Alarm Ringing: Nokia in 2010

" . . Thlokia 's problems are still fixable but the window is closing. lam not optimistic that they will be
fixed in 2010 because there isn't much time left, and if they aren't fixed in 2011, Nokia will be in big
trouble."'
Nick Jones, vice president, Gartner, Inc.' in 2010.

Market Leader In Trouble

In September 2010, Stephen Elop (Elop) joined Nokia
Corporations (Nokia) as the President and CEO. Elop, former
head of Microsoft's Business Division' (MBD), was brought
in to fix the numerous problems faced by the world's leading
mobile phone company. His tasks included the onerous job of
reversing not only Nokia's eroding market share in the highend smartphone segment but also its slumping profits. "My
role, as the leader of Nokia, is to lead this team through this
period of change, take the organization through a period of
disruption. My job is to create an environment where those
opportunities are properly captured, to ultimately ensure we
are meeting the needs of our customers, while delivering
superior financial result,"4 said Elop.
The Finland-based Nokia had a presence in over 160
countries as of 2010. Though it was the world's largest
mobile phone maker with a market share of 35% in the
first quarter of 2010, Nokia had been losing market share
consistently in the high-end mobile phone market.
According to analysts, problems began for the company
with the increase in the global demand for smartphones, a
segment in which Nokia was unable to find its footing
compared to rivals like Research In Motion' (RIM) and
Apple. 6 Nokia was not only slow in launching
7

smartphones with the latest version of its Symbian

operating system (OS), but also in catching up with the
touch-screen technology, they said. Nokia's major problems
were development of new software services, hardware design, and North American distribution. The plunging market
share price and dwindling investor confidence ultimately led
to Elop replacing 011i-Pekka Kallasvuo (Kallasvuo), who

had been CEO since mid-2006. Experts opined that

under Kallasvuo, Nokia had struggled to keep up with
rivals in the smartphone segment, the most profitable and
fastest-growing segment in the global mobile phone
market.
Analysts felt that Elop had a tough road ahead as he
had to establish the company's presence in the smartphone
segment and increase its profits. Moreover, he would
have to revitalize the Nokia brand and stand up against
the competition. What made the assignment even more
challenging for Elop was the deeply-entrenched culture
at Nokia. Being a Canadian, who had spent most of his
time managing the affairs of US-based companies, he was
expected to face resistance from the management team with
a strong Finnish cultural bias. Elop's appointment elicited
mixed reactions from analysts. However, they were
unanimous in their view that the decisions he took would
determine whether Nokia would be able to regain its past
glory or whether it would capitulate to the fast emerging
competition.

About Nokia
As of 2010, Nokia employed about 123,553 employees and
operated under three business segmentsD e v i c e s &
S e r v i c e s , N AVT E Q ( a l e a d e r i n comprehensive
digital mapping and navigation services), and Nokia
Siemens Networks. It operated 15 manufacturing facilities
in nine countries and maintained R&D facilities in 12
countries. Nokia had been market leader in the mobile phone
market since 1998.

0 2011, IBS Center for Management Research. All rights reserved. This case was written by Syeda Maseeha Qumer, under the direction
of Debapratim Purkayastha, IBS Center for Management Research. It was compiled from published sources and is intended to be used as a
basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.