Strategic Change at Nokia Based in Finland, Nokia transformed from being a diver

Question

Strategic Change at Nokia

Based in Finland, Nokia transformed from being a diverse conglomerate into a world-leading mobile phone producer in the 1990s. Since then, the company has experienced very tough operating conditions in the face of competition from Samsung and products like the Apple iPhone. Substantial layoffs and plant closures took place across the world as Nokia missed out on consumers who were turning to smartphones. By concentrating on mobile phones, Nokia also faced intense competition from large volume producers in China with lower cost structures.

A new CEO was appointed from Microsoft in 2010 and he quickly sent a memo to all employees. The memo, rich in metaphor, became known as the ‘burning platform’ memo and basically said that Nokia had missed out on some big consumer trends and was now years behind the market and, while that was happening, top managers in Nokia thought they were doing the right thing and making good decisions.

The new CEO accused Nokia of lacking accountability and leadership. Of not collaborating enough internally and not innovating fast enough. He likened the situation that the company faced with being on a burning oil platform, the implication being that Nokia could stay where it is and perish in the flames, or jump into icy waters and have a chance of survival. Despite the new CEO’s ‘call to arms’, market share, revenues, profits and share price continued to fall.

In 2013, Microsoft purchased Nokia’s mobile phone business and the CEO moved to Microsoft as part of the deal.

If Nokia continues to lose share in the market then the Finnish economy will suffer further. The company had helped put Finland on the map as a technological leader and employer of a lot of people.

QUESTIONS

1. Explain how different elements of the temporal and competitive environments interact to influence the situation at Nokia. (Introduction, Contents /discussion, Conclusion,Diagrams)

2. Consider how you could use multiple-cause diagrams to ‘picture’ the multiple and interacting causes that bring pressure for change where you work, or in an organization that you know well. (Introduction,Contents /discussion, Conclusion,Diagrams)

Explanation / Answer

1.Causes of failure of Nokia:
Lack of leadership and initiative to innovate along with current trend in the market lead to failure of Nokia. Nokia was taken over by Microsoft because of its consistent failures,
Inability to visualize the trends in technological market lead to failure of very successful mobile company. Introduction of smartphone by Apple lead to change in consumer trends. Consumer shifted from traditional mobile phones to more advanced smartphone with additional features. Competitors like Samsung, hTC and Sony developed products for the current trend in the market. And slowly demand for Nokia started to decline. Chinese manufacturers also entered the market by producing low cost smartphones leading to increase supply of smartphones.

Diagram

Lack of innovation

Lack of vision

Emerging new competitors

Leadership problem

All the above parameters are interrelated leading to failure of nokia.

2. Multiple cause diagrams can help to bring the leadership teams attention to the current problems that can influence the revenues of the organisation. This would help to take timely decision and avoid the potential failure or loss of market share. Taking timely control action is very important before we lose our customers to the competitors.
Diagrams also helps in analysing competitive behaviour and current consumer trends. It reminds the organisation to keep in pace with the current trend or else there would be serious consequences.

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