Online Assignment Submission

Birmingham Business School

Student ID Number: 1524675, 1578075, 1578213, 1594368, 1600280, 1617585

Programme Of Study: Graduate Diploma Business Administrasion
Module: Cases in Marketing
Assignment Title: Nokias Challenge in the Fast Change High-End Market (Smartphone) in 2012
Date and Time of Submission: 14th March 2016, 10:30

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1. Introduction
Nokia, the giant high technology company, had a dominant position and it had the largest
manufacturing company in the mobile phone industry over 14 years. However, Nokia failed to
catch up smartphone business. This research paper illustrates what is the challenge of Nokia's
marketing with three problems (brand strategy, market demand cognition, and value position)
between 2008 and 2012. Real business operation result and academic approach had been
estimating Nokia's case study from various aspects to identify some key marketing elements.
2. Background
Nokia as well as known most famous Finnish multinational company established in 1865 and
started telephone and electricity cable manufacturing business in 1912. From late 1990's, Nokia
has been long the strongest market leading company in the mobile phone industry with
significant operating system as Symbian and Nokia's product series used to dominate the high,
middle and low-end market in the world (Troianovski, A. and Grunberg, S., 2012). However, in
terms of internal problem, Nokia did not focus on smartphone development compare with
competitors. For example, Samsung invested $9.3billion to boost smartphone business.

Assuming Nokia did not sell their mobile phone division. If you are the CEO of Nokia what
strategy you will do to increase market share in 2012 and onward, in fast changing high-end
market (smartphone) market? Your strategy should answer three main problem of Nokia (value
proposition, Brand effectiveness, Industry change).
3. Market Analysis
3.1. Industry Analysis
Nokia had the biggest share in the smartphone market in 2008 with 40% market share. The
closest competitor is Samsung with 15.5% (see Exhibit 1). The Symbian operating system (OS),
created by Nokia was the most popular smartphone OS, was used by more than half
smartphone worldwide (see Exhibit 2). The second most popular OS is RIM by Blackberry used
by 20% smartphone. This Symbian supremacy could be understood because the other
manufacturers also used it, such as Samsung and Motorola. In 2008, Apple was a minor player
and only have a decent market share in the United States (Elmer, 2008). Furthermore, the first
Android phone was released by HTC and Google in the same year (Gohring, 2008).
In the next five years, Nokia faced a serious challenge. The Android and iOS gained wide
acceptance by the customer and reduced Symbian popularity. The iOS, Apple proprietary,

targeted high-class customer. In contrast, Google used a different strategy, Google made
Android as open source and invited other manufacturers to use it. The Android manufacturers
targeted middle to high customer segment. As a result, Nokia experienced dramatically decline
about 60% in profit (see Exhibit 2).

To prevent further declining, Nokia appointed Stephen Elop as a new chief executive officer on
21 September 2010. Elop was head of Microsoft's Business Division beforehand. Nokia board
believed that Stephen owned the right industry experience and leadership skills (BBC, 2010). In
2011, Elop made a strategic partnership with Microsoft to develop Windows Phone. The
strategy was combining Nokia hardware and Microsoft software expertise. The first Nokia
Windows Phone, named Lumia 900, launched on April 2012. Lumia offered lower price and
fresh looking user interface (UI), inspired from window 8 metro design, compared with Android
and iOS (see Exhibit 4). Nokia also came with Lumia variation targeting middle to high
consumer segment.

3.2 Consumer Analysis

The smartphone technology experienced technology shift in 2008-2012. Big screen and full
touch screen smartphone replaced the traditional model with buttons for the middle to the highincome consumer. Google and Apple opened their OS for third party developers. This
stimulated many innovative apps and games available in their app store, such as Facebook or
Angry Bird. It was different with Nokia with their closed platform policy for Symbian before
followed their competitors to launch app store, named Ovi Store, in 2009.

This condition changed the behavior of consumer. According to research by InsightsNow about
what is the reason consumer using their smartphone (see Exhibit 6), only 19% customer use
their time for interacting with other people (texting, calling, email). On other hand, 49 %
customers use their smartphone for me time, participating in their hobbies and interest. For
example, playing game and enjoy entertainment. In addition, Smartphone will be more
promising in the future as the market projection increase fourth times in 2016 (see Exhibit 7).
4. Problem Identification and Symptoms
There were several issues that make Nokia failed in the market. First, Nokia was
overconfidence to their famous brand. They considered that famous brand could help to

maintain their market share although their competitors released new products to the market
earlier. They thought the time to market would not be a barrier to get success in the market.

Second, Nokia disastrous to adapt the market trend and customer expectation of product phone
industry. It was ironic as they were the market leader that owned adequate resources to make
most of the product that customers need. They were the first company to introduce internet
phone and to make a prototype of touch screen technology. Furthermore, they were the first
company that made smartphone. One of former Nokia designer, Frank Nuovo, said they had
prototypes that anticipated the iPhone (Troianovski, A. and Grunberg, S., 2012). These
portfolios were only portfolios until being leveraged to meet customers need. They did not have
the ability to transform their Research and Development into a product that customer actually
want to buy (Surowiecki, 2003). As a hardware company, Nokia consumed most of his
resources to make sophisticated devices. They did misjudge the importance of software
including the application that supports the devices. They did not realize that customer
expectation toward phone changed. Particularly in high-end smartphone market, customers
were expecting a constant innovation of the product. While Nokia still focusing on their hardware,
the competitors were focusing on innovation of the software. Nokia failed to respond to this fast
change of the industry. Particularly in the high end market, Nokia was late to realize and get
beaten by Apple and Samsung, which provided much better operating system and supporting
application that add more value to customers.

Another problem that makes Nokia failed in the market was that Nokia product has less value
proposition (Sandeen, 2010). Their smartphone has not enough specific value. As a result, they
were no longer the best choice for their targeted customers since Apple and Samsung were
getting more market share. Nokia did not make something special connected with their products.
For example, Apple had a strong value proposition because of minimalist style design, unique
user experience and product performance of their products. However, Nokia failed to develop
application for their products, which lead to poor user experience. That was one of the reasons
why Nokia lose value proposition. In addition, Nokia did not have a good branding strategy.
Compared to its main competitors, Apple and Samsung, Nokia failed to implement the right
umbrella branding strategy. Apple launched a new product every year by using iPhone as an
umbrella and Samsung have a high-end phone Galaxy S series. Although Nokia used Lumia
series as the umbrella later, they failed to build the anticipation of their customers because of
their poor product performance.

References
1. Arthur, C., 2013. Microsoft and Nokias Problem-Explained in Three Graphs. Available at:
http://www.theguardian.com/technology/2013/sep/03/nokia-microsoft-deal-explained-graphs
(Accessed 6 March 2016)
2. BBC,

2010.

Nokia

Appoints

Microsoft

Executive as New

Head.

Available

at:

http://www.bbc.co.uk/news/business-11257069 (Accessed 6 March 2016).

3. Egham, 2014. Gartner Says Annual Smartphone Sales Surpassed Sales of Feature
Phones for the First Time. Available at: http://www.gartner.com/newsroom/id/2665715
(Accessed 6 March 2016)
4. Elmer, P., 2008. iPhone Grabs 30% of U.S. Smarphone Market. Available at:
http://fortune.com/2008/12/02/iphone-grabs-30-of-u-s-smartphone-market/

(Accessed

March 2016).
5. Gohring, N., 2008. T-Mobile, Google and HTC Introduce first Android Phone. Available at:
http://www.macworld.com/article/1135695/android_g1.html (Accessed 6 March 2016)
6. Harvard, 2013. How People Really Use Mobile. Available at: https://hbr.org/2013/01/howpeople-really-use-mobile (Accessed 6 March 2016)
7. Sandeen,

P.

(2010).

Why

Nokias

Marketing

Strategy

Failed.

Available

at:

http://www.petersandeen.com/nokia-marketing-strategy-fails/ (Accessed: 6 March 2016)

8. Surowiecki,

J.

(2013).

Where

Nokia

Went

Wrong.

Available

at:

http://www.newyorker.com/business/currency/where-nokia-went-wrong (Accessed: 6 March

2016)
9. Troianovski, A.and Grunberg, S., 2012. Nokia's Bad Call on Smartphones
Available at
http://www.wsj.com/articles/SB10001424052702304388004577531002591315494
(Accessed: 6 March 2016)

Appendix

Exhibit 1

Source: IDC

Exhibit 2

Source: Gartner

Exhibit 3

Exhibit 5

Flagship Smartphone
in early 2012
Product

Samsung Galaxy S3

iPhone 4S

Lumia 900

OS

Android 4.0

iOS 5

Windows Phone 7.5

Screen

4.8 inches

3.5 inches

4.3 inches

Resolution

720 x 1280 pixels

640 x 960 pixels

480 x 800 pixels

CPU

Quad-core 1.4 GHz

Dual-core 1.0 GHz

Single Core 1.4 GHz

Camera

8 MP

8 MP

8 MP

Ram

1 GB

512 MB

512 MB

Memory Internal

16

8/16/32/64 GB

16 GB

M. External Slot

Yes

No

No

Battery

2100 mAh

1432 mAh

1830 mAh

Launch Retail Price

500

499 (16GB)

399

599 (32GB)
699 (64GB)
Source: gsmarena

Exhibit 6
The reasons consumers use Smartphone

Source: InsightNow

Exhibit 7
Smartphone vs Feature Phone Market projection