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NOKIA: GLOBAL STRATEGY
A Pandora’s Box worth $410 million!
Under Stephen Elop, Nokia is fighting tooth and nail to give up on Symbian & come back with Windows. But is it too late?
Issue Date - 15/09/2011
 
It was in the year 1995, when Finnish mobile handset maker Nokia had entered the Indian market and within no time, it found itself in a pioneering role to shape the growth of the Indian cellular industry when there was hardly any serious competition. The one who was venturesome enough to grasp the pulse of the Indian market scored. Nokia did, and scored like how. Country focussed product & marketing strategies took Nokia to a stage where it dominated the Indian market with ridiculous ease with market shares hovering around the 80% mark.

However, in India as it is with other parts of the world, the company has made some serious strategic blunders and that have led to serious corrections in its growth story. Nokia’s global revenues have witnessed southward movement for the second consecutive quarter in 2011. With net sales falling by 7% to €9.3 billion, the company has registered a loss of €368 million during the quarter, compared to €227 million in profits during same period in 2010. Also, the current losses are despite a royalty payment of €430 million received as the result of a patent dispute with Apple that went in Nokia’s favour. Nokia’s shares have received a royal hammering on NYSE. The share was trading at $6.44 (mcap of $23.89 billion) on August 30, a steep fall of 30.3% compared to its price one year ago.

With a current market share revolving around 22% in handsets (compared to 39.6% in 2008, source: IDC), it has gradually levelled up with the figure it registered in 2002. The world cellphone market grew by 11.3% yoy for the 2nd quarter of 2011 (IDC), facilitated greatly by Apple’s whopping 142.1% growth & ZTE’s 36% growth for the same period. Nokia’s shipments, in turn, have fallen by 20.3% to 88.5 million units. While speaking to B&E from Hong Kong, Gavin Byrne, IT Analyst, Informa Telecoms & Media says, “Nokia’s weaknesses in recent years has been innovation and then the execution of that innovation, i.e., bringing it to market in appealing consumer oriented products.” He laments how the company had just one great trick in the smartphone market – the N95 in 2007 – and the iPhone stole its thunder in no time.

 
On one hand, the company’s overconfidence in its hardware dominance led it to miss the competitive waves that just about swept it away in the smartphone and feature phone segments. On the other hand, its illogical reliance on its own operating software (OS) Symbian has led to problems of a different kind. Symbian was once considered to be a jewel in the company’s crown, which was originally designed by Symbian Ltd. With inputs from handset makers including Nokia, Sony Ericsson and NTT Docomo (the latter two dumped it later), it was to be used as a common platform. But Nokia’s overdependence on the software proved suicidal. Rather than developing a new operating software according to the dynamic market, Nokia bought over Symbian Ltd. in 2008 for $410 million to develop a better & update version of the OS. It remained on top with 39.3% market share in 2009 against competitors like Apple and RIM, which undoubtedly possessed the so-called next generation phones like Blackberry and iPhone. But it was largely due to the contractual agreements that Apple & iPhone had with telecom operators like AT&T in US and Airtel & Vodafone in India. Thus they were not able to pose a significant challenge and Nokia was more interested in milking its investments rather than making critical new ones.

Nokia’s ignorance towards innovating with a better OS was a crucial phase in the telecommunication world. It was the time when Google’s free operating software Android was introduced in the market in 2008, after which Google did not look back. It entered into strategic alliances with handset makers like Samsung, HTC & Huawei (though it avoided any negotiations with Nokia) to sell Android in world markets. Symbian immediately came across as outdated, slow and considerably short on features compared to Android. Although Nokia has come out with updated versions of Symbian – “Symbian Anna” and “Symbian Belle” with its latest handsets E7 & C7 and Nokia 700 respectively to better the Android, the company still faces a daunting challenge in the applications space. Where Apple application downloads on a daily basis are around 30.5 million, Nokia’s Ovi store has been able to register only 6.5 million in the previous quarter.

          

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