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CASE STUDY

Nokia was established in 1865 as a pulp and paper mill in Finland. During the 1960s,
they expanded into the rubber and cable industries through a series of mergers. In
1975, they expanded into many industries such as computers, consumer
electronics, and cell phones. In 1979, Nokia and Mobria entered into a joint venture,
which Nokia took over later to design and manufacture mobile phones1 . Since
1998, Nokia has been the market leader in the mobile phone industry transcending
the boundaries between countries and continents. Nokia has diversified its business
model time and again to maintain its leadership status in the industry. To achieve
growth and success, Nokia had to go through a number of corporate restructurings
to revive the organization and adapt to its dynamically changing goals and visions.
Restructuring allowed Nokia to come to terms with the increasing competition in the
industry, creating an organization culture that promotes innovation2 and results in
low attrition rates3 compared to the industry. In the past six years, Nokia has had
two major waves of restructuring comprising three restructuring processes in all.
The first wave came early in the 21st century, with two restructurings in 2002 and
2003 respectively. The second wave, currently in progress, aims to place Nokia at
the vantage point with respect to the future technology.
The First Wave
The late 1990's saw Nokia shifting its focus from 2G to software development. The
growth path in 2G was limited primarily because of bandwidth constraint and lack of
protocols for high speed downloads. Nokia had already begun work on 3G which
would eventually see the convergence of telephony, computing and the Internet.
Nokia's widespread restructuring at this time was an attempt to support this new
corporate strategy. A monolithic organization structure was no longer appropriate
for a market that required flexibility and faster movement to tap opportunities. In
2002, Nokia split its mobile phone division pillar into nine separate business centers
based on geography, charging them with working on specific markets
independently, especially Russia, China and India. Nokia had finally learnt from its
folly of neglecting these growth markets. September 2003 saw Nokia marching
ahead with its structural changes by dividing the company into four divisions:
mobile phones, multimedia phones, enterprise solutions and networks. These
divisions along with the cross-divisional market operations and technology platforms
gave it a matrix structure4 attuned to the existing environment that needed
flexibility (refer Exhibit 1: Nokia's organization Structure, 2003-2008). The divisions
were small in size and enabled faster response in targeting markets that were vastly
different with respect to feature demand and usage.

This structure was significantly responsible for the growth that Nokia saw in this
period, especially in the emerging markets. Nokia managed to overcome its mistake
of allowing competitors like Motorola to run away with product innovations like flip
phones. But Nokia's change-if-unfit methodology of dealing with its organization
structure ensured that the second wave of restructuring was not too far away.
The First Wave Loses Steam
The second wave of restructuring was necessitated by the changes in the rapidly
growing marketplace. The existing structure was strained by this growth which
magnified its deficiencies. Trouble started creeping in as technologies began to
converge and the phones started becoming similar. Every phone in the market
seemed to be offering similar features that drove the demand for a common
platform. The structure was incapable of meeting such needs. The major issues
faced by this structure were:
1. Repetition of work across divisions and non-standardization of product
2. Poor coordination among divisional groups working on the same technology
3. Inability to develop any major expertise
This led to cost ineffectiveness and called for a major revamp and re-structuring in
Nokia.
The Second Wave
Nokia restructured itself into three main functional groups: Markets, Devices, and
Software & Services (refer Figure 2:
Global Architecture (New Structure), 2008).
Markets:
This division handles customer, front-end sales and the go-to-market strategy of
Nokia sales worldwide.
Devices:
It deals with all the hardware and software requirements for the development of a
new mobile phone. Research and Development, product development and software
variants that were earlier separated in three divisions have now been put together
under a single umbrella division. The R&D division was further broken down into
functional entities as per the requirements.
Software & Services:

It was created in the restructuring exercise with an eye on the future of the industry.
It reflects the path that Nokia wants to take in the coming years and is in sync with
its vision of bringing the best of Internet to phones and offering Consumer Internet
Services.
Nokia-Siemens Network:
Nokia established networks division in collaboration with Siemens as a separate
entity to grow fixed and mobile network infrastructure and services. This helped
Nokia to expand its scale of operations and strengthen its market position.

Nokia focused on four main aspects in its restructuring process:


1. Product focus: Nokia was manufacturing 70 models world wide
2. Functionality focus: Technical and functional expertise was important for cutting
edge technology
3. Geographic focus: Expanding global footprint
4. Focus on Internet services: Exploring future possibilities
While the clear effects of the second wave of restructuring are yet to be seen, the
new structure is expected to offer the
following advantages to Nokia Consolidated R&D department with functional
expertise that eliminates repetition of work Flexibility and adaptability in sharing
human resources across programs
How Does Nokia Do It?
Organizations of the size of Nokia tend to stick to the same structure for long
periods of time for the simple reason that it is an enormously difficult task to
restructure. Large organizations that undergo restructuring face a lot of discontent
from employees who have gotten used to a specific style of functioning
(organizational inertia7 ). How then is Nokia, a giant, able to restructure so often
without batting an eyelid? A large part of this answer stems from its organizational
culture and values. The need for a "Culture of mobility" has led to an external
strategic focus and flexible environment. This flexibility has ensured that even
major changes result in minimum discontent among employees. Transparency in the
restructuring process and a clear definition of new roles and duties allow things to
fall in place quickly ensuring a smooth transition from one structure to another. The
structures adopted also have a role to play in the success of the restructuring
exercise. The newer structures have allowed for significant growth through

acquisitions and collaborations. The divisions' multifunctional competencies have


resulted in increased cooperation with organizations in the wider ecosystem.
Acquisitions of smaller technology firms are an attempt to use its divisions'
expertise to grow. These acquisitions and other collaborations form a part of Nokia's
extended firm. Symbian, Nokia's leading collaborative platform for mobile devices is
one such component of its extended firm.

Solution
Year
2003

Interventions
Technological change in cell
phones

12-

2008

Technological change in cell


phones

1234-

Why
Limited bandwidth of
2G.
High speed internet
downloads in
cellphones.
Standardization of
cellphone products.
To develop major
expertise.
Repetition of work.
Poor co-ordination.

SWOT Analysis
Strength
1- Market leader in mobile phone
industry since 1998.
2- 70 type of cell phone models
worldwide.
3- Diversified its business model
time to time so that it can
maintain its leadership status in
the industry.
4- Low attrition rates.
Opportunities
1- Can start manufacturing 3G
cellphones
2- Can increase its more specific
expertise in new technology based
cellphones which will give
opportunity to high speed internet
downloading and surfing.

Weakness
1- Standardization of cellphones
2- To develop major expertise in
cellphone manufacturing
3- Leading to repetitive
4- Poor co-ordination
5- 2G mobile phone production
6- Flip based cellphones

Threats
1- Price war facing from competitors
specially from Asian
manufacturers like-Samsung &LG
2- Another innovation of technology

Action Research

1- Started working on 3G which would eventually see the convergence of


telephony.
2- Divided mobile phone division into nine separate business center based on
geography. (Specially for Indian, Chinese and Russian markets).
3- Focused on technical and functional expertise
4- Focused on future possibilities (Especially best internet based phones).
5- More focused on its products so that they can manufacture a wide range of
variety cellphones.

Change model (Lewins 3 Stage)

1- Growth path for 2G phones was limited primarily because of bandwidth


constraints and lack of protocol for high speed downloads.
UNFREE
2- Similar technology and featured based cellphones manufacturing.
ZE3- Repetition of work due to standardize products on the same technology.

MOVEME
1- Begun
NT with 3G R&D for next generation cellphones which had a huge
convergence in telephony market.
2- Started innovations on flip phones.

1- Started manufacturing the 3G cellphones and flip cellphones.


RE-FREEZE

2- Adopted Symbian technology which made Nokia again a market leader in


cellphone industry.
3- Established a collaboration with Siemens to develop mobile network
infrastructure & services.

Movement of Change
a) Revolutionary change
Started manufacturing 3G enabled cellphones.
Started making Symbian software based cellphones with the
help of Siemens collaboration.
They split its mobile phone division pillar into nine separate
business centers based on geography, charging them with

working on specific markets independently, especially in


Russian, China and India.
They also restructured their mobile phone divisions in 4 parts
Mobile phones, multimedia phones, enterprise solutions and
networks.
By restructuring it in small divisions they enabled faster
response in targeting markets that were vastly different with
respect to feature demand and usage and get a rapid growth
and once again overcome from its major competitor Motorola.
In the second wave they restructured itself in three main
functional group: Markets, Devices, and Software and Service.
They also consolidated R&D department with functional
expertise that eliminated repetition of work.

Evaluation
The second wave of restructure have allowed for significant growth through
collaborations. (Specially with Siemens which extended its firm)
Divisions multifunctional competencies have resulted in increased cooperation with organization in the wider ecosystem.
Acquisitions of smaller technology firms are an attempt to use its expertise to
grow.