Ethical and Business Setbacks for Nokia On the morning of September 5, 2012, Nok

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Ethical and Business Setbacks for Nokia
On the morning of September 5, 2012, Nokia staged a press conference in New
York City to announce the official launch of its new Windows 8 smartphones,
the Lumia 920 and 820. The event focused heavily on the phone’s PureView
camera technology. Videos played at the press conference and online
emphasized the phone’s stabilizing technology. One advertisement in
particular praised the steadiness of the smartphone’s camera with a video
showing a woman bicycling by a riverbank in Helsinki, supposedly shot on a
Lumia 920 by a young man bicycling beside the woman. However, the online
tech magazine The Verge decided to take a closer look at the video, and while
examining it, a researcher for the magazine noticed a reflection in a window of
a trailer behind the woman on the bike. The reflection showed a young man
not on a bicycle, but rather in a van—holding a large camera. Further
investigation revealed that the shot was taken by a Steadicam, a professional
motion picture camera, held by a cameraman in the van. By 4:30 p.m., the word
was out. And by 8:00 p.m. the same day, Nokia had updated the video with a
disclaimer and issued a formal apology. Five days after the Lumia
advertisement fiasco, Nokia announced that it would conduct an ethics review
of the incident. “What we understand to date is that it was nobody’s intention
to mislead, but there was poor judgment in the decision not to use a
disclaimer,” Nokia spokesperson Susan Sheehan said. She refused to identify
the company responsible for producing the advertisement and stated that
Nokia would conduct its investigation “quickly, fairly and privately.” The
company quickly concluded its investigation, but has not revealed the results
of its investigation, other than to acknowledge that “poor judgment” was used.
Nor has Nokia not made public any ethics initiative or punitive measures
taken as a result of the false advertisement.
Nokia is one of the world’s largest mobile phone manufacturers. It has a 120-
year history of worker- and community-centered operations, and a sterling
reputation for environmental consciousness. Its corporate manifesto, “The
Nokia Way,” emphasizes people-centered decision making in a network of
equals. The camera fiasco, however, was the latest in a string of ethical and
business setbacks that have set the giant corporation reeling.

Nokia announced in 2007 that it was moving production from its facility in
Bochum, Germany, to the relatively low-wage environment of Romania. A
consumer backlash ensued. The company was eventually required to pay 60
million Euros ($93 million) back to the German state for subsidies paid to the
company for locating its facilities in Germany. In addition, a boycott was
organized by German trade unions, and several cabinet ministers publicly
changed to other brands of cell phones. Nokia saw its share of the German
smartphone market drop from 70 percent to 50 percent between the factory
closure announcement and the end of 2009. Ironically, Nokia’s 2011 decision
to close the Romanian facility and move manufacturing to Asia met with
similar reactions in Romania.
In 2009, the company strongly supported a law in its native Finland allowing
for corporations to monitor the electronic correspondence of its workers. While
the protection of trade secrets is a legitimate corporate goal, and similar
activities are allowed in many European Union countries, Finnish culture is
strongly in favor of privacy and the right to confidentiality. The campaign did
little to reassure workers that the Nokia commitment to trust and open
decision making was going to continue.
The last several years have also been a time of unprecedented financial
upheaval for Nokia. Since 2009, Nokia has lost over a third of its revenues,
downsized its workforce by about 25 percent, and seen its market
capitalization drop by over $100 billion. While the Lumia line of smartphones
continues to be the market leader in Europe, Nokia’s share of the U.S. market
has dropped to less than one percent. The public’s response to Nokia’s poor
ethical decisions has cost the company heavily. The question remains whether
Nokia will learn from its current troubles and adapt quickly enough to satisfy
its customers, shareholders, and other stakeholders.

Questions:
1. Were Nokia’s leaders acting unethically when they moved their facilities
from Germany to Romania and from Romania to Asia, or was this a
legitimate business decision to reduce costs and improve profits?
2. Why did Nokia’s customer base in Europe react to the company’s
decisions by withdrawing patronage? Do customers always respond to
unethical decisions in this way?
3. How difficult is it to ensure ethical decision making in a business that
is organized as a “network of equals”? How does this impact
accountability? Does this explain why Nokia kept the investigation
secret?

Explanation / Answer

1) Ofcourse, the decision was taken by the lmobileeaders is... to get profuts and saling the LUMIA profits, but due to some unfortunate things, they got losses.

2) By Patronage, the company was thought that sales would be increased, one thing to be clear is ...by such sceme company got no profit. So the customers always not respond to unethical issues.

3) Ethical decision making is the correct process also will bee organised as a Network Of Equals.

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