Nokia Ltd: Travails of a Market Leader

Abstract

Nokia was the world’s largest manufacturer of mobile telephone handsets. At its peak in 2000 it accounted for around 4 per cent of Finland’s GDP. However, complacency set in and the company spent its cash reserves on paying dividends and share repurchase. This was done at a time when its competitors were investing in future technologies that would drive the telecom market in the years to come. As a result since 2009 its products were unable to compete with the superior technology based touch-screen smartphones from competitors especially the iPhone, by Apple, and devices running on Android, an open source operating system (OS), which was dominated by Samsung. Nokia appointed a new CEO, Stephen Elop who took the decision to replace Symbian OS with Microsoft’s Windows Phone OS in all Nokia smartphones. There were operating issues with Windows Phone which made Nokia’s customers disillusioned. As a consequence its market share declined drastically so did its stock price from a high of $40 in late 2007 to under $2 in mid-2012. To tied over this situation Elop initiated several measures which included the launch of Windows-based smartphones, the new mid-priced Asha series of feature phones, dual-SIM card phones, downsizing, delayering, launch of Android-based smartphones, as well as moving manufacturing to low-cost Asian locations. The company hoped that these measures would enable it to compete better as well as attract and retain more customers.