Management Research Paper.
Management Research Paper.
Introduction
Nokia is a Finnish, telecommunications public limited-liability company listed at number 274 of the Fortune 500 companies based on its 2013 revenues. Nokia is multinational having employed 61656 people in 120 countries across the world. According to its Q4 and full year report for 2014, the company gained revenue to the tune of €12.73 billion having made sales in over a hundred and fifty countries worldwide. Nokia enjoyed dominance and continued profitability in mobile telephony through its Symbian platform for a good 14 years before it was tremendously overtaken by the iPhone and Android. Its response to these eventualities which many claim to have been slow affected profit margins greatly.
Prior to the year 2013, Nokia had been reporting losses for at least the preceding six quarters. In 2013, it reported a profitable whole year. The figures, however, indicated a fall in net sales compared with previous year. The fourth quarter of 2013 achieved €3.476 billion in net sales which was a 21% fall. Its three major departments reported acceptable profits. The NSN division raked €420M that had been preceded by €795M loss in operating profit. Having discontinued certain operations in the phone business, losses reduced from €1.47B in 2012 to €590M.
The year 2014 saw Nokia end with new strength and position shift. All the business division reported year-on-year growth in net sales. Nokia networks posted the most excellent margins. In the last quarter, it registered an 8% year-on-year growth owing to the momentum North America. Full-year reports indicated net sales of €12.7B and improved the EPS with a 40% margin compared to 2013.
Management Failures
Failure by Nokia to continuously report profits stems from disconnects in managerial functions in the company. First, the management must have flopped in planning a favourable course. Second, identified course took too long to be launched thereby affecting market shares. Planning requires that the management be in constant contact with organizational goals so as to keep defining worthwhile courses of action that will effectively achieve the goal. Coordination throughout the organization is needed so that every stakeholder is up to speed with the common objective. Finally, planning requires an understanding of available resources so that they can efficiently be appropriated.
Nokia can be applauded as being the pioneer of the smartphone concept. With its magnificent Symbian operating system, it launched the Symbian Series 60 devices back in 2002. It was until 2007 when the iPhone was launched that they faced competition. The idea of an application based operating system that Apple introduced threatened the Symbian OS. Nokia made the first mistake by not having an appropriate plan to respond to Apple’s invention. They failed to appreciate changing customer demands thereby causing an aging of the Symbian OS.
When Nokia would have considered taking the alternative of staying relevant in the smartphone race, management took longer than necessary to initiate the action. While this may have been a lesson they learned from Ericsson’s failure in the 1990’s, the delayed move into windows phone indicates disconnect in planning. This step was only forthcoming in 2011. Having lost their market to iPhone and Android for four years, reclamation will prove hard.
Nokia also failed in coordinating its activities appropriately. Having a Symbian OS that depended on UX designs from different companies caused fragmentation woes. Agreement between designers was not easy. Decisions and execution would take long to reach since everyone wanted their input to be assimilated. Coordination, therefore, was not at its best leading to products that served more the intent of vendors rather than demands in the market.
External Factors
The woes with Nokia not only stem from the management but also influences from its external environment. The biggest contributor among external factors has been technology. Advances in technology struck Nokia to the extent that it CEO once admitted. Stephen Elop is quoted saying that technology had taken them by surprise to the Finnish national daily. This finally saw the company ditch Symbian OS for windows in a partnership with Microsoft.
Secondly, Symbian phones unlike iPhone and Android had no standard brand and direction. Symbian did not offer the application based user experience that iPhone capitalized on. Apple was hence able to attract app developers who would do apps and users could access them from a common place in the app store. Symbian having been highly fragmented could not have cross-platform apps hence scared away developers. It never had a meaningful app store, and therefore users were not fancied enough.
Apart from technological aspects, the shift in social/lifestyle dimensions have significantly affected Nokia’s profitability. While the emergence of the iPhone may heightened customer’s expectations of a smartphone, the social, cultural trends being witnessed changes these demands dramatically. The change in ways of conducting business and lifestyles creates a need for absolute value.
When Nokia was struggling to keep its smartphone relevant, the identified need was to serve the increasing phone usage by customers in many aspects of their life. Communication was being overtaken by the basic need for a phone. Customers now needed a pocket device that could easily pull content, support online presence and also support the life on the phone. Symbian’s response to this was not forthcoming. Nokia has once again failed in addressing changing social setups and lifestyles.
Conclusion
Effectiveness in managing an organization is necessary to maintain profit margins. A disconnect in functions entrusted to managers translates to ineffective processes that later affect performance. External factors relevant to the organization need also to be addressed carefully as they affect performance too. The Nokia Company as has been shown suffered a major setback since planning was not at its best. Failure to coordinate activities also led to servicing of the wrong motives thereby missing the goal.
Managers, therefore, need to be always on top of things in the organization. Intuition should always guide their actions so that they remain timely and effective.
Reference List
Agence France-Presse, 2012. Nokia CEO Admits Failure to Foresee Fast-changing Industry. [Online] Available at <http://www.industryweek.com/strategic-planning-amp-execution/nokia-ceo-admits-failure-foresee-fast-changing-industry> [Accessed 29 April 2015].
Nokia Corporation Report for Q4 2014 and Full Year 2014. [Online] Available at <http://company.nokia.com/en/news/press-releases/2015/01/29/nokia-corporation-report-for-q4-2014-and-full-year-2014 > [Accessed 29 April 2015].
