
market. The market associated Apple with smartphones in some countries which created a generation of
customers that only buy one brand. In more recent years, Nokia has had to deal with the popular
misconceptions that there are only two brands of smartphone in the market, Apple and Samsung, and
only two operating systems: iOS and Android. This has kept many customers from even considering Nokia
products.
3. What ultimately caused Nokia’s downfall? What could they have done to defend their market
S W
- It has a strong brand name. In fact, it is one - It does not have a good product demand
of the popular household names in its prime forecasting compared to its competitors.
years. - It didn’t look at innovating seriously
- It is known for its reliability and durability. resulting to being overtaken by its rivals.
- The company values connectivity among its - Had bad specs especially on the phones it
people and their clients. produced on its latter years.
- In its early years, it was considered - Their operating system was not able to
consumer friendly and having amazing compete with the emerging android and iOs.
innovative breakthroughs. - Did not understand the significance of apps,
- Its phones are user-friendly and versatile. software and building an ecosystem around
- It was considered the best selling phones in the apps.
the late 90s and early 2000s beating its rival - They replaced the innovative and creative
Motorola. thinking to factory thinking.
- It dominated the mobile phone industry - Underestimated the importance of third-
during the late 90s and early 2000s. party apps in smartphones.
- During its hey days, it was known for its fluid - Assumed that downloading apps was only
system menu, text messaging, organic ovoid done by the minority of people.
design, snap-on covers with a wide range of - Late in coping up with the trends and
colours, internal antennas, email and a big innovation.
display. - There was an internal conflict between the
- They have way superior technology during R&D Team of Nokia that is in charge in
that time compared to other phone revamping their old software. This resulted
developers. to internal politics rather than design.
- Conflict in the management slowed down
innovation and success of Nokia. In fact, it is
one of the major reasons of the downfall.
O T
position?
- The new technology can provide Nokia an - Emerging technologies and innovations from
avenue to innovate and retain its loyal competitors can prevent Nokia from
customers. regaining its market leader status.
- New market trends can change consumer - Nokia is behind from other mobile phone
behavior. Nokia has to take this opportunity manufacturers and was not able to capture
to dominate again the industry by building the market’s interest.
new product lines and diversify. - Changing consumer behavior especially on
- The Nokia-Microsoft deal can be a win-win if how mobile phones emerge from being a
properly utilized because it possesses great device to communicate to having multiple
opportunities. functions can impose a big threat and
- It has built lots of loyal customers challenge to Nokia to keep up.
throughout the years. - Market leaders like Apple and Samsung are
- Almost everyone in the developed and also continuously improving their products.
developing countries have phones. In fact, Also, they were able to retain and satisfy
there are 3.50B smart phone users. That’s their loyal patrons.
almost 45.15% of the population. While
mobile phones comprised of 61.67% of the
population which is around 4.78B (Turner,
2020)
Based on the SWOT Analysis presented, the major reason for the downfall of Nokia is the lack of
urgency to innovate. This is evident in the weaknesses that were furthered by the threats faced by the
company. As shown above, the contributing factors mostly speak of the inability of the company to keep
up with the emerging trends and developments. It fell short behind its competitors and took a longer
time to decide when presented with opportunities. Also, management conflicts slowed down the growth
of the company. It was not able to maintain its market leader status also because of the very lax response
from the management.
On the other hand, the aforementioned downfall could have been prevented if Nokia did the
following based on the SWOT Analysis provided:
1. The conflict in the management could have been addressed earlier for this has caused a ripple
effect in the company’s growth. As the emotions and politics in the company surge, it couldn’t
help but also lag in the developments. Product releases became slower and redundant due to
unstable management. The restructuring or the rehabilitation of the people working for the
company could have saved it from all the fiascos.
2. There is no sense of urgency from the end of Nokia. During its hey days in the 90s, people were
so aggressive towards the mobile phones they release because for the first time, connecting to
people will no longer be bulky and hassle. It indeed served its purpose as a device for
connectivity. However, as it progresses the company became a producer of factory product than
a tool to really connect people. The company should have focused its efforts on how to truly
connect to people. Since there is a rise in the usage of smart phones which enabled people to
connect more than ever, aligning their strategies to the very reason why the company existed
could have helped. Also, prototypes of early tablets were already on the watch of Nokia years
before iPad was launched. However due to delays in approvals and other conflicts within the
research and development team, Apple was able to take over.
3. As a market leader with a good foundation of loyal customers, Nokia could have opted to
challenge the conventional and pushed the limits of innovating. Anyway, it has gained popularity
among mobile phone users. The loyalty could’ve been taken advantage if the company
introduced a product that would serve Nokia’s purpose – connecting people. Also, there are
billions of people using mobile phones around the globe. The market has a very high potential if
captured.
4. How does the case relate to the chapter on Marketing Environment?
Chapter 3 talks about how the different actors and forces of the micro and
macroenvironment affect the marketing management’s ability to build and maintain customer
relationships.The chapter explained in detail how each actor of the microenvironment can affect
the company, and in a similar manner how each force of the macroenvironment affects the
company.What happened to Nokia is a very good example why it is important to look into a
company’s marketing environment. We can look at this in two ways; the microenvironment,
where marketing has some influence over, and macroenvironment, where it does not have any
form of influence over. Or do they really have no influence over these?
Microenvironment
Marketing success requires building relationships with other company departments, suppliers,
marketing intermediaries, competitors, various publics, and customers. (Kotler & Armstrong,
2012) In this regard, marketing can have some level of influence over these actors which means
marketing can actively change how these actors react or interact with the company itself.
One cause for Nokia’s demise was that they failed to give due importance into these actors. First
and foremost, we have the Research and Development department that was divided into two
groups to work on Symbian OS and MeeGo OS simply because the management couldn’t decide
on which operating system to pursue. Albeit not expressed, we can imply that this created an
unhealthy environment within the R&D department wherein both groups would not want to
share any development to the other and were trying their best to get better funding on their
end.
As to the suppliers side, their adoption of Miscrosoft’s Windows Phone operating system was
also one big misstep as they were trying so hard to have an identity of their own that they were
not able to see that the operating system was not ready to compete with Android and iOS.
Next worth mentioning is the competitors, in this case Apple iOS and Google’s Android OS. Both
of these operating systems work better than both Symbian and MeeGo. Had Nokia have made a
decision to make their competitor into a business partner, in this case Google, they could have
smartphones running the Android operating system.
Lastly, the customers themselves, Nokia simply ignored how their customers reacted to their
products. As was stated in the case, they were simply slow to satisfy customer expectations. In
this regard they were just manufacturing phones and hoping consumers would buy them
without looking into and really identifying consumer needs. Had they listened and provided
products that were meaningful for their customers, they would have been able to maintain the
customer relationship they had built over the decades.
Macroenvironment
The other half of the marketing environment is the macroenvironment. This includes political,
economic, socio-cultural, technological, environmental, and legal, these forces affect the
different opportunities and threats that companies face. As for the macroenvironment the
marketing management has limited influence over these and will most probably have to react
depending on the changes in these forces.
The most notable force in this case was technological. Nokia was used to being the leader in
mobile phone technologies especially since they were the one to develop the Global Systems for
Mobile Communications (GSM 2G). With this, there were some lapses in Nokia’s part to look into
the technological scene, in addition to being slow to have a better operating system for their
mobile phones. They were also slow to adapt the capacitive touchscreen, the technology that
apple iPhone which provides a more fluid touchscreen compared with Nokia’s flagship phone at
that time.
Going back to the fact that Nokia was at one point the leader in mobile phone technology, so in
that aspect, Nokia was dictating the technological environment during that period in time, so it is
not impossible for companies to influence the macroenvironment.
Conclusion:
Nokia was not able to act upon these actors and forces in the marketing environment well
enough. As a result, they failed to make products that can continue to build further and maintain
meaningful customer relationships, ultimately selling off to Microsoft. It is not enough for
companies to react to the marketing environment, they must also be proactive so they can have
measures in place before changes even happen or better yet, they can dictate the course of the
marketing environment.
Bibliography
Kotler, P., & Armstrong, G. (2012). Principles of Marketing (14th ed.). New Jersey: Prentice Hall.
Turner, A. (2020). How Many Smartphones are in the World. Retrieved July 2020, from bankmycell.com.
