Role of Strategy in Nokias Quest for Competitive Advantage
Strategic management allows managers to create an organizations longstanding direction, establish the particular working objectives, incorporate various approaches to attain these objectives considering the appropriate internal and external contexts, and implement the selected action plan (Schlage, Bessant &Trifilova 76). Strategic management in an organization entails the blending of competitive actions and business approaches which managers integrate to satisfy clients, compete on the market effectively, and attain objectives of the organization. There are three steps of strategic management, namely stipulating the objectives of the organization, raising policies and procedures to attain these objectives, and apportioning resources to execute the policies (Rothaermel 4). The implementation of workable business policies guarantees the success of the organization. This paper is going to explore why Nokia Corporation failed its strategic management and the adopted business policies which made the company decline in their performance. under the influence of organizational inertia.
Nokia Company must plan strategies for all its operations basing on research and market development exploiting resources and participating in business relations. In case the firm simply performs a mere planning, it will lose their market share to their competitors. Good strategy provokes the company not just to concentrate on the results of the planning process, but also to consider substantive aspects that influence the long-term welfare of the business. Hence, large players in the phone industry have domineered smaller rivals with their market innovations in precise entrepreneurial style. Nokia Company, in particular, has been implementing well-scrutinized strategies comprehensibly, persistently, and, in most cases, with an alarming speed (Aspara, Lamberg, Laukia & Tikkanen 467). Regularly, the company has been securing its profitable market shares from more conventionally managed companies. Nokia Company followed a suggestions of strategic management discussed below until the time it began to lose to other companies such as Samsung, Techno, Apple, and much more.
History of Nokia Company
Nokia Company became the worlds leading cellphone manufacturer in 1988 when it surpassed Motorola. At that time, Motorola had just joined the telecommunication industry. Nokia had commanded about 40% of the global market for a long time before Apple Company launched its new product called iPhone in 2007 (Schlage, Bessant&Trifilova 18). Nokia had dominated for 14 years as the largest handset maker. In 2012, when the corporation shipped about 83 million of its handsets products, it began to lose influence on the market. Samsung Company had shipped 92 million of the mobile phones at the same time. Since then, Nokia Corporation has been overloaded with poor-quality products that have demoted Nokias ties to a lower grade.
Origin of Nokia Company
It is only a few corporations that exceed connecting people to the point that they transform the globe. Nokia brand began in 1865 in a paper mill in Finland. Consumers believed the company to be the most successful and significant among Fortune 500 businesses that had ever existed. Consequently, the brand modernized communication across the world. Nokia Company was formally referred to as Nordic Mobile Telephone (NMT). It built the first global phone network in 1981. In 1982, Nokia DX200 was their first digital handset switch that was introduced in the market.
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Nokia Company began as a mere idea gently expanding to various regions of the world and leading to a mobile device revolution. The company introduced to their market a portable handset dubbed Mobira Talkman. In 1987, Mobira Cityman was the first phone to be handheld. In 1991, when the idea of GSM was recognized, Nokia utilized its tool to create the first GSM call which later revolutionized the world. In 1992, Nokia 1101 became the companys first GSM handset that was greatly accepted in the market and it led to an instant triumph for the company (Schlage, Bessant&Trifilova 18). The brand recognized continued success during that time because of the endless researches that emerged to stimulate innovation. In 1999, corporation launched the first WAP handset that enabled customers to browse. That trend continued until other companies such as Samsung, which adopted the Android operating system, began to prevail on the market.
Reasons for Nokia Corporations Failure
Nokia Company failed in their strategic formulation because management did not execute a thorough situational analysis. The analysis contributes to the organizations strategy both internally and externally, as well as the macro-environmental and micro-environmental factors which are a key. Nokia Company did not counter the 2007 release of iPhone by their competitor (Rothaermel 11). Nokia smartphones seemed to be popular product during that time with the company gaining a market share of about 62.5 percent. The company was then exploiting products of other players such as Microsofts Windows Mobile OS as well as BlackBerry. The competition intensified in the subsequent year when the Apple brand took the main initiative. The CEO of the company produced strategies to deal with this new challenge, but Nokias markets share was becoming terminated day by day. The introduction of iPhone of 3rd generation by Apple Company doubled their business share initially covered by Nokia. Even though at this point Nokia was leading the market with a 40.9% of market share, it was diminishing in its operations and production (Schlage, Bessant&Trifilova 26).
Nokia Company was weak at implementing resources. They delayed showcasing of the Symbian OS that was established by Symbian Company. Even though Nokias acquirement of Symbian Limited was a great strategic move, they could not create a better product than the Android operating system that had already offered new possibilities to numerous developers. Successful strategic implementation relates to allocating sufficient resources to facilitate the execution of objectives. In Nokias case, the company poorly allocated their resources to facilitate the process of implementation (Rothaermel 37). The management failed to establish some alternative frameworks that would help them compete with their rivals who had already dominated the market.
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PESTEL Analysis of Nokia Company
Several environmental factors often influence businesses in the technology industry. These factors are external as most of them happen outside the control capacities of the company. They comprise competitors, socioeconomic, political, and technological aspects.
For instance, legal restrictions regarding such services as 3G can be contemplated since several businesses endeavor to make profits using these services. As a result, they are forced to mislead their clients about pricing, the quality of the products, and the accessibility of their offers. Also, they may attempt to reduce expenses by incorporating lower quality materials in their items, such as weaker materials for Nokia covers and batteries. Precisely, in 2000 the government of the UK began to receive bids from thirteen companies that requested for authorization to offer next-generation handsets (Schlage, Bessant&Trifilova 31). Nevertheless, the organizations started to defect the payments bidding the vast amount of money. The structure of the UK auction was such that the subsequent bidder was supposed to pay a higher percentage of money than the previous one. That fact predictably amounted to an increase in the size of bids. Therefore, companies spent much money to continue operating in the UK and it had negative consequences for Nokias development.
Nokia Company covered 91% of the sales of GSM camera phones internationally in 2002 as Samsung covered 24% of CDMA camera phone sales globally in the same year. To understand what kind of product wil be on demand, economic needs of each nation have to be examined (Laamanen, Lamberg & Vaara 4). Not trying to adjust their phones cameras to the necessities of the consumers, Nokia failed to understand their niche in market. As a esult, most customers across the world did not receive needed product. Furthermore, factors such as interest rates, demand, taxes, buying potential, exchange charges of the intended population are essential as they influence the operations of the company.
Social factors are various social life characteristics such as education, technological innovation, and advancement and composition of the population. Nokia can endeavor to gain more market share in nations with high affinity towards the cellular items. Culture, age, and location determine the social aspects of a region. The big challenge for Nokia was that since it partnered with Microsoft and in the present circumstance it had to realize a downward curve as the customers incline more toward Android phones (Laamanen, Lamberg & Vaara 6). Many applications that encourage the social well-being of clients are not in the windows phone of Nokia. The corporation failed in updating their business policies and strategies as they insisted on their old system of operations.
In the communications industry, technological advancement is the most influential factor that companies such as Nokia exploit. Corporations must update their goods with the changes in technology and adjust their products to the current customers preferences. The Nokia Company remained adamant to changes regarding updating the characteristics of their handsets. Their customers were not anticipating anything new like the clients of companies such as Panasonic and Sony did (Rusko 71). Nokia failed to move with the dynamism experienced in the technological world today, and, thus, they presented only the same products to their customers, without any form of differentiation.
Environmental and Ethical Factors
Companies, working in the phone industry, value profits more than maintaining strong ethical standards in the business environment. Such a compromise of the behavior and conduct of the company will cause it to be ejected out of business. The government dictates practices by law to guide the operations of the companies. In certain occasions, some practices may be acceptable by law but are greatly unethical regarding the potential customers (Laamanen, Lamberg&Vaara 19). Companies that follow these practices will drop its market share if they are recognized by the consuming public. Nokia has endeavored to be environmentally friendly and has always cooperated not to offend the general public. Consequently, that was one of the reasons for becoming a renowned brand of mobile phones in its time.
There are the legal policies and regulations that are controlling the operations of businesses in any country. The state authorities provide certain rules and regulations for the companies to adhere to (Rothaermel 41). At the same time, the company is always reluctant to adhere to operating regulations of the nation they are expanding to. Corporations such as Nokia often fail to comply with the legal framework stimulated in the region since they have their intellectual properties to guard their products designs from reproducing them elsewhere.
Products and Services
Nokia Company has been reluctant to provide their customers with well-advanced diversity of products and services through differentiation. The consumer did not obtain a variety of mobile products to be used outdoors. Initially, Nokia had been an innovator in the branch of cell-phones. For instance, it developed the Mobira series between 1982 and 1990 that were hugely embraced during that time. Later on, Nokia forged ahead by producing color screen handsets that had the digital camera and could play music. Furthermore, Nokias gaming series during that time was greatly embraced by youth who loved to play games on the phones. Therefore, people no longer preferred Sonys Walkman and iPods. Ultimately, Nokia acquired Symbian OS and was evidently at the top of the markt, producing outstanding phones with impressive characteristics. Unfortunately, regarding that issue, they had embraced their highest level of research and development techniques and could not develop their products further than that (Laamanen, Lamberg &Vaara 65).
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Nokia failed to pave the way for dynamic new technology that had begun saturating the globe. Beginning in 2007, companies could survive in the phone industry only by embracing the new technology. Scholars and engineers who worked at Google and Apple companies established Android and iOS operating systems to fulfill the demand of times. On the other hand, Nokia still considered their Symbian OS option as the capacity to outdo those decisions of the two companies. Consequently, such a policy led the corporation to failure. Nokia began searching for partners that would help them to be a mighty force using their astounding hardware appliances. Through their affiliation with Microsoft for another Windows OS, Nokia introduced the Lumia series to market, which opted for development in their hardware, but still meant they could not follow the tempo of new market players development. Thus, Nokia Company became a victim of organizational inertia due t inability to implement changes into the previously successful business scheme.
Organizational Inertia in Nokia Company
The general business approach of Nokia Company was to strengthen its global reputation in the market as a leader in the network system and to be the largest supplier of mobile devices. The goal of the company was to increase the level of customers fulfillment and create new models in technology so that consumers could have simple and prompt access to the global mobile internet services (Rothaermel 43). The companys fundamental objective was to capitalize its leadership function and target to dominate in the communication market. All these aims failed and caused the companys slower development and made Nokia lose grip of their market share at that time.
Strategic analysis typically provides the groundwork for strategic choice. Strategic choice is the act of choice between the best possible directions of actions and serves as the foundation of evaluation of the presented strategic alternatives. Strategic choice has three components, namely the determination of strategic alternatives, evaluating the alternatives, and choosing the strategy (Grant 88). During the process of making a strategic choice, there may be several strategic alternatives; thus, it is needful to determine the best option. Testing of the strategic alternatives can be performed in the strategic analysis so as to evaluate qualified advantages of possible alternatives (Rusko 76). When the business organization chooses any of the alternatives, it might opt to make several inquiries. The initial significant inquiries relate to fact whether the alternative bases on strengths, capitalizes on the opportunities, and overpowers weaknesses while alleviating threats that are challenging for the business. Concentration on these elements is known as establishing the aptness of the strategy. There are many questions that the entities may raise to help company effectively evaluate the strategic alternatives.
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The management of Nokia Company did not select the best strategy that could guide them among the many alternatives. As a result, they experienced organizational inertia which occurred due to certain four-step process (Rothaermel 369). Firstly, the company became a master of the mobile phone development branch. In many times, the preferred choice cost the company their development as the management could fathom the appropriate moves to stay ahead of their rivals (Grant 84). Thus, the second point leading to the failure is the success the corporation obtained. Then, to accommodate to leadership and growth, Nokia established certain systems. Simply put, the leaders of the company could not incorporate the process of choosing the best alternative that would amount to objective performance relying on the old methods. The fourth step is organizational inertia itself and resistance to adjust to new rules and demands (Rothaermel 370). During tactical selection, the chosen strategy was loosely determined, and verification from the relevant companys structures could not be implemented.
Stakeholder Strategy, Corporate Governance, Business Ethics, and Strategic Leadership
Strategic management and workable business policy were essential in allowing Nokia Company to function during complicated dynamic contemporary times efficiently. For the company to continue competing, Nokia was intended to be less administrative and more flexible to adjust to the market demands of the time (Schlage, Bessant&Trifilova 34). Managers were to intertwine related principles and offer a strategic leadership to the other employees. The company demonstrated non-adherence to business ethics as it was stipulated in the environment. Corporation did not choose a suitable resultant line of action, which led to their failure in implementing their business activities accordingly.
Nokia Corporation had to define the competitive position soon before the rivals launched their own platforms and then defended them (Rusko 78). With proper strategic management, Nokia would have developed a strategically flexible approach so that they could have had the potential to shift from one dominant strategy to the next. Moreover, as a result of changes in the business environment, the organization must also consider altering its strengths. Through strategic management, Nokia Company could have examined whether their strengths at that time could continue developing the company in different circumstances.
The deterioration of Nokia Company occurred because of failure to employ strategic management continually. Their success and survival were hinged on the business policies that were enforced as well as strategic management and led to organizational inertia. If Nokia Company had exploited a strategic management approach to their product choice and decision making in all matters of the company, they could have reaped more financial and nonfinancial benefits comparing with the competitors. Through their joint ventures with other companies like Siemens, the company can rebrand itself and employ effective corporate governance that will make Nokia dominate the market once again.