Kenneth Aynrand V.

Montoya (11330880) Project Feasibility Study

Queen Jean A. Flores (11349069) Prof. Claude Marcel C. Manglo
June 5, 2017

A Case Analysis on Nokia Cellphones

Introduction

From 1979 to late 1990s, Nokia was the leader in the mobile phones market but
as the new decade begins, it brought new set of challenges for the company and despite
all the efforts to create new features for their product, the company failed to embrace the
drastic change of demand in the market which became the reason for its sales to go down.
However, it tried to compete by creating the Symbian OS though it was still not enough
to get the attention of the people.

Tracing its early hiccups and epic fall, Nokia first experienced its downfall way
back 2001 when its market share gradually slide down though still leading at 35% but in
2007, the company experienced again a tragedy upon having 46 million faulty cell-phone
batteries and the situation became worse when the Android version 1.0 was launched in
2008. There was a sudden change to the market share of Nokia in which being taken over
by Apple, Blackberry, the newcomers like Samsung, HTC and LG. In 2010, Stephen
Elop, former head of Microsofts business software division, became the Nokias new
CEO (Himanshu, 2015). It leads to the partnership of Microsoft and Nokia which gave
birth to Lumia smartphones though the company still suffered due to its descending sales.
It had an overall business net loss of 25 million euros ($34 million) in 2011. Finally,
Nokia decided to sell its Devices and Services division together with other division to
Microsoft with a total of $7.2 billion acquisition and laying off thousands of former
Nokia employees (Blass, 2016).

In 2016, Microsoft spent again $8 billion for restructuring the product and paying
thousands of employees. The new Microsoft CEO, Satya Nadella, made it clear that she
wasnt interested in running a phone business and declared a strategy shift away from a
devices and services focus just a couple of months after Nokia acquisition finalized.
Though, it announced that in 2017 the first Nokia-branded handsets running Android will
soon to arrive having the licensing agreement with HMD Global (HMD), also based in
Finland, in which will be the new home of Nokia phones (Warren, 2016).

Statement of the Problem

Nokia is still the largest mobile company in the world but the dominance of this
leading company for a long time is now challenged more than ever. Nokias smartphone
sales are seen to be plunging down and struggling in the market despite the takeover
which resulted in the absorption of Microsoft, Nokia's smartphone sales continued to
decrease dramatically due to several reasons such as: (1) being unable to respond to the
fast-paced technological development of mobile phones; (2) lack of product innovation;
(3) changing consumers attitudes towards purchasing mobile phones; (4) being unable to
evaluate and give attention against stronger competitors; (5) being unable to act fast on
the entry of smartphones; etc.

The next question is the next move that Nokia should do, whether to focus
essentially on developed products or on emerging markets or even both in order to save
the products from total extinction. Should Nokia consider new OS, introduce new range
of products and the like in order to increase its sales and be back in the competition?

Objectives

The objectives of this case study are:

1. To analyze the reasons behind the downfall of the long-time leader mobile phone
company Nokia
2. To analyze the smartphones market and how it shaped Nokias downfall
3. To generate alternative courses of action for Nokias new approach in winning the
phone market
4. To recommend the best alternative course action for Nokias next move in selling
smartphones

SWOT Analysis

Table 1. SWOT Analysis of Nokia

Strengths of the Company Weaknesses of the Company

Strong trusted brand name for
customers
Durability of Products
Wide price range of products (low
and high end market)
Wide range of product line
User friendly products
Opportunities of the Industry
Growing demand for smartphones
in the market
Population increase which means
Lack of innovation in its product
line
Slow reaction to the competition
Weak promotions versus
competitors
Low sensitivity to environment
changes
Slow OS and applications update
Threats to the Industry
High market share of iOS and
Android OS operating smartphones
New Entrants in the market
 market is still expanding
Expansion to new product lines
Adaptation of Android OS
Development of underdeveloped
countries
Strong market competition/ stronger
competitors
Emergence of low cost phone
imitations such as China mobile
Approaching saturation of the
smartphones market in developed
countries

Strengths

Nokia has been a formidable company which produces the best cellphones in the
past decade. Before the smartphones that we have today, it was Nokia leading the market
in communications and technology. With this, Nokias brand name has been an
established one and proven to be trusted by most customers. Add to that the durability of
their products. Nokia manufactures and distributes the best quality and the most durable
phones which developed their reputation in this aspect.

Aside from that, Nokia produces the different products which targets both the low
class consumers up to the high class consumers. Nokia offers wide range of prices that all
customers can choose from. With that being said, Nokias one notable strength is that if
offers a number of varieties in their products where customers can enjoy choosing from.
Lastly, Nokias products are designed to be user-friendly with user friendly accessories.

Weaknesses

On the other hand, there are several weaknesses on Nokias products. First is that,
Nokia phones are slow to innovate. The handset they produce does not allow them to
attract more users as compared to new competitions from HTC, Huawei, etc. Second,
Nokia was too slow in taking the competition to the next level. They took some time
before entering the smartphones market which turned to be a disadvantage to them. As
the demand and market grows, Nokia handsets were not able to react well to these
changes.

Furthermore, promotions and marketing strategies of Nokia seemed to be not

working well as compared to their competitors who were able to show stronger
campaigns for their brands. Also, Nokia was not very much sensitive and responsive to
the needs of the customers or to the changes in customers expectations. Lastly, the
current OS is too slow to update as well as the applications present in the store.

Opportunities
 Just like many other organizations or companies, despite of the occurring down
trend, Nokia has still many opportunities to be back in the competition. The smartphone
market is still growing day by day which means that there are still opportunities to sell
the products. Next, population is still increasing which means that more and more people
will avail the products (related also to market expansion). Third, expand to new ranges of
products as well as take the innovation to the next level in order to be at par with the
competitors.

Adapting to Android operating system and replacing the Windows OS can give
Nokia smartphones an equal chance of success. With this, more applications would be
available as compared to the current OS. Also, faster and more updates will be provided
which in turn improves the smartphone itself. While there are saturation in the
smartphones market for developed countries, development of underdeveloped countries
will pave way for new markets which means that there is an opportunity to sell the
products.

Threats
On other end, there are threats to the success of the Nokia. First on list is the high
market share of Android and iOS operated smartphones (around 95-99% of the market).
This means that most users tend to choose phones with the aforementioned operating
systems which puts Windows OS on the others section. Also, one challenge for Nokia
is the emergence of new entrants in the market such as Oppo, Huawei, etc. These
businesses are starting to grow and have a share in the market which may threaten the
standing of Nokia.

Add to that the stronger competition in the market with stronger competitors such
as Apple and Samsung which have become the market leaders. In short, Nokia is facing a
huge threat. Also, the low-cost threats produced by China mobile companies can also
pose huge problems to Nokia. Lastly, according to some researches, smartphone
ownership might have reached its saturation point for developed countries since these
countries has a large percentage of smartphone users compared to their total population.
This translates to markets with fewer first-time buyers.

Alternative Courses of Action

1. Change OS from Windows to Android.

Table 2. Advantages and Disadvantages of Changing Microsoft to Android OS

ADVANTAGES DISADVANTAGES

Google Developer Android OS is owned Gmail ID Since it is run by Google,

by Google, one of the most trusted and users cannot access to the device without
reputed products. The company can gain the Gmail ID, so joining to Google is a
trust to the users if they will change their must.
OS from Microsoft to Android

Multitasking Users love to do many Short Battery Life Because it can

tasks at once. In android, users can open
several applications and still manage all for
it has great UI that makes it easy for
multitasking.
multitask different applications, android is
considered one of the most battery
consuming operating systems due to the
number of process running the background
which can drain its battery

Millions of Applications The best Viruses Despite its millions of

feature of android is users can download
many applications for free from games to
movies to educational tools because of
Google Play Store which is the worlds
largest mobile store.
applications, android devices are not
considered safe because of the malware or
virus. There are reports about hackers that
trying to steal the users personal
information.

(Puri, 2016)

2. Bring back the Linux-based MeeGo OS together with new features.

Table 3. Advantages and Disadvantages of Bringing Back Linux-based MeeGo OS

ADVANTAGES DISADVANTAGES

Open Source Developers being an open Windows Programs in Linux Many

source developer means that users can
access to tools, mailing lists, discussion
forum, technical meetings and other
multiple options. With the new features of
the product, users especially the
professionals may purchase it.
windows programs will not run in Linux so
if the company will pursue this option, they
should find a way to make windows
programs work since this type of OS can
cross platform.

Cross Platform OS it offers Qt and web No Standard Edition Unlike Windows

runtime for application development so and Mas, Linux has no standard edition. In
developers can write their applications fact, there are hundreds of different user-
once and deploy in many types of Meego developed editions though it can be
devices or even on other platforms challenging to figure out which one is the
supporting the same development
environment. As an innovation, the
company can make MeeGo same as the
platform of android so that users can get
many applications.
Customization users can have a user
interface customization. It provides a single
platform for multitude devices, minimizing
the efforts needed by the operators in
training their teams and allows their
subscribers to be familiar with the
experience common to many device types.
3. Continue the Microsoft OS though compatible to android applications with same
specifications and unique features.
Table 4. Advantages and Disadvantages of Retaining Microsoft OS in which Compatible to
Android
ADVANTAGES
High Compatibility - Microsoft Windows
is a common OS whether in home,
workplace or in school computers. This is
the edge of the company though they still
need to innovate their product such as by
adapting the cross platform to make it also
compatible with android together with
same specifications and unique features. In
this way, the barrier of acquiring many
apps will be limited.
User-friendly since it started being the
processor of laptops, people are aware how
to use it. The aesthetic design of the
programs are simple and users can easily
customize it.
best for different users. This is the dilemma
of company before, they didnt know
which edition to have due to different
users perspectives.
Learning Curve Linux is not that user-
friendly unlike Windows and Mac which
can be very challenging for a beginning
user. It requires more effort to understand
the functions of Linux with practice and
self-teaching.
DISADVANTAGES
Action Center According to Nield
(2014), one dilemma of users upon using
Microsoft OS is the action center. Default
Microsoft apps such as Outlook,
Messaging, and Store work in sync with
the Action Centre though other applications
have a hard time updating. If it will be
compatible with androids then the company
should make the updates of the new
programs fast in order for it to be salable
again to the market.
Sharing Files One problem of having
windows phone is the problem upon
sharing a file to other device. It is quite
confusing and sometimes, it cannot detect
the device youre trying to reach so the
company should find some ways how to
deal with this problem especially now that
 they will be dealing with a lot of
applications.

Outlook, Office and Universal Apps
Since it is run by Microsoft, office
documents such as Microsoft office is
already installed in the product. Also, it has
a cloud storage platform, OneDrive, which
is in direct competition with iCloud and
Google Drive.
Lagging and Short Battery Life Since it
will be compatible with android then the
number of applications will be doubled or
tripled and there might be a case that not all
applications will work properly. Also, the
battery life will be shorten due to the usage
of the users so the company should take
into consideration about the possible
logging of applications and how can they
enhance their batteries to deal with heavy
usage.

Conclusion

Downfall may be an inevitable thing to happen for all companies and

organizations present just like what happened to the long-time leader in phone market
and technology Nokia Corporation. Such things may be true but with correct response
and careful planning with regards to the changing landscape and demands of the market,
these things can be delayed.

Three alternative courses action were generated: (a) Change OS from Windows to
Android; (b) Bring back the Linux-based MeeGo OS together with new features; and (c)
Continue the Microsoft OS though compatible to android applications with same
specifications and unique features. From the three, we have chosen the first alternative
action which is to Change OS from Windows to Android. This alternative has also been
considered by the CEO since sticking to the current OS is forecasted to still have a
downward trend. Considering this alternative will have greater advantages than
disadvantages since the listed downsides of using Android as OS can be fixed by
improving phone specifications. Aside from that, Nokia can still use unique features
while using the said OS. In addition, this OS will give the Nokia smartphones a great
chance in competing in the market since most customers prefers to use smartphones with
iOS and Android OS.

Recommendations

Product

Currently, Nokia has two smartphones product lines which are Nokia Lumia and
Nokia Asha. Nokia Lumia is more expensive that caters extensive hardware and software
features targeted at the high-end customers and in competition with Apple and Samsung.
Meanwhile, Nokia Asha is the inexpensive line of the product with lesser features and
targeted the first time smart phone users in the emerging markets (Jabitta, 2014).
Choosing alternative 1, instead of adding another product line, the company can change
Nokia Lumia with the new Nokia Android in order to compete more with Apple and
Samsung which have iOS and Android OS; moreover, to reduce also expenses as much
as possible. In this way, the company will have a better chance in getting larger market
share since Nokia is one of the most trusted mobile products even before its competitors.
In addition, it already signed a 10 years contract with HMD Global to change the OS,
features and specifications of Nokia (Warren, 2016). Nevertheless, Microsoft already
spent billions just to save the product. Trying it to become an android is quite feasible
knowing the trend of this OS which is shown below.

Figure 1. Global Market Share by the Leading Smartphone Operating Systems in Sales
to end users from 1st quarter 2009 to 3rd quarter 2015 (Blass, 2016)

Pricing

In the Philippines, Nokia Lumia is being sold from the price of P22, 000
downwards while in other countries the price can be as high as 500. Meanwhile its
competitors such as Apple and Samsung have the price range for as high as P60, 000-
P30, 000 (Jabitta, 2014). Changing it to Android, it can somehow make its price lower
than its competitors such as making it at least P25, 000. In this way, since Nokia Android
is now operating as Android OS and much cheaper than Samsung or Apple, people can
be persuaded to purchase it since it also have same functions like other brands. In
addition, retaining Nokia Asha will help the company to reach the lower class and must
not be omitted.

Promotion

Even before Nokia was promoting their new technologies or mobile devices by
creating a big advertising campaign which focuses on a singular technology instead of
each individual handset in order to appeal to a lot of different markets with one campaign
(Bhasin, 2017). The company can still do it now just like the iTunes Festival of Apple
(Jabitta, 2014). This will be the grand launching of the new product, Nokia Android, with
all the invited media and people to see the new specifications and features of the product.
Also, they can do television advertising, posters and advertisements using social media.

Place

Nokia is distributing its product mainly through Mobile operators and retailers
such as electrical suppliers. Unlike Apple which have different Apple Stores, Nokia
doesnt have its own shops in most part of different countries (Patel, 2015). It is better to
establish their own shops so that people can easily purchase and ask questions pertaining
to the new product, Nokia Android, and also for Nokia Asha. The location of the shops
can also be built to different malls and other commercial places to make it more
reachable to people.

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