Nokia: Itís Not Over Yet Ö
"At the highest level, what I have initially found is a company with many great strengths and a history of achievements that are second to none in the industry. And yet our company faces a remarkably disruptive time in the industry, with recent results demonstrating that we must re-assess our role in and our approach to this industry.” These words by Stephen Elop, the newly appointed CEO of Nokia, sent out a message loud and clear that Nokia needs a facelift for its business strategy to prevent its dwindling market share. In reality, Nokia needs much more than a new CEO. The company needs a complete renovation of its business model that addresses Nokia’s failure to react to dynamic market trends.
The launch of iPhone in 2007 had completely changed the face of the mobile phone industry and Nokia has been losing its grip on the market ever since. The feature rich Nokia N97 saw a sales figure of 500,000 phones in the first quarter of its launch as compared to Apple iPhone’s phenomenal sales of 1,000,000 phones in the first week. Also, the recently launched product from Nokia in the N-series, the N8, has been overshadowed by the demand for Apple’s iPhone 4, according to reports from financial company Morgan Stanley.
A recent survey of 150 smartphone retailers revealed that the Apple‘s iPhone is outselling Nokia‘s 12 megapixel powerhouse, six to one in Europe. Morgan Stanley analyst, Patrick Standaert says: “The N8 scores highly on most key handset features except applications. However, with more than 400,000 developers on Qt and three million downloads a day, Nokia is showing some encouraging improvements on this front.”
Still, it seems like Nokia has a lot of catching up to do in order to sustain in the ever increasing competitive mobile industry. So the evident question that stands out is where or why is Nokia lagging behind? The low satisfaction level index clearly illustrates that Nokia has been unable to meet the satisfaction levels of its customers who use smartphones.
Nokia manufactures distinct products for the smartphone user segment. The ‘N’ series caters to the Entertainment users while ‘E’ series targets the communication user segment. Internet usage is a common aspect for both entertainment and communication users. Entertainment users are more likely to use internet to download applications and games, music, and to connect to social networking sites. On the other hand, communication users prefer services to access e-mails, video conferencing and instant messaging. Internet is critical for both the users. In comparison with its competitors, the statistical data for internet usage on Nokia smartphone handsets is substantially low.
There is an imminent disparity between Nokia’s products and its targeted customers. Either Nokia products are not reaching the intended consumers or they are plainly failing to meet customer satisfaction levels.
Nokia also has a wide range of products than any other mobile manufacturer. Its wide product portfolio is clearly not helping to improve its market share. Nokia in an anxious attempt to regain its lost market is heaving the market with a myriad of products. A broad product portfolio will consequently boost its overall cost, reduce its profit margins and spread its customers slim across each product line.
To successfully capture the market, it essential that the company recognizes the right customers and also realize adequate number of consumers for each segment, which acts as a basis point for consumers to differentiate between consecutive product lines.
Nokia has not been able to address both of these issues, consumers have not been able to embrace its products and are thinly scattered across the various product ranges. Therefore, Nokia should concentrate its efforts towards the development of products and services that can be acknowledged by explicit customer needs suit their respective lifestyles.
Telecom operators wield control in, sales & marketing, distribution in most of parts of the world thereby influencing sales of smartphones in the respective regions; this value chain aspect is a key strategic issue that needs to be addressed.
Telecom operators’ collaborate with various mobile manufacturers to provide data and 3G plans with the smartphone and use their distribution channels for its sales. Voice ARPU (Average Revenue Per Unit) is losing its gleam Data ARPU slowly takes over in the future, as a result of which telecom operators are particularly interested in marketing bundles that improve data ARPU. The low internet usages on Nokia phones do not provide any incentive for telecom service providers to provide Nokia handsets with their packages. This has negatively impacted Nokia’s potential consumer base, can be attributed for its low market share especially in the US.
Consumers’ perception of Nokia as a ‘2G’ Mobile phone manufacturer has an adverse effect on Nokia’s image. Is ‘Brand Perception’ a show spoiler for Nokia? Should Nokia be sub-branding its products to change consumer perception? ‘Nokia’ as a brand has a high global recognition and creating a sub-brand to market its values on a global scale might be an excruciating task. Branding their products as low-end and high-end mobile phones differently may or may not cast any magic on its declining market share.