electronics not? Is it a failure of the
company that was founded in 1865 by Fredrik Idestam, Leo Mechelin
and Eduard Polon. It is mostly known for the production of mobile phones. For
almost more than a decade it dominated the phone industry, but then, all of a sudden,
its market share has plunged from 46.7% to just 9.5% in 7 years (Sam Oliver,
apple insider). What caused such dominant firm to lose its market share that quickly?
During the same year, Nokia met its new competitor, Apple. In 2007 Steve Jobs,
founder of Apple, introduced to the world a new phone called iPhone. Was this
the main reason of Nokia’s failure? What did the Apple do that Nokia did not? Is
it a failure of the Nokia brand, or maybe a result of a bad corporate strategy?
This essay aims to find the main causes that caused Nokia to fail.
In 2007 Nokia’s phone market share was as
high as 49.4% according to Gartner’s research. From that year onwards, Nokia’s
market share has been decreasing every year to 43.7% then 41.1% and 34.2% until
it reached 9.5% in 2014 (BBC). Apple, as well as Samsung were definitely one of
the main causes leading to that failure. Both companies just took over the
phone market share. Nokia was falling behind as they rocketed. Why is Apple so
successful? There are many reasons why Apple is so successful compering to its
competitors. One of the reason is that Apple’s approach is towards creation of
products is different. Often engineers create something because
they can, whereas Apple engineers are creating their products for themselves.
When Steve Jobs was alive, he represented the “real consumer” of Apple
products. What is more, Steve Jobs was innovative, he was able to see the
future unlike his competitors. During his announcement of the first iPhone he
showed the world how easy his product is to use which actually had a huge
impact on its success. Also, apple keep making things simple. Unlike the
majority of phone makers Apple has just one product, in this case iPhone.
Thanks to that it minimizes the decision making for the consumers. This
may seem limiting given the number of smartphones available to users however, the
truth is the revers. According to Tim Bajarin “Our company has done
consumer research for over 30 years, and consumers constantly tell us that
while choice is nice, in reality they want the process of choosing a tech
product to be simple and not complicated by a plethora of choices.”
Furthermore, Apple wasn’t inventing new products but they were recreating existing
products they just made smartphones better and were at least two years ahead of
the competition. They had the vision of future smartphones. They were
innovative which undoubtedly was the major key of their success.
We already know
that Apple and Samsung crushed Nokia, but are they the only reason why Nokia
failed? Did Nokia’s corporate strategy fail? What were Nokia’s decisions during
that period. In order for a company to work it must analyse the
behaviour of competitors, or evaluate the company’s share price or consider
different ways to expand the business. A company must seek for strategic long-term
activities of their business which is known as strategic management. The firm needs to have competitive advantage which are the various factors, such as lower
costs or a better product (like Apple), that give a firm an advantage over its
rivals. It also should take into account internal strategic analysis, what stages
or activities should company take to help to create product value (value
chain). Such as marketing and sales, service etc. (ECON BOOK)
Apple and Samsung
obviously have surpassed Nokia, however Nokia at a time was surprisingly an
adaptive company. They weren’t falling behind with technology, they created
their first smartphone back in 1996. They also spent huge amount of money on research
and development, however what they were struggling with is to transform all
their spending of research and development into something that people might
actually want to buy. Nokia lacked innovation. They could not see the
future of smartphones and what is more, they are more of a hardware company
rather than a software company meaning that its experts building physical
devices like etc. but not programs that could run those devices. (the new Yorker).
Because of that Nokia didn’t see how important software will be in future so in
didn’t increase its research in this particular field. On the contrary, Apple
saw both hardware and software as really important and that they need to work
together in order to create the perfect product.