Nokia is one of the greats in the mobile phone industry but it’s been in the news in recent years for all the wrong reasons. Once a dominate force in its own right and now owned by another company, Nokia hopes to create its former glory days again and take on Apple, Samsung, HTC and others. So what went wrong?
“THE RISE”
Even though Nokia is best known for its mobile phones, the company can be traced back as far as 1865 as a riverside paper mill. It didn’t get involved in telecommunications until the late 70’s and eventually in 1992 the management decided to concentrate on manufacturing mobile phones and telecommunications systems. With this decision, the firm released its first portable headset – the 1011 the same year. With further investment in GSM and the popularity of mobile phones over the 90’s, despite Nokia suffering a breakdown in its logistics and supply-chain management, in 1998 it became the biggest company in telecommunications in the world. Nokia capitalised on this, by releasing further products such as the 8800 series which had a gross profit margin of between 70-80%. Other models such as the 3210 and its successor the 3310 were also a massive hit selling over 160 million and 126 million handsets respectively. Eventually by the start of the 21st century, Nokia had a market share of 35% – in other words, 1 in 3 phones sold globally was a Nokia. In the UK, it was a question of not what phone to do you have but what Nokia do you have.
The 3210 (left) and the 3310 (right) sold very well
“THE FALL”
The first sign of a potential threat for Nokia was its competition during the start of the 21st century. During this period of time, technology was moving at a phenomenal rate which gave its rivals the opportunity to be a stronger force in the market. Motorola and LG biggest success in this era was their “fashion” phones, choosing style over substance with the RAZR V3 and the “Chocolate” respectively. Arguably, Sony Ericsson meanwhile went the opposite direction and created sub-brands for their phones with the Walkman and Cyber-Shot series, focusing on media and its camera respectively. Samsung seemed to try and combine both by making handsets with a flip or slider design rather than the traditional “candybar” but still with specifications impressive in its time. As a result, Nokia’s market share by the end of 2004 was down from 35% to 28%.
Despite this drawback, Nokia was still a major player in the business. It reacted quickly and released popular handsets to compete which its rivals which kept it in the game such as the 6230 which eventually sold 50 million worldwide. Eventually Nokia released handset for all markets which helped the firm regain its market share. It released a lot of entry-level phones such as the 1600 that was not only popular for 1st-time phone owners and those who’s more interested in ease of use rather than the latest features, but also for emerging markets across the globe. They also unveiled the “N-Series” in 2005 which was handsets with leading specifications and had as much features that the technology allowed it to. As a result, the market share by 2007 was 49.4% – nearly 1 in 2 phones was a Nokia in the world.
The second sign of a potential threat was the release of Apple’s iPhone and the start of the smartphone era. Apple started the trend which all phones followed eventually with a full touchscreen and a dedicated online store full with applications you can download straight to your mobile. Eventually other rivals followed suit with built-in online features, with Google releasing the first Android powered phone the HTC Dream/T-Mobile G1, and BlackBerry (RIM at the time) offering its existing online services to a much wider audience by releasing mid-range phones such as the “Curve” series as well as phones in the top-end market. To compete with their rivals Nokia purchased Symbian OS in June 2008 and eventually made headsets exclusively for the operating system. However, this time it did not react quickly enough and it was arguably Nokia’s complacency and failure to keep up with the other manufacturers that resulted in its decline. The hardware of the mobile phones was never out of the question – more the software. For example, with the Nokia N8 which was released in 2010, reviewers praised the specifications of the phone but was often frustrated with the Symbian software. The guardian says that;
“I can’t recommend the N8 to anyone but hardened Nokia fans or people who really want a fantastic camera that can also make phone calls. Certainly, anyone who’s used an iPhone will find its interface enraging.”
CNET UK also did a review on the handset and said that,
“We don’t like to point fingers, but we blame Symbian for the N8’s problems. This is the first phone with the latest version of the operating system, Symbian 3, and, although there are improvements, it’s just not good enough.”
TechRadar added their verdict and said that,
“Everything that we didn’t like about this phone can be traced back to the user interface and Nokia’s stubborn approach to updating its ageing platform and user interaction”
The N8’s software was heavily flawed
During this period of time, Nokia’s failure to adapt quickly enough to the smartphone era resulted in a massive drop in its market share. Even though the market had expanded, the share still decreased from over 49% in 2007 it to as far down as 28% in 2010 – almost halved in 3 years. The main reason it didn’t decrease any further is because of its strong sales of entry-level handsets in emerging markets.
In the hope to regain its position in the high-end mobile phone sector and to compete with Apple’s iPhone and Google’s Android partners Samsung, Sony and HTC, Nokia made an agreement with Microsoft in February 2011 to feature its Windows Phone operating system. The main reason behind it was because Android was the only other open-source operating system available (iOS and BBOS is only available to their respective owners), and if Nokia chose Android it was no guarantee that it would save the company due to the strong internal battle with Samsung, Sony, HTC and LG. To makes matters worse, even as far back as 2010 there were fears that one of those manufacturers would dominate Android and some of the others could end up making a loss. Also, North America is an important market for Nokia and Microsoft.
Sales started slow but eventually picked up with 13.3 million Lumias (the Windows Phone sub-brand) handsets sold worldwide in 2012. Compared to Apple’s 26 million iPhone’s and Google’s 104.8 million Android headsets in Q2 alone – Nokia was still in decline in the smartphone market. With a decrease to under 5% by 2013 from 40% in 2010 and from 25% since the Nokia-Microsoft partnership, the company’s performance overall started to affect the low-end phones in the Asha range as well. Even though the Asha range was strong, the market share decrease to 19.9% from 22.8% a year earlier with the company posting a loss every quarter. Even with Lumia sales more than doubled in 2013 and Windows Phone OS overtaking BlackBerry as the 3rd largest OS in terms of market share, it wasn’t enough to save the company due to the amount of investment into Microsoft’s operating system. Arguably, Microsoft had no other choice but to purchase the Finnish company. Back in July 2013 (a few months before the announcement of the purchase of Nokia), according to AdDuplex Nokia had a 85.4% share on Windows Phone 8 devices – which is nearly 7 in 8 phones. If Nokia was to declare bankruptcy then Windows Phone could potentially fail due to the lack of support from not only other manufacturers such as HTC and Samsung but also the software developers since not a lot of apps get released for Windows Phone compared to iOS and Android.
Nokia’s and Microsoft’s smartphone market share between 2010-2013
“THE RISE AGAIN (HOPEFULLY?)”
With Nokia now part of the Microsoft family, there are plans to better integrate the software and hardware for a much better user experience. The CEO of Microsoft at the time, said that
“having one company making decisions on everything from innovations to marketing would make things more efficient, with higher returns.”
By doing this, Microsoft plan to increase the market share to around 15% of Windows phone by 2018. With 12 in 13 Windows Phone 8 handsets branded a Nokia (92.3% – as of February 2014) , this is an golden opportunity for Nokia to regain its position as a market leader in the mobile phone market. There are various ways Microsoft plan to do this and these include;
– Using Nokia’s Maps
As Microsoft also purchased the patents as well, they see an opportunity for moving in the right direction with Nokia HERE technology and using it in Windows Phone saying that “there’s needs to be another alternative other than Google” and “more than one digital map of the world”. Already given fair praise, Microsoft sees an opportunity to further enhance the HERE maps into Windows Phone (and possibly the Asha range as well) to boost their chances of reaching their market share goal. Of course the maps is a small part of the overall smartphone experience, but judging from the intense criticisms Apple received when it dropped Google maps in favour of their own maps, it shows that maps are important and could be a deciding factor when an user is selecting a new handset.
Microsoft sees great potential in Nokia HERE maps
– Savings In Ownership
Also as it stood with the Nokia and Microsoft agreement, it was reported that Microsoft themselves were making less than $10 (£7.30) per phone. Now that Nokia is owned by Microsoft, that should rise to around $40 (£29.20) per phone and save $600 million (£438 million) within 18 months. Of course that doesn’t necessarily mean that this will be an automatic boast for Nokia, but it means that there’s an opportunity for further investment in the Windows Phone platform with these savings from bringing Nokia in-house.
– Feature Phone Opportunity
Features phones have higher specifications than basic cell phones but are not as advanced as top-end phones like the Samsung Galaxy S4, iPhone 5S or the HTC One. Already strong in the field, Nokia now has the opportunity to increase its lead because not only is there bigger profit margins but also it’s considered “the future” by some experts due to price differences between feature phones and smartphones. It was also reported that 52% of Windows Phone users previously owned a feature phone. What this means is that not only do Nokia have a leading position in what is thought to be the future of mobile phone, but also for those wishing to go onto to smartphones, the Windows Phone OS is more than likely the best choice. It could be said however that this was always the case even before Microsoft’s purchase of the Finnish company but now with the full support of Microsoft it could lead to greater opportunities.
Nokia is without doubt one of the most successful technological companies in the world and was once a very dominant player in its market. Of course now things are different with Microsoft’s purchase of the organization, but this could open doors for it to be dominant once again…
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