‘NO’ kriya – for Nokia |Will Nokia witness a slow death?

Author: S. Arun Kumar, Assistant Professor, SMOT School of Business, Chennai

Marketing & financial analysts feel that Nokia suffered from shortsightedness and failed to be proactive in delivering the customer’s hidden needs. Apple’s i-phone and Samsung’s superior innovation in smart phones & android market made them to gain advantage over Nokia in the past few years. Nokia lost a considerable market share due the dumping of low cost Korean and Chinese handsets in Asian markets. People preferred these low cost mobile as they had more features with dual SIM advantage and better battery backup facility. Further to these woes Samsung added many models to its portfolio catering from budget mobiles to premium category. Samsung was the first global brand to have better dual SIM models with fantastic features. This was the major reason for Samsung to boost its market share.  Nokia took a long way to come out with dual SIM models and by that time it was too late to enter into the market.  Nokia was the market leader in mobile phones for more than a decade. This led Nokia to complacency and it was not thinking beyond its existing product portfolio due to high brand value in the market. Theodore Levitt referred this ‘problem of neglecting to customer needs and being too product centric’ as marketing myopia in HBR business review in the year 1960.  

Samsung had technology partnering with Google’s Android, this created a magic in mobile phone market and it was competent enough to conquer the No.1 position, pushing Nokia behind. The Finnish cell phone maker witnessed a heavy decline in sales and the company would continue to lose its market share to Apple, Google and Samsung. These three were direct competitors which were visible for Nokia to compete with but there are more than 100 mobile brands which capture a substantial market share. After S&P & Fitch it was Moody to rate Nokia under non investment grade status. These are globally reputed rating agencies. The rating indicates the institutional investors wouldn’t buy it bonds, due to its poor financial position.  The company will face a serious economic crisis that may even collapse its existence if Nokia fails to slow down its cash burn. The company has company used its cash reserves extensively such that stabilizing and regaining its position is questionable. According to internal sources, the company is anticipating huge loss than predicted numbers and the management is ready to sack more than 10,000 jobs to reduce the costs. Nokia had a major setback after the launch of Samsung smart phones in the market. Samsung’s smart phone compatible with android was better salable in the market than i-phones and symbian models, as it was powered with multiple applications from Google. Samsung currently has 46% market share in smart phone devices and it expects to capture 60% by the end of FY2012. 

Though the management of Nokia started singing the lament with a fear of being shutdown, there is good news for Nokia from the world’s most reputed research agency Neilsen! A recent survey conducted by the research firm claimed that Nokia is still No.1, the most preferred model in the dual SIM model with 30% market share; Samsung with 16%; Micromax with 12% and G-five with 7% market share. There is no doubt that, Nokia ruled the market from 2000-2010 with dedicated models for every set of age and usage. The world has already began to sense the Euro crisis and one has to wait and watch, how the Finnish brains tackle and win their tough times ahead!