NOKIA: How It Wrestled To The Top

I. INTRODUCTION

Mobile phones are one of the fastest growing markets today as it

continuously provides new innovations and features. To date, the number of

mobile phone users approaches the 1 billion mark. Corporations are the key

participants in the increasingly global developments of mobile phones and

undeniably, Nokia is one of the notable firms in this industry.

Nokia is today known as the mobile telecommunications giant being the

largest mobile phone manufacturers in the world. With an impressing 40 percent

global market share and huge global customer base that now numbers more

than two billions of users, indeed, Nokia is an absolute world leader in mobility.

This company is even the reason why Finland is a prosperous country in which it

is accounted for about 30 percent of the nation's market capitalization.

Unknowingly, Nokia had a really humble beginning. It all started in 1865

when mining engineer Fredrik Idestam established a groundwood pulp mill on the

banks of Tammerkoski rapids in southwestern Finland, and started manufacturing

paper. In 1868, Idestam built a second mill near the town of Nokia. This town

was named after the Nokianvirta river, known for better resources for hydropower

production, which flowed through the town.

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 In 1871, Idestam, with the help of his close friend statesman Leo

Mechelin, renamed and transformed his firm into a share company, thereby

founding the Nokia Company, the name it is still known by today.

II. BODY

A Glimpse at Nokia’s Past

The history of Nokia dates back in 1865 from the wood pulp mills on the

banks of Tammerkoski rapids and the Nokianvirta River. Between 1865 and

1967, the company would become a major industrial force, but it took a merger

with a cable company and a rubber firm to set the new Nokia Corporation on the

path to electronics.

At the beginning of the 20th century, Finnish Rubber Works began

establishing its factories. This company acquired the Nokia Wood Mills and also

acquired a company producing telegraph and telephone cables, the Finnish

Cable Works. The merging of these three companies in 1967 led to the creation

of the Nokia Corporation.

The new company tried producing many products like papers, bicycle, car

tires, personal computers, footwear, communication cables, electricity generation

machineries, televisions, aluminum, capacitors, and a lot more. However, among

these products, electronics made up about 3% of the overall company sales.

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 By 1980, Nokia had begun focusing its energies internationally on

becoming a communications company. It was around this time that a department

called Dedicated Networks was set up to deal specifically with transmission

technology and Private Mobile Radio (PMR). Although initially based in Finland,

Dedicated Networks had a global sales base. The seeds of Nokia's eventual

international success had been planted.

Nokia’ Biggest Challenge

Nokia expanded into new fields in the 1980s. It was headed by their Chief

Executive Officer named Kari Kairamo where he was able to expand Nokia into

new fields, mostly by acquisitions. However, in the late 1980s and early 1990s,

Nokia ran into serious financial problems due to its heavy looses by the television

manufacturing division and businesses that were just too diverse.

The biggest blow came in 1988 when the television business that had

been acquired in Germany turned out to be in the red. The development in the

company’s financial result took a steep turn for the worse. The share price

plummeted. Conflicts within Nokia management escalated. These problems, and

a suspected total burnout, contributed to Kairamo’s suicide in December 1988.

After Kairamo's death, Nokia wound up in an internal crisis which

continued as the large European chaos began. The Soviet Union disintegrated,

and Finland’s Eastern trade disappeared. Nevertheless, a path to the West was

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opened for Finland, but the country first fell into a deep economic depression.

Nokia shareholders even negotiated selling the company to L.M. Ericsson.

Simo Vuorilehto became Nokia's Chairman and CEO. Under Vuorilehto's

management, Nokia was restored. The company responded by streamlining its

telecommunications divisions, and by divesting itself of the television and PC

divisions.

Nokia’s Strategic Change

It was in 1992 when the most important strategic change in Nokia's history

happened. The arguing parties, both among the owners and within management

that shook Nokia, were forced to step down. Thereafter, a new, simplified

organizational structure was created.

The 41-year-old Jorma Ollila took over as CEO, and the new Chairman of

the Board was Casimir Ehrnrooth. These two personalities gave hope to the rise

of Nokia having Ollila, a career manager with a many-sided, high-level education

and Ehrnrooth which represents a family that traditionally owned industrial

companies.

With these two at the helm, Nokia’s astonishing rise to the ranks of the

world’s largest companies began.

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 Ollila made a crucial strategic decision to concentrate solely on

telecommunications. Thus, during the rest of the 1990s, the rubber, cable and

consumer electronics divisions were gradually sold as Nokia continued to depart

itself on all of its non-telecommunications businesses.

Nokia’s new diversified management boldly separated the company from

the past and set its focus on telecommunications. This occurred at exactly the

right timing when the international telecom markets were opening, and

technological developments were accelerating. Although more than a quarter of

Nokia’s turnover still came from sales in Finland, Nokia saw a huge increase in

sales to North America, South America and Asia.

With the boom of mobile telephones, beyond even Nokia’s most optimistic

predictions, Nokia met another big challenge of facing logistics crisis in mid-

1990s. This motivated Nokia to revamp its entire logistics operation.

The Nokia First Mobile Phone

Nokia started producing military as well as commercial mobile radio

communications technology in the 1960s. They started to create VHF-radio with

the company named Salora Oy in 1964. The two companies started to develop

mobile phones for network standard. It was only in 1982 that they were able to

introduce their first car phone called the Mobira Senator, which weighted 9.8 kg.

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 In 1984, the merging with Salora Oy made the company to create its

telecommunication branch named Nokia-Mobira Oy. In the same year, the

company also launched the Mobira Talkman, the world's first transportable

phone.

In addition, Nokia introduced one of the world's first handheld phones in

1987 and this was called Mobira Cityman 900. During those days, the Cityman is

one of the most light-weight phones having only about 800 g. But its tag price is

approximately 4,500 Euros. Although that was very expensive, Cityman was still

considered a success.

Nokia and the Global Systems for Mobile Communications

The Nokia Mobile Phone emerged from the Nokia Mobira Oy in 1988. After

three years, the first Global Systems for Mobile Communications or popularly

known as GSM phone was introduced. Nokia is said to be one of the key

developers of the GSM technology. This is a second-generation mobile

technology which could carry data as well as voice traffic. Nordic Mobile

Telephony (NMT), the world's first mobile telephony standard that enabled

international roaming, provided valuable experience for Nokia for its close

participation in developing GSM. This was then adopted in 1987 as the new

European standard for digital mobile technology.

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 In 1989, Nokia was able to deliver its first GSM network to the Finnish

operator Radiolinja. The world's first commercial GSM call was made on July 1,

1991 in Helsinki, Finland over a Nokia-supplied network, by then Prime Minister

of Finland Harri Holkeri, using a prototype Nokia GSM phone.

In 1992, the first GSM phone, the Nokia 1011, was launched. The model

number refers to its launch date, 10 November. Subsequently, the Nokia's

characteristic ringtone, the Nokia tune was introduced as a ringtone in 1994 with

the Nokia 2100 series. This phone series was an incredible success having set

its goal to sell 500,000 units but was able to sell 20 million units.

The foundation for a worldwide boom in mobile phone use can be

attributed to the GSM's high-quality voice calls, easy international roaming and

support for new services like Short Message Service (SMS) or the text

messaging capability. The domination of the GSM in the world of mobile

telephony came in the 1990s.

The success of Nokia continued until the world's first satellite call was

made in 1994 using a Nokia mobile phone. And in 1997, Nokia introduced a

classic game highly associated with the company-Snake.

By 1998, Nokia’s focus on telecommunications and its early investment in

GSM technologies had made the company the world's largest mobile phone

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manufacturer and the world's leader. After a year, the company moved to further

innovation with its launching of the first WAP handset in the world, the Nokia

7110.

Between 1996 and 2001, Nokia’s turnover increased almost fivefold from

6.5 billion euros to 31 billion euros. Logistics continues to be one of Nokia's

major advantages over its rivals, along with greater economies of scale and in

mid-2008, the mobile telephone subscribers in the world reaches for about three

billion, with more than 700 mobile operators across 218 countries and territories.

New connections are added at the rate of 15 per second, or 1.3 million per day.

Nokia Technology Strategy

Nokia mobile phones continue to be one of the best and most innovative in

the world. Its use of technology is a key contributor to the company’s overall

business goals. The right technology strategy provides revenue through

differentiation, brings cost advantage and a favorable supply environment. It

gives access to the right technologies at the right time, helps shape the future

competitive landscape and encourages innovation through openness to benefit

consumers.

One of the key success factors of Nokia is their continuous high

investment in their Research and Development (R&D). The Nokia Research

Center (NRC) was founded in 1986. It is Nokia's industrial research unit

consisting of about 500 researchers, engineers and scientists. It has sites in

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seven countries: Finland, China, India, Kenya, Switzerland, the United Kingdom

and the United States. Besides its research centers, Nokia founded in 2001 the

Nokia Institute of Technology (INdT), an R&D institute located in Brazil. Nokia

operates a total of 15 manufacturing facilities located at Espoo, Oulu and Salo,

Finland; Manaus, Brazil; Beijing, Dongguan and Suzhou, China; Farnborough,

England; Komárom, Hungary; Chennai, India; Reynosa, Mexico; Jucu, Romania

and Masan, South Korea. Nokia's industrial design department is headquartered

in Soho in London, England with significant satellite offices in Helsinki, Finland

and Calabasas, California in the USA

With the significant expansion of its Research and Development

undertakings in China, Nokia launched the Nokia Postdoctoral Program which

provides educational and research opportunities for postdoctoral researchers to

work on advanced telecommunication technology research projects. The

Program will accelerate technological innovation by attracting high potential

students and enabling wider cooperation with the China research community.

Postdoctoral researchers will concentrate on areas such as Asian use.

As of December 2009, Nokia had R&D presence in 16 countries and

employed 37,020 people in research and development, representing

approximately 30% of the group's total workforce. R&D expenses totaled EUR

5,968 million in 2008, representing 11.8% of Nokia's net sales in 2008, up from

11% of net sales in 2007.

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 The worldwide presence of Nokia Research Center proves that it is now a

truly global organization. This enables NRC to engage with the foremost

minds and partners in the mobile field to conduct leading-edge research. By

bridging this wide variety of cultures, environments and skill-sets across these

diverse geographies, NRC empowers Nokia to develop products and services

that meets the needs of their customers.

Nokia’s strategy is to have a short and medium term strategy where Nokia

researchers support the product development units to master key technologies

and their evolution. This enables them to develop competitive products efficiently.

They also have their long term strategy where research aims to disrupt the

present. Research in different sciences with global participation is a prerequisite

for creating these disruptions. Research also serves as an organizational

pioneer. Researchers keep the organization moving by challenging the present

working methods and technologies. They are also encouraged to bring forth

ideas for new business development.

Nokia aims for technology leadership in all device categories developing

the most rewarding consumer experiences that allow people to connect to what

matters to them.

III. CONCLUSION

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 The humble beginning of Nokia Corporation having its roots in paper,

rubber, and cables is a living example of a big success in technology. It has

gone through its most difficult times of trials having experienced a deep

recession which even resulted in the suicide of its Chief Executive Officer in

1988. However, despite the depth of the recession, Nokia came to its feet

quickly as its eager and dedicated people started formulating strategic plans

which could revive the company.

Nokia deeply believes that it is vital to make the right choices of

technology. Its guiding principle is whether people will use the technology in their

everyday lives to connect and share with others. Technologies need to be easy to

use, seamless, interconnected and easily integrated. Nokia conducts consumer

research and studies the ways in which people interact with mobile devices and

use technology to ensure that new technologies meet the needs of the people.

This is the reason why Nokia mobiles are said to be the most “user-friendly”

mobile phone in the market today. This approach enables Nokia to bring new

products and services to market at the right time and in the right way.

From 1865 until today, Nokia continues to create mark on the mobile

phone industry. Innovation is always at the top of this company and its history

proved its fearless business moves that led it to its massive success. And in just

over 100 years, Nokia becomes a powerful industrial corporation.

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 Nokia’s success in the past can be attributed to its determination,

innovation and bold first mover strategy. Its secret code could not be found in its

historical strategies but in its strategic history. However, as recent performance

shows, Nokia and its strategy for success is not invulnerable. Left and right

competitors like Apple’s iPhone and RIM’s BlackBerry in the high-end segment

will always remain a threat to Nokia’s unfaltering success. Nevertheless, Nokia

continues to lead the cellphone market as it continuous to fill shelves with new

and innovative products to dominate categories, solidified own strengths and

weakened powerful competitors.

Indeed, Nokia has learned from its mistakes and struggled to move on

quickly. The company had grown and became the world’s largest manufacturer

of mobile phones. With its lessons learned from the past, Nokia will surely

continue to be a veteran thriving in a never-ending emerging industry.

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