NOKIA: RE-CONNECTING PEOPLE
1. Intro
Nokia, the Finnish telecommunications company, is not only the world’s leading mobile phone manufacturer but also Europe’s biggest brand and the world’s 5th biggest brand according to the Business Week – Interbrand ‘Best Global Brands 2009’ report.
However, in what might be described as a ‘challenging’ – for “challenging”, read hyper-competitive – global marketing environment, Nokia’s brand value fell by 3 per cent to £23 billion (euro 24 billion) – still an enormous amount. With Coca-Cola, IBM, Microsoft and GE occupying the top four positions, Nokia retained its title as the world’s largest mobile phone manufacturer.
2. What Nokia says about itself
Nokia is the world's largest provider of mobile devices; a leader in equipment, services and solutions for network operators; and a driving force in bringing mobility to businesses. Nokia is about enhancing communication and exploring new ways to exchange information. In short, Nokia is about connecting people.
The company has 15 manufacturing facilities in nine countries, producing over 265 million handsets from 100 billion components. Nokia has research and development centres in 11 countries. and employs over 50,000 people1.
3. Now did Nokia get here?
Nokia’s origins can be traced back to the 19th century, and since then it has made one of the most remarkable business transformations ever. It has moved from wood pulp, through rubber boots and tires, cables – almost 10,000 different types – and even erasers, slippers, tissues and toys, to state-of-the-art consumer electronics (specifically within the field of mobile telecommunications).
It took almost 100 years to get into electronics. In 1960, the cable company started an electrical division. Then in 1966, came a decisive moment – the 3 original firms were formally merged. The businesses for the new Group were defined as rubber, cable and forestry, electricity, and electronics.
Then, it was by no means certain that electronics would win out as the most important division within Nokia. The traditional businesses within the group could point to stability, longevity, market share and cash generation. And in the “new” business divisions, television manufacture was seen as a much better bet for quite a few years – in other words, the “safe” option.
However, several factors were soon to make mobile communications not only a natural but also strategic choice and what might be described as a strategic window – a strategic opportunity where there’s a strong fit between the resources and capabilities of the organisation and an identified opportunity.
4. The pioneering ‘70’s – There might be gold in the sky
At the start of the 1970s, the Nordic countries, who had already established a great degree of co-operation in various areas of trade, planned to have a common telephone network. No way, or so it was thought at the time, could Finland take the lead this enterprise. To put it bluntly, it had too small a population, and too many lakes, which ruled out interconnecting cables between the islands as far too expensive. The aerial route was the best, maybe the only solution, and so the NMT (Nordic Mobile Telephone) network idea was born, with Nokia appointed supplier of hardware. This enabled them to set future standards – potentially a huge market advantage.
5. The take-off ‘80’s – There’s definitely a market
NMT, the world's first international cellular mobile telephone network, opened in Scandinavia in 1981 with Nokia introducing the first car phones for the network. In 1982, Nokia developed Europe's first digital telephone exchange, the DX 200.
Since then, the company has had a hugely impressive track record of achievement. They claim the invention of the first car phone (the Mobira Talkman – 1984) and the first true portable and commercially available handset/phone (the Mobira Cityman – 1987 – a favourite of City Gents and Yuppies i.e. business people who were the market ‘innovators’ and ‘early adopters’ Nokia initially focused on). Other innovations introduced in the late ‘80’s included development of the world's first ISDN (Integrated Services Digital Network) exchange in 1998 and the world's first fast-poll 14,400 bps (bits-per-second) modem in 1989.
6. The manic ‘90’s – Reasons to be cheerful
Nokia built on its successful pioneering and market development efforts as well as track record of innovation in the 1990s with milestones such as the development and launch of the first potentially global mobile communications network – GSM (Global System for Mobile Communications) with the very first GSM call in 1991. GSM now has over 2 billion users in more than 200 countries worldwide2.
It also introduced the both the Nokia 100 series, the first family of (hand) portable phones for all analogue networks and the Nokia 1011, the first digital (hand) portable phone for GSM networks (both 1992), the world's first SMSC (Short Message Service Centre) in 1993 and in the same year, the development and launch of the world's first credit card size cellular modem card, developed with AT&T Paradyne.3
Nokia’s strategic insight and corporate/commercial shift toward telecoms combined with its pioneering work within the area (as evidenced by its ‘Firsts’) meant that the company engineered its positioning to ensure that it was in the right place at the right time for the inevitable explosion of mobile telecommunications – the market definition of which is, to use Nokia’s strap-line, ‘Connecting People’.
As for the market, business take up of the mobile communications technology continued apace in the early ‘90’s and in the mid to late ‘90’s there was an explosion in the consumer market as the technology became more widely available, more useful and much cheaper.
And, as the market expanded, portability, design, style and services became much more important and segments of customers and consumers with different needs clearly emerged. Identifying these segments and developing value propositions which met each segments clearly defined needs, wants and desired was to be one of the key reasons why Nokia handsets became the handset of choice for the majority of users. The following graphics4 show this development.
Graphics: The Mobile Revolution - Dan Steinbock (Kogan Page 2005)
As the chart below shows, exponential growth in volumes, revenues and profits, kicked in especially from 1990 to 2000 where volume totalled 78.5 million units (up 92% on the previous year’s volume), revenues reached almost £14.2 billion (€20.0 billion) and operating profits of £2.8 billion (€3.9 billion) – a 57% increase over the previous year. The following table5 charts this remarkable rise.
Graphic: Nokia ‘Towards Technology’ PDF available on Nokia web site
7. In the Millennium Doldrums
From 2000, much to the surprise of the market, the Nokia bandwagon veered off the road – only slightly, at first, and then much more seriously. In August 2000, the value of the Nokia brand was deemed to be £21.9 billion (€30.7 billion), according to Interbrand. By 2004, the brand value had collapsed to £13.7 billion (€19.2 billion) – a reduction of 37.5%.
However, although it had been obvious for some time that there was a problem, it was only in April 2004 that Nokia admitted that their sales were slowing. The reasons for this decline were various, some of which are listed below. They contain lessons for any company, especially market leaders like Nokia.
Fixating on one competitor, at the expense of the others.
When Microsoft announced their intention to enter the mobile phone market in 2004, all onboard systems at Nokia went into emergency mode. An article in the Economist in 2004 stated: “When a firm dominates a market, especially one that is driven by constant technological advances, it becomes so fixated with trying to ward off what it reckons to be its most powerful challenger, that it leaves itself vulnerable to attack from other directions”. Nokia seemed to ignore the challenges from other competitors (see below), and concentrated on Microsoft.
Focusing on internal rather than market benefits.
Nokia were guilty of taking their eyes off the market place, and failed to read and monitor the growing demand for colour phones, inbuilt cameras and clamshell models (incredibly, Nokia was the only major player by 2004 not to have a clamshell). Other, smaller, hungrier, more market-focused competitors saw the way the market was going much more accurately. They built up value by offering the above features (with the attendant benefits) to the market. Nokia, on their own admission, focused on functional features like size and ease of use.
They also restricted the range of their models, mainly to reap the rewards of manufacturing cost reduction. However, important segments of the market wanted more variation than Nokia was giving them.
Reluctance to design and badge operator-specific handsets
Because the market was rapidly maturing, competitors were eager to grab whatever market share they could. One of the ways to do this was to do deals with airtime providers, and agree to manufacture handsets specifically designed for them.
For instance, Vodafone did a deal with Sharp, who designed and badged a handset just for them. Nokia believed that customers would stay loyal to handset makers, and paid less attention to their channel partners.
Bad timing for carrying out major internal reorganisation
Nokia implemented a huge reorganisation in late 2003. Obviously, one could say that any major reorganisation will cause some problems, but Jorma Ollila, Nokia CEO at the time, conceded that the timing of this one was wrong. It led to great upheaval in the company, and must have exacerbated the lack of focus on the marketplace.
8. The Turnaround
Thankfully for Nokia, the sky brightened significantly between 2004
โนเกีย: เชื่อมต่อคนใหม่1. บทนำ โนเกีย บริษัทโทรคมนาคมที่ฟินแลนด์ จะไม่เพียงแต่ผู้ผลิตโทรศัพท์มือถือชั้นนำของโลก แต่ยังแบรนด์ที่ใหญ่ที่สุดของยุโรป และของโลก 5 แบรนด์ที่ใหญ่ที่สุดตามสัปดาห์ธุรกิจ – รายงาน Interbrand 'สุดโลกแบรนด์ 2009' อย่างไรก็ตาม ในอะไรอาจจะเป็นการ 'ท้าทาย' – สำหรับ "ท้าทาย" อ่านไฮเปอร์แข่งขัน – สากลการตลาดสภาพแวดล้อม ค่าแบรนด์ของโนเกียตกโดยร้อยละ 3 ไป £23 พันล้าน (ยูโร 24 พันล้าน) – ยังมีจำนวนมหาศาล โคคา-โคล่า IBM, Microsoft และ GE มีใน 4 ตำแหน่ง โนเกียเก็บชื่อเรื่องเป็นผู้ผลิตโทรศัพท์มือถือที่ใหญ่ที่สุดในโลก2. สิ่งที่โนเกียพูดเกี่ยวกับตัวเองโนเกียเป็นผู้ให้บริการที่ใหญ่ที่สุดในโลกของอุปกรณ์โมบาย ผู้นำในอุปกรณ์ บริการ และโซลูชั่นสำหรับเครือข่ายอินเตอร์เน็ต และแรงผลักดันในการนำเคลื่อนธุรกิจ โนเกียเกี่ยวกับเพิ่มการสื่อสาร และสำรวจวิธีใหม่ในการแลกเปลี่ยนข้อมูลได้ ในระยะสั้น โนเกียจะเกี่ยวกับการเชื่อมต่อผู้คนบริษัทมีสิ่งอำนวยความสะดวกผลิต 15 ในประเทศ 9 ผลิตโทรศัพท์มือถือกว่า 265 ล้านจากคอมโพเนนต์ 100 พันล้าน โนเกียได้วิจัย และพัฒนาศูนย์ในประเทศ 11 และมีพนักงานมากกว่า 50000 people1 3. ในตอนนี้ ได้ Nokia ได้ที่นี่Nokia’s origins can be traced back to the 19th century, and since then it has made one of the most remarkable business transformations ever. It has moved from wood pulp, through rubber boots and tires, cables – almost 10,000 different types – and even erasers, slippers, tissues and toys, to state-of-the-art consumer electronics (specifically within the field of mobile telecommunications).It took almost 100 years to get into electronics. In 1960, the cable company started an electrical division. Then in 1966, came a decisive moment – the 3 original firms were formally merged. The businesses for the new Group were defined as rubber, cable and forestry, electricity, and electronics. Then, it was by no means certain that electronics would win out as the most important division within Nokia. The traditional businesses within the group could point to stability, longevity, market share and cash generation. And in the “new” business divisions, television manufacture was seen as a much better bet for quite a few years – in other words, the “safe” option.However, several factors were soon to make mobile communications not only a natural but also strategic choice and what might be described as a strategic window – a strategic opportunity where there’s a strong fit between the resources and capabilities of the organisation and an identified opportunity.4. The pioneering ‘70’s – There might be gold in the skyที่เริ่มต้นของปี 1970 ประเทศนอร์ดิก ที่แล้วได้ก่อตั้งความร่วมมือในพื้นที่ต่าง ๆ ของการค้าในระดับที่ดี การวางแผนการมีเครือข่ายโทรศัพท์ทั่วไป วิธี หรือเพื่อจะได้คิดว่า เวลา สามารถฟินแลนด์นำองค์กรนี้ ใส่ตรงไปตรงมา มีประชากรขนาดเล็กเกินไป และทะเลสาบมากเกินไป ซึ่งปกครองออกสายระหว่างเกาะเป็นราคาแพงเกินไปที่เชื่อมต่อกัน กระบวนการทางอากาศถูกสุด บางทีทางออกเดียว และดังนั้น ความคิดเครือข่าย NMT (นอร์ดิคโทรศัพท์) เกิด กับโนเกียแต่งตั้งผู้จำหน่ายฮาร์ดแวร์ นี้เปิดใช้งานการตั้งค่ามาตรฐานในอนาคต – อาจเป็นประโยชน์จากตลาดขนาดใหญ่5.ตัด ' 80 – นั่นเป็นตลาดNMT เครือข่ายโทรศัพท์มือถือโทรศัพท์มือถือครั้งแรกของโลก เปิดในสแกนดิเนเวียในปี 1981 ด้วยโนเกียแนะนำโทรศัพท์มือถือรถแรกสำหรับเครือข่าย ในปี 1982 โนเกียพัฒนายุโรปแรกดิจิตอลโทรศัพท์แลกเปลี่ยน DX 200ตั้งแต่นั้น บริษัทได้มีประวัติน่าประทับใจอย่างมหาศาลสำเร็จ พวกเขาอ้างการประดิษฐ์โทรศัพท์รถแรก (Mobira Talkman – 1984) และแรกจริงใช้ได้ในเชิงพาณิชย์ และแบบพกพาโทรศัพท์มือถือ/โทรศัพท์ (Mobira Cityman – 1987 – ชื่นชอบสุภาพบุรุษเมืองและ Yuppies เช่นนักธุรกิจที่มีตลาด 'innovators' และ 'ก่อนผู้รับบุตรบุญธรรม' โนเกียเริ่มเน้น) นวัตกรรมอื่น ๆ นำมาใช้ในช่วงปลาย ' 80 ที่รวมการพัฒนาของโลกแรก ISDN (รวมบริการเครือข่ายดิจิทัล) อัตราแลกเปลี่ยนในปี 1998 และโลกแรกสำรวจอย่างรวดเร็ว 14,400 bps (บิตต่อวินาที) โมเด็มในปี 19896.คลั่งไคล้ ' 90 ของ – เหตุผลจะร่าเริงโนเกียสร้างสรรค์ความสำเร็จ และความพยายามพัฒนาตลาดเป็นของนวัตกรรมในปี 1990 มีเหตุการณ์สำคัญเช่นการพัฒนาและเปิดตัวของข่ายสื่อสารเคลื่อนที่ระดับโลกอาจแรก – GSM (ระบบสากลสำหรับการสื่อสารเคลื่อนที่) กับ GSM แรกเรียกในพ.ศ. 2534 GSM ขณะนี้มีผู้ใช้กว่า 2 พันล้านดอลลาร์ในกว่า 200 ประเทศ worldwide2มันยังแนะนำทั้ง Nokia 100 ชุด โทรศัพท์มือถือแบบพกพาครอบครัว (มือ) ที่แรกสำหรับเครือข่ายอนาล็อกทั้งหมดและ Nokia 1011 แรกดิจิตอล (มือ) แบบพกพาโทรศัพท์สำหรับเครือข่าย GSM (ทั้ง 1992), ของโลกแรก SMSC (สั้น ๆ ข้อความบริการศูนย์) ในปี 1993 และ ในปีเดียวกัน การพัฒนา และเปิดตัวในโลกแรกบัตรเครดิตขนาดมือถือโมเด็มบัตร พัฒนากับ AT & T Paradyne.3Nokia’s strategic insight and corporate/commercial shift toward telecoms combined with its pioneering work within the area (as evidenced by its ‘Firsts’) meant that the company engineered its positioning to ensure that it was in the right place at the right time for the inevitable explosion of mobile telecommunications – the market definition of which is, to use Nokia’s strap-line, ‘Connecting People’.As for the market, business take up of the mobile communications technology continued apace in the early ‘90’s and in the mid to late ‘90’s there was an explosion in the consumer market as the technology became more widely available, more useful and much cheaper.And, as the market expanded, portability, design, style and services became much more important and segments of customers and consumers with different needs clearly emerged. Identifying these segments and developing value propositions which met each segments clearly defined needs, wants and desired was to be one of the key reasons why Nokia handsets became the handset of choice for the majority of users. The following graphics4 show this development.Graphics: The Mobile Revolution - Dan Steinbock (Kogan Page 2005)As the chart below shows, exponential growth in volumes, revenues and profits, kicked in especially from 1990 to 2000 where volume totalled 78.5 million units (up 92% on the previous year’s volume), revenues reached almost £14.2 billion (€20.0 billion) and operating profits of £2.8 billion (€3.9 billion) – a 57% increase over the previous year. The following table5 charts this remarkable rise.
Graphic: Nokia ‘Towards Technology’ PDF available on Nokia web site
7. In the Millennium Doldrums
From 2000, much to the surprise of the market, the Nokia bandwagon veered off the road – only slightly, at first, and then much more seriously. In August 2000, the value of the Nokia brand was deemed to be £21.9 billion (€30.7 billion), according to Interbrand. By 2004, the brand value had collapsed to £13.7 billion (€19.2 billion) – a reduction of 37.5%.
However, although it had been obvious for some time that there was a problem, it was only in April 2004 that Nokia admitted that their sales were slowing. The reasons for this decline were various, some of which are listed below. They contain lessons for any company, especially market leaders like Nokia.
Fixating on one competitor, at the expense of the others.
When Microsoft announced their intention to enter the mobile phone market in 2004, all onboard systems at Nokia went into emergency mode. An article in the Economist in 2004 stated: “When a firm dominates a market, especially one that is driven by constant technological advances, it becomes so fixated with trying to ward off what it reckons to be its most powerful challenger, that it leaves itself vulnerable to attack from other directions”. Nokia seemed to ignore the challenges from other competitors (see below), and concentrated on Microsoft.
Focusing on internal rather than market benefits.
Nokia were guilty of taking their eyes off the market place, and failed to read and monitor the growing demand for colour phones, inbuilt cameras and clamshell models (incredibly, Nokia was the only major player by 2004 not to have a clamshell). Other, smaller, hungrier, more market-focused competitors saw the way the market was going much more accurately. They built up value by offering the above features (with the attendant benefits) to the market. Nokia, on their own admission, focused on functional features like size and ease of use.
They also restricted the range of their models, mainly to reap the rewards of manufacturing cost reduction. However, important segments of the market wanted more variation than Nokia was giving them.
Reluctance to design and badge operator-specific handsets
Because the market was rapidly maturing, competitors were eager to grab whatever market share they could. One of the ways to do this was to do deals with airtime providers, and agree to manufacture handsets specifically designed for them.
For instance, Vodafone did a deal with Sharp, who designed and badged a handset just for them. Nokia believed that customers would stay loyal to handset makers, and paid less attention to their channel partners.
Bad timing for carrying out major internal reorganisation
Nokia implemented a huge reorganisation in late 2003. Obviously, one could say that any major reorganisation will cause some problems, but Jorma Ollila, Nokia CEO at the time, conceded that the timing of this one was wrong. It led to great upheaval in the company, and must have exacerbated the lack of focus on the marketplace.
8. The Turnaround
Thankfully for Nokia, the sky brightened significantly between 2004
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