I.

Facts about the Case

Nokia is a Finnish communication and IT corporation, which is founded in 1865.

Initially they started as a ground wood pulp mill. By the end of the century Nokia expanded

their business by adding electricity generation. They generate power with their mills for the

towns nearby. In the beginning of the 20th century they Nokia moved to the town Nokia near by

the Nokianvirta River for their second mill, and that's how the company got their name. In this

period Nokia started to produce telegraph and electrical cables. After World War 1, the Nokia

Company was nearing bankruptcy. To ensure the continuation of Nokia, the company

Rubber Works acquires the business. In 1967 the Nokia Corporation was founded by merging

the companies. The new company was involved in many industries, producing at one time or

another paper products, car and bicycle tires, communications cables, televisions and other

consumer products. Around 1978 Nokia started to develop a digital phone network. The first

mobile network was made in Scandinavia in 1981; this was initially for the car phones. In 1994

Nokia introduce the 2100 series, it goes on to sell 2omillion phone worldwide. In 1998 Nokia

became the world leader in the mobile phones market. In the period 1996-2001 Nokia's turnover

increases from €6.5bn to €31bn. Nokia launches the first mobile phone with a built-in

camera in 2001, called the Nokia 7650. The year after Nokia launches the first 3G phones,

Nokia 6650. With 3G technology phones can now be used to browse the web, download music,

watch TV and more. Nokia began to lose its market share in 2004 to its rivals.

When the 'smartphones' arrives, Nokia came with the Nokia 9210. This was the

first mobile phone with an organizer, Word and Excel. After a while Nokia came developed the

mobile phones with Symbian OS, with this the capabilities were expended. But then came Apple

with the iPhone in 2007, Apple brings a new definition to the 'smartphone'. Apple developed the
iPhone in such a way that is a mini computer that could make phone calls. Nokia couldn't keep

up with the iPhone as Nokia was still using Symbian OS. Nokia's market shares were falling

more downwards after Samsung came with their smartphones. During this period Nokia was

unwilling to challenge itself. Nokia was sticking to the model that mobile phones were mainly

about calling people. Nokia failed to notice that they were just as much about

checking your e-mail, surfing and social media. In 2011 Nokia unveiled their new strategic

alliance with Microsoft. The new Windows Phone is to replace the Symbian OS for

smartphones. It was suggested the alliance would make Microsoft's Windows Phone a

stronger contender against Android and iOS. This new line is called Lumia line. In 2012 the

Lumia line sold above 1 million phones before 26 January 2012. In the second quarter sales

went up to 5.4 million Windows Phones. The sales of the Lumia line went up, in the second

quarter of 2013 Nokia announced that Lumia sales were 7.4 million, this is a new record for

Nokia. In 2013 Nokia returns to profit after a spell of losses, Microsoft buys Nokia's handset

business for €5.44bn (Nokia: The rise and fall of the mobile phone giant, n.d.).

III. Cause of the problem

Nokia was a pioneer in the smartphone market, literally introducing consumers to the

smartphone with its initial Symbian Series 60 devices in 2002. For the next five years, Symbian

phones had little trouble maintaining a leadership position in the smartphone pack. “They didn’t

make the leap of faith onto Windows Phone until 2011. Now they are suffering from their slow

response." -- Wayne LamBut in 2007, Apple introduced its iPhone. With its full touchscreen

and app-based operating system, the iPhone changed the very definition of what a smartphone

should be yet Nokia failed to respond to the iPhone and the shifting consumer demand that came

with it. As the years passed, the Symbian platform aged, and that age really showed when
compared to iOS and, later, Android. Simultaneously, the smartphone market exploded -- more

and more consumers opted for pocket-sized mini-computers instead of "feature" phones with

tedious WAP browsers.

Samsung, on the other hand, moved quickly into the smartphone market. Granted,

Samsung had the advantage of working from the ground up, whereas Nokia had a relatively

successful smartphone platform that it just didn't want to give up (the same can be said of RIM's

Blackberry OS). Not only was Samsung speedy, it also bet on multiple platforms, including

Android and Windows Phone -- and it even had its own homegrown OS, Bada, just in case none

of the others worked out. But in the end, Android paid off. And it paid off handsomely. Nokia,

on the other hand, spent its time focusing on Symbian until the company's recent partnership

with Microsoft. But Nokia's flagship Lumia Windows Phones haven't paid off yet, as evidenced

by Nokia's Q1 earnings.

Not only did Nokia move too slowly in the smartphone market, it didn't anticipate

competition in the lower end of the market, either. Other manufacturers like HTC, Huawei and

ZTE have attacked Nokia from the low-end in developing markets like China.

The classic Nokia brick phone -- and the Snake game on it -- brings back a lot of

nostalgia. But that's a problem. Consumers, especially in developing markets, associate the

Nokia name with a different era of technology. And in today's world, having the newest and

shiniest device is what matters. Nokia didn't market itself as an innovator, and frankly, it hasn't

been doing much innovating anyway. At least not until it entered the Windows Phone space.

Where Samsung shines brighter than Nokia, and many other manufacturers, is execution.

Samsung mirrored Apple's game plan by dazzling consumers with a high-end flagship line in its

Galaxy S Android phones. But Samsung also has a broad portfolio of smartphone devices,
several costings less than $200 without a contract, which appeals to customers who don't want

(or can't afford) a high-end phone like the Galaxy S or the iPhone. The company also has the

advantage in its hardware manufacturing process.

IV. Recommended Solutions

When analyzing the possible solutions to the problems faced by Nokia, management

should adopt a contingency perspective whereby they acknowledge that there is no single best

way to solve a problem, and as such are open to more holistic approaches to solving these

problems. The recommend solutions as follows:

1. Reduce non-labor cost. Over the medium-long term, Nokia could seek to reduce

costs other than its costs attributed to labor. Obviously any reduction to expenses

would equate to an increase in profitability. The potential challenge which is

accompanied with this suggested solution is that Nokia’s CFO may have already

exhausted this avenue whereby the company has reduced both fixed and variable

costs as far as can be realistically achieved.

2.