Gabriela-Cosmina Tudor, FABIZ

Presenting a critical situation

Nokia case study

This Nokia case study presents the management crisis the company encountered in mid 2007 with the malfunctioning of its handsets due to faulty batteries which could get overheated and emphasizes the critical challenges a multinational company faces in an emerging market. Nokia is a Finland based communications technology provider. It started as a paper pulp business which expanded into various business verticals majorly mobile phones, multimedia, enrprisse solutions and networks. It is the worlds largest mobile manufacturer since 1998. It expanded into several countries all around the world and has now become a global brand.

Context
India had one of the fastes-growing mobile phone markets in the world with 170 million mobile subscribers as of October 2007; an average of 8 million subscribers was being added every month. Nokia entered the Indian market in 1995 and within a decade established as a leader, developing a huge customer base within the country with revenues of over $3.5 billion in the year 2006. Nokia has been able to build such a reputation due to the quality of its products, the localized offerings it makes to the Indian customers, its relations with the media and shareholders and the trust created due to its investment in the Indian market. Nokia had developed a strong network of sales and marketing centres within India and boasted one of the largest distribution networks, with a presence in more than 130,000 outlets.

Critical situation
Nokia has built a solid reputation as a brand for ten years and has been the market leader in the Indian mobile industry. India, incidentally, was also the second largest market of Nokia, after China. In August 2007, a routine product feedback and defect analysis process identified a defective batch of batteries supplied by a Japanese vendor, Matsushita. India happened to be the recipient of the largest proportion of the defective batch. Nokia's corporate communications team, based in Finland, in cooperation with the Indian team, responded with a customary global product advisory, that, unfortunately resulted in a customer panic. For almost four months, Nokia India had to recall millions of batteries and replace them with new ones.

Gabriela-Cosmina Tudor, FABIZ

Managerial problem and decisions

In the summer of 2007, Nokia received a few consumer complaints about Bl-5C batteries; the batteries were overheating while charging. Within a month over 100 complaints were registered globally. Following the directive from top management, Nokias global communications team in Finland activated the standard protocol for such events and proceeded to issue a product advisory. The global team had devised a solution whereby customers could visit the website and determinate whether their battery was affected by keying in a 15-digit battery number. An affected battery could then be registered online and a new battery could be shipped to a customers address within 15 days. The global communications team worked in conjunction with its counterparts at Nokia India, headed by Poonam Kaul. Throughout the problems, Kaul and her team kept close contact with headquarters and D Shiv Kumar, the managing director of Nokia India. Once the product advisory issued, the television channels started reporting sensational instances of battery explosions totally unrelated to the product advisory. Nevertheless, the extensive media attention generated public fear, which quickly turnedin to panic and spread widely. To handle the fallout from the media panic, two teams were immediately formed: a crisis management team, comprised of D Shiv Kumar, Sudhir Hohli, Poonam Kaul and Devinder Kishore, and a logistic team comprised of Dhariwal and Kohli.It was clear that a local solution needed to be developed to replace the web-based service, rather than wait for a solution from corporate headquarters or the regional office in Singapore; thus, an SMS solution was activated whereby customers could text their 15-digit battery number to determine whether their battery is affected. If the battery was affected, it could be registered by texting the customers address, and a new battery would be shipped to the customers address in 15 days. In total, Nokia was bombarded with more than 150,000 phone calls and text messages within a couple of days and more than 3 million requests within a week. Nokias chairman, Olli-Pekka Kallasuvo, was scheduled to visit India from August 23 to 25, 2007. His interaction with the media served to strengthen the perception of Nokias commitment to India. Communication with Customers Nokia introduced an advertisement campaign that was directed towards all Nokia mobile phone owners. The focus was to allay customer fears regarding the battery recall and to provide sufficient information to the cutomers. A tool-free telephone helpline was also activated. Each customer care centres (CCC) and Nokia priority dealer was assigned a promoter - an employee speciafically designated to assist the walk-in customers. Further, an SMS facility was activated whereby customers could text their 15-digit battery number to Nokia to receive appropiate instructions through their mobile phones.

Gabriela-Cosmina Tudor, FABIZ

Communication with Suppliers Within a week of the media panic, battery replacements ran in the millions. Other than the batteries from the Chennai plant, more batteries were brought in from Singapore and Dusseldorf. Given the huge volume of shipments, Nokia had to seek the intervention of DHLs regional headquarters though its Singapore office for managing the surge. Reverse Shipment In late September 2007, Nokia global headquarters issued a mandate that the old batteries be collected and disposed of in an environment-friendly manner. An empty insulated envelope, which Matsushita shipped to Nokia from its factory in China, was sent in a DHL courier bag to each customer address that a replacement battery had been delivered. Customers were asked to send their old batteries back in that envelope. Nokia collected almost 100,000 old batteries in this manner, and also collected almost 300,000 old batteries from the CCCs. To ensure that customers ere given sufficient time to replace batteries, Nokia continued the replacement process for four months.

Results and effects

The company finally wound up its advisory operations in December 2007.At the conclusion of the recall operation, Nokia ceremoniously distributed mementos to everyone involved in the recall; fittingly, the memento displayed a BL-5C battery. Despite the intensifying competition, Nokia held on to its market leadership. Given that product recalls were rare in India, many observers felt that Nokia may have escaped the ire of consumers by simply being prompt. Many were of the opinion that following the recall issue, the Nokia brand seemed to have a more endearing image among Indian consumers. Shiv Kumar recalled: Even in the absence of local rules governing product recalls in India, we managed the crisis rather well. The brand means something to the consumer. If they can trust you, they will stay with you.