Nokia’s Downfall

Nokia Corporation is a Finnish multinational communications corporation that is headquartered in Keilaniemi, Espoo, a city neighboring Finland's capital Helsinki.

Nokia is engaged in the manufacturing of mobile devices and in converging Internet and communications industries. It is a public limited liability company listed on the Helsinki, Frankfurt, and New York stock exchanges. It plays a very large role in the economy of Finland; it is by far the largest Finnish company, accounting for about a third of the market capitalization of the Helsinki Stock Exchange (OMX Helsinki) as of 2007, a unique situation for an industrialized country.It is an important employer in Finland and several small companies have grown into large ones as its partners and subcontractors. But now, the king has fallen.

Nokia shares have fallen by 47 percent since Apple introduced its iPhone. Even its market share has been shrinking. This downfall was caused by three major factors. First was that Nokia rested on their laurels.

They were just too confident of their success and glory that it eventually lead to poor assumption of sticking to its market share without giving much attention on innovating and developing its products.In this industry, the company must always make sure to innovate their products in order to attract and excite the consumers to purchase it. The second factor was that Nokia was unwilling to challenge itself to innovate its products. They failed to notice that the mobile phone users nowadays don’t just use their phones to call or send someone a message.

Instead, current users now cares about mobile phones that can provide them with a feel of the advancement in technology like, they use their mobile phones to check their emails, to locate a specific place or even update their “facebook” status.Lastly, Nokia was not situated in a location where in other Web companies or consumer electronics manufacturers are. So, they were not able to gather concrete and relevant ideas on innovation. They were not able to assess properly the assumptions they continuously depend on.

They chose to isolate themselves which is bad for the company who’s in an industry undergoing rapid change. Looking at it in a deeper way, Nokia can be categorized as a player in an oligopoly market. Here, decisions of competitors are considered by the firm in order for them to make the necessary decisions. Decisions of competitors are very important.By this theory alone, we can see that Nokia is definitely at fault. Simply by sticking with their assumptions, they have not considered that their competitors have been trying to make a way to come up with new, exciting and differentiated products.

Just for example, Apple, they are known for their ipods but now, their iphones sell very great too. Other companies like Samsung and LG are making their way to the top too. Based on what I see in this case, Nokia was poor in anticipating the decisions of their competitors. It was also emphasized that Nokia failed to innovate their products.

This decision of the company can be related to the choices of the consumers. As previously learned, consumer choice can be analyzed by examining consumer preferences and their limitation with their income budget. Consumers mostly prefer to have more of any good to less and they choose goods that can maximize their satisfaction given the limited budget. Analyzing Nokia’s case, we put a given that preferences are complete and transitive.

Nowadays, as mentioned earlier, consumers do not simply use mobile phones for calling or sending a text message. They do their e-mail messaging and other internet connected forms of communication as well.Consumers currently prefer mobile phones that could provide them with these services. But it is not only that, the style and convenience of the mobile phone is relevantly very important as well. In the industry, consumers have a lot of choices. They have for example, the iphone of Apple, Blackberry by Research in Motion, Samsung phones and LG phones.

For people who can be distinguished as in the higher class of the society, they mostly prefer the iphone of Apple or the Blackberry. Why not Nokia? It is because iphone and Blackberry provides them with the services they may not seemingly need but they want.The style and performance of the phone is that of what they like. So, even if these mobile phones are of high prices, consumers are willing to pay its high prices because they perceive their benefit to be higher than the cost of acquiring it.

But then there are still others who can’t afford the services of these top mobile phones. Here, they have other choices like, Samsung and LG. Why not Nokia? Nokia may offer products with low prices but consumers prefer the services of Samsung phones and LG phones over them. Why? Let us take for example; consumers currently are fascinated with touch screen phones.Nokia, LG and Samsung offer these types of phones but why would consumers not insist on Nokia? It is because Nokia may have a touch screen mobile phone but the prices are higher than those of Samsung and LG. Mobile phones offered by these two companies offer more services as compared to that of Nokia’s in the same price category.

As we can see in the market, the market share of Samsung and LG is definitely growing. This is because consumer’s satisfaction is maximized by the two companies given the budget constraints. Now, what could be the effects on this downfall of Nokia to Finland.We have known earlier that Nokia is an important employer of Finland and small companies have grown because of them. It was not mentioned in the article but I see that if Nokia could not recover from this downfall then, there is a great possibility that the company will do some job cut-offs. Many workers may lose their jobs and this could affect the economy of Finland as well.

This should be avoided so as to prevent crisis. The company should then think of ways to bring back the glory that they once have. Now, they currently hired Mr. Stephen Elop, the Canadian head of Microsoft’s business unit and he may be answer to Nokia’s dilemma.

Or, he could also worsen the situation. Those are the possible outcomes of the strategy. But then, I suggest that Nokia should focus on their product development. The location is a factor to the downfall too but is only quite minimal compared to the weight of the product’s effect on the company. The company should invest more on research and product development to remain in the competition. It would be quite difficult but the company must think of something different that they could offer so that they could differentiate their products intensely over those of the competitor’s.

The company must take in to consideration that the demand for their product is elastic but not that very elastic as well. Consumers can simply shift from one product to another. Here, the company must also have to be very sensitive to the needs and wants of the market. They must consider the changing attitudes, preferences and tastes of the market. As technology advances, the consumers’ choices also changes with it so, the company must keep up with the growth of technology.

The aid here boils down to the idea of giving the consumer the right product for the right price. Consumer satisfaction is very vital. When consumers are satisfied, there will be re-purchases. There may be consumers who are very conscious on the price but there are others who are willing to give up some of other goods for another good.

There others who simply want the style. Others may focus on the performance. Or there may be those who just want the social perception of the product. So, the company must know how to deal with these markets.