The purpose of this report was to analyse and identify the key strategic issues that were important to develop a new market strategy for Nokia. Although Nokia is doing well in its low cost mobile segment market, and is still second behind Samsung in the overall sales, the real problem lies in the smartphone category. Nokia has lost its market share to the likes of Samsung and Apple in the most competitive smartphone category.
1. Some of the internal issues that the company needs to address were: Its inability to break into the US market, that is considered to be the fastest growing market for smartphones, difficulty in competing against high-end handsets based on the Apple and Android platforms and its earlier incompetent Symbian platform. However, the biggest internal issue that Nokia faced was related to its top management. There was no product vision, new ideas were delayed, ignored and therefore it could not compete with the likes of Apple and Samsung, which later became market leaders in the most profitable smartphone category.
2. The biggest competitive advantage that Nokia has is its strength in the lower end of the markets. Countries like China, India and Brazil have huge demands for such phones. Moreover, China and India are the two biggest markets for Nokia respectively (Exhibit 3, Alarm ringing- Nokia in 2010). Nokia should aggressively market its Windows based Lumia phones in these markets, as these countries already have a huge Nokia customer base.
3. Today’s mobile phone market offers very interesting insights, where profitability depends on the quality of sales and not the quantity. A company like Apple, makes lesser sales as compared to Samsung or Nokia, but has a bigger profit margin as compared to the other two. The game has shifted to selling more smartphones, because the profit lies over there. The ASP (average selling price) of a smartphone is much higher as compared to a low-end phone. And the problem with Nokia, over the past few years, has been that it has shipped more low-end handsets with reductions in its ASPs. Nokia needs to reverse this trend with its Lumia range, in order to win back lost markets.
4. Looking at the competitors, it can be easily inferred that Samsung and Apple are Nokia’s biggest rivals, apart from other competitors such as Sony Ericson, HTC, RIM and Motorola. If we talk about the global smartphones market share, then we find Samsung right at the top, followed by Apple and Nokia. Although Samsung is the market leader in the global smartphone sales, it is Apple’s iPhone, which is the most profitable smartphone in the world as it has a higher ASP as compared to Samsung.
Source: http://qz.com/120917/the-smartphone-business-microsoft-bought-in-three-charts/#120917/the-smartphone-business-microsoft-bought-in-three-charts/
One good thing, which Nokia is doing, is concentrating on markets like China and India, where still, there is a huge demand for low cost and low power consuming devices. Another plus for Nokia is their abandonment of Symbian operating system and launching its Lumia brand under the Windows operating system.
If we carefully analyse these internal and external factors, we can select the key strategic issues that Nokia needs to take into account for developing its future strategy.
- Target growing economies like India and China: India and China are such markets that possess huge growth potential. These countries have a huge base of low-end mobile users that can be effectively targeted and can be bought under ‘smart phone’ category. Nokia must try and develop new range of mid-priced Lumia smartphones, which would be priced just above the low end phones. Such an attractive price proposition, and a strong brand image in these markets, will translate into huge profits for the company. However, Nokia needs to implement this strategy in a quick and effective way, because of high competition from the likes of Samsung in such markets.
- Provide variety of services and applications through its online stores. One of the reasons, why Apple has been so successful is because of its I-tunes store, and thousands of applications, songs and videos that can be downloaded through it. Although, Nokia has an online store (http://store.ovi.com/applications), it is still not as comprehensive as an I-tunes or an Android store. The company needs to develop new and innovative applications in collaboration with several technology companies, if it needs to grow in the smartphone category. The users of Nokia smartphones must get value for their money through these applications, games, songs and video downloads.
- Concentrate of ‘Premium category’ of Smartphones’. Nokia has introduced couple of models in its Lumia series that can be counted in the ‘premium category’ of smartphones. Since they possess higher ASPs as compared to other handsets, such models should be aggressively marketed in developed markets like Europe and United States, where Nokia sales has been pretty dismal. With the new OS and its successful Lumia Series, Nokia should try to enter the American markets with new vigour.
- Keeping the decision of ‘linking to other Microsoft divisions’ as a standby strategy, in case the above strategies fail to deliver.
The following key issues will be important for Nokia in shaping its future market strategies. Who know, the day might come when Nokia again becomes the market leader in the smartphone industry. We have to wait and watch if that happens or not!
References
IBS Centre for Management Research (2011). Alarm Ringing: Nokia in 2010. Hyderabad. Print.
Popper, B. (2010). The Wrong Guy: Nokia’s new CEO. Retrieved from: http://www.cbsnews.com/news/the-wrong-guy-nokias-new-ceo-stephen-elop-lacks-smartphone-smarts/
Frommer, D.(2010). Nokia Makes the Same Mistake Again. Retrieved from: http://www.businessinsider.com/nokia-makes-the-same-mistake-again-hires-a-manager-not-a-product-visionary-2010-9?IR=T
Warman, M. (2010). Can Nokia CEO Revive the Company?. Retrieved from: http://www.telegraph.co.uk/technology/nokia/7994846/Can-Nokias-new-CEO-revive-the-company.html
Ewan (2010). Nokia’s fall from Grace: A Background Story. Retrieved from: http://www.mobileindustryreview.com/2010/07/nokias-fall-from-grace-the-background-story.html
Ricknas, M. (2010) Nokia on Long Comeback Trail after Smartphone Misses. Retrieved from: http://www.macworld.co.uk/news/apple/nokia-long-comeback-trail-after-smartphone-misses-3229048/
www.nokia.com
http://store.ovi.com/applications
