Challenges Faced by Nokia: A Management Perspective

This paper discusses the challenges faced by Nokia due to competitors, market demand, customer preference, technological advancement, and government policies. It includes a PESTLE and SWOT analysis of Nokia and highlights management issues such as leadership, environment scanning, managing innovative teams, and HR issues. Recommendations are provided to improve the company's performance.

Running head: FUNDAMENTALS OF MANAGEMENT 0
MANAGEMENT FUNDAMENTALS

FUNDAMENTALS OF MANAGEMENT 1
Table of Contents
Introduction................................................................................................................................2
Background................................................................................................................................2
Situational Analysis...................................................................................................................3
Pestle analysis of Nokia.........................................................................................................3
SWOT analysis of Nokia.......................................................................................................5
Management Issues....................................................................................................................7
Recommendations......................................................................................................................8
Conclusion..................................................................................................................................8
References..................................................................................................................................9

FUNDAMENTALS OF MANAGEMENT 2
Introduction
This paper outlines the various challenges faced by Nokia during its business life cycle.
These challenges are due to varieties of the reasons like competitors, market demand,
customer taster and preference, technological advancement and government policies, etc.
In addition, relating these challenges with the management issues including various theories,
models and concepts will help the decision makers to identify potential solutions, which can
improve the management ability to develop necessary solutions and thus enhance the overall
performance of the company.
Background
Nokia was incorporated in 1865 by Frederick Idestam and it is a Finland based company. The
company started their operation by engaging in the manufacturing of the mobile devices and
network equipment as well as with the related solutions and services at the international level
(Aspara et al, 2011). The organization divides their operations into four main segments
including, Mobile devices, and Networks, Multimedia and Enterprises solutions.
They have a tagline related to their integrated network i.e. Connecting People. Their vision
statement of Nokia is related to building reliable customer associations by presenting
captivating and valued customer keys that combine beautiful devices with context-enriched
services.
Considering the market share, the company captured 1.1 % of the smartphone market in the
first quarter of the year 2018. This is because of the HMD who expanded their smartphone
portfolios with various new model including Nokia 1, Nokia 5, Nokia 6 and Nokia 8 during
the 2018 Barcelona event (Stipe, 2018). These all models are powered by Google Android
and this shows that Nokia did not do the pervious mistake, like that of partnership with
Microsoft. However, Nokia still faces challenges from the Samsung, Apple and Huawei who
hold top position in the smartphone market due to their huge capital investments. In addition,
due to less capital, the company is not able to invest much in marketing of their products.

FUNDAMENTALS OF MANAGEMENT 3
Situational Analysis
This analysis can be effectively made if the management evaluates various internal and
external factors bounding the organization and having a significant impact on the business
operations. SWOT and PESTEL analysis can help the company to effectively evaluate both
the internal and external environment and thus make a necessary strategic decision in a timely
manner (Helms and Nixon, 2010).
Pestle analysis of Nokia
 Political Factors – The political factors comprises all within in the relation with the
government and policies. Nokia gained success from the Finnish policies which help
Nokia in their advancement of the products. Finnish government try to best simplify
the effective functioning of the economy by aiming resources to the reduction of
market catastrophes (Breznitz and Ornston, 2013). Although, it was not only the
Finnish government but also as a Global company i.e. Nokia, who play a significant
role in the expansion of information society and national technology strength. In
addition, they also need to comply with all other international countries in which they
had started their operations.
 Economic Factors – In the past few years, Nokia again started growing swiftly and
had a positive effect on the economy. The company have to undergone different
metamorphoses and this history of the company has also included various
disinvestments, acquisitions and joint venture. With these experiences, the company is
now learning and playing in the market with their various new products and earn a
revenue about € 23.147 billion in the year 2017.

FUNDAMENTALS OF MANAGEMENT 4
Relative Market Share
High Low
Stars
(Strategy – Innovation, market
development and product development)
Question Marks
(Strategy – Market penetration, market
development and product development)
Cash Cows
(Strategy – Product development and
diversification)
Dogs
(Strategy - Company need to
disinvestment or retrenchment)
 Social Factors – This factor can be said to be a strength for Nokia and the business
accepts its accountability of their global position. Nokia as an international
organization is committed to supporting various communities with the help of
donations, sponsors programmes and exclusive partnerships. Many of their
programmes comprise of young people such as “Le boulevard des jeunes
musicians” in Morocco (Bentahar, 2010). The use of the mobile technology also helps
Nokia to link the communication gaps between many groups around the globe.
 Technology Factors – These are one of the significant factors in a cell phone
industry. This creates the need for fast innovation and creativity. The rise in to the
open-source operating system in the mobile devices i.e. Android has radically
changed the mobile phone market. In the previous years, the problem occurs for
Nokia started with the un logical decision to stick with the less popular windows
operating system and to stick with their own operating system i.e. Symbian
Nokia
Market Growth rate
LowHigh

FUNDAMENTALS OF MANAGEMENT 5
(Mohtasebi, Dehghantanha and Broujerdi, 2011). This decision of the company was
proved to be a downfall situation for the company as the younger customers’ needs
were not met with their previous OS.
 Legal factors – Its legal environment is extremely challenging as every international
government has its own rule in the different countries. In addition, Nokia also works
in the European Union and the EU action against the Google can bring various radical
changes in the market of Nokia such as may be Android can be turned off into a
separate company.
Although it is not, clear that how such action will impact Nokia but it can be proved
to be a level playing field and can raise Nokia access to the market of European
Union.
 Environmental Factors – Nokia also faced some issues like the other electronic
manufacturers of safely and economically setting of the products in an environment
friendly manner.
Other environment factors such as a rise in the material costs and components,
particularly lithium for batteries can also affect Nokia (Andersen, Mathews and Rask,
2009). The growing demand for lithium for the other uses like in electric cars can
limit it supply and increase the costs. Various innovative environmental laws in China
are also designed to limit greenhouses gases that can upsurge production costs in that
country and affect the cost of Nokia.
SWOT analysis of Nokia
In this analysis, the Strength and Weakness of Nokia are evaluated which comes in the
internal environment of the business. On the other hand, the external environment emphases
on the threat and opportunities that are needed to be analysed so that to make strategic
decisions.

FUNDAMENTALS OF MANAGEMENT 6
STRENGTHS
 Experience – The Company enjoys
142 years of history before the
launch of Android or IOS
smartphones.
 Huge integrated network of selling
and distribution channel which help
them to reach across all countries in
the global market.
 Strong customer relation.
 Durability in terms of products with
long-lasting battery life.
 Diversified products for all class of
individuals.
WEAKNESS
 Launching of E-series was a flop.
 Heavy set of products.
 Less investment in R & D.
 Ineffective market scanning as due
to which they tie-up with the
Microsoft windows instead of
Android (Kautto, 2009).
OPPORTUNITIES
 New growth market in China where
people have strong brand image in
their mind.
 Enhancement in the quality of
camera.
 Powered their devices with Google
Android.
 Mini Notebooks.
THREATS
 The biggest competitor – Samsung
and Apple i.e. as they wiped out
Nokia in 2014 and now again
challenge the Nokia in 2016.
 China mobiles who make an exact
copy of various Nokia phones and
thus pressurize Nokia to movie
outside the market.
 Less capital investment as after
coming back again, Nokia did not
have enough capital to invest in
Research and development
programme.

FUNDAMENTALS OF MANAGEMENT 7
Management Issues
Nokia is large and global organization implementing both physical and telecommunication
network products and software for their products. However, due to various management
issues, the company have to suffer huge losses in the global market which was the end
towards their failure. The major management issues faced by Nokia are –
 Leadership – In 2010, when Stephen Elop take the position of CEO of Nokia, the
company afterwards fail in their businesses as they face obsession with costs, unclear
chains of responsibility and wicked executive judgements. This makes Nokia to sold
their handset division to the Microsoft for €5.4bn in September 2013 (Laamanen,
Lamberg and Vaara, 2016). A leadership is a process to influence other so that
specific and organizational goals can be effectively achieved. However, The Nokia
failed in their leadership aspect and thus suffer huge losses.
 Environment Scanning (Business) – Effective scanning of Business environment
plays an important role in the business success and failure. These include both internal
and external factors, which have direct influence over the business operations of the
business (Ates et al, 2013). Nokia Research and Development department is not able
to manager this aspect of management effectively as they always focus on the
hardware aspects and neglect the software which in present in the market in the form
of open sources project i.e. Android. They underestimate the future of Android and
stick on Symbian OS and this is also one of the real cause, which lead to many issues
in the organization.
 Managing Innovative Teams– Innovation is the fuel of competitive advantage and
Nokia also faced several management issues in this aspect (Vuori and Huy, 2016).
The company always focuses on the durability of their product and the most of the
design of the company are same in terms of hardware. The management also not able
to handle their teams, guide them in doing just of traditional work of making the
durable phone, and promote it through various channels.
 HR issue – The Nokia HR practices mainly focuses on retaining good employees.
These practices also include techniques like selective staffing, internal promotion and
opportunities, career growth and extensive development of staffs and employee
involvement in the process of decision making. However, Nokia faces main issue in

FUNDAMENTALS OF MANAGEMENT 8
terms of Human Resource, which arises with the massive layoffs. For example, one
occurred in spring 2003, which have a negative impact on the employee behaviour as
well as attitude (Velasquez et al, 2018).
Recommendations
The issue at Nokia is at a huge level, which needed to be analysed and resolved on an
immediate basis so that the further control on their business operations can be effectively
established. Therefore, in terms of leadership issues, the board of directors of the company
need to take an effective step so that in future no other leader like Elop can harm the image of
the company. In addition, the all departments and managers at Nokia need to adopt
continuous scanning of business environment so that they can easily analyse all the factors
that have a direct or indirect impact over the business decisions of the company. This will
help them in the framing of necessary plans and policies in advance relating to their products,
employees and customers. The HR managers’ needs to also work actively so that to gather
necessary information about related integrated issue and thus align their work with their
creative and innovative teams. This will help them in establishing successful HR activities.
Conclusion
From the above result and discussion, it can be concluded that Nokia needs to create a
positive culture in their internal environment so that they can eliminate their issues. Other
than research, the company need to increase their relative market share with the fuel of
innovation and this makes their economic position strong and thus also leads to change their
categorization from question mark category to star category in relating to BCG matrix.

FUNDAMENTALS OF MANAGEMENT 9
References
Andersen, P.H., Mathews, J.A. and Rask, M. (2009) Integrating private transport into
renewable energy policy: The strategy of creating intelligent recharging grids for electric
vehicles. Energy Policy, 37(7), pp.2481-2486.
Aspara, J., Lamberg, J.A., Laukia, A. and Tikkanen, H. (2011) Strategic management of
business model transformation: lessons from Nokia. Management Decision, 49(4), pp.622-
647.
Ates, A., Garengo, P., Cocca, P. and Bititci, U. (2013) The development of SME managerial
practice for effective performance management. Journal of Small Business and Enterprise
Development, 20(1), pp.28-54.
Bentahar, Z. (2010) The Visibility of African Identity in Moroccan Music: From Gnawa to
Ghiwane and Back. Wasafiri, 25(1), pp.41-48.
Breznitz, D. and Ornston, D. (2013) The revolutionary power of peripheral agencies:
Explaining radical policy innovation in Finland and Israel. Comparative Political
Studies, 46(10), pp.1219-1245.
Helms, M.M. and Nixon, J. (2010) Exploring SWOT analysis–where are we now? A review
of academic research from the last decade. Journal of strategy and management, 3(3),
pp.215-251.
Kautto, P. (2009) Nokia as an environmental policy actor: evolution of collaborative
corporate political activity in a multinational company. JCMS: Journal of Common Market
Studies, 47(1), pp.103-125.
Laamanen, T., Lamberg, J.A. and Vaara, E. (2016) Explanations of success and failure in
management learning: What can we learn from Nokia’s rise and fall?. Academy of
Management Learning & Education, 15(1), pp.2-25.
Mohtasebi, S., Dehghantanha, A. and Broujerdi, H.G. (2011) Smartphone forensics: a case
study with Nokia E5-00 mobile phone. International Journal of Digital Information and
Wireless Communications (IJDIWC), 1(3), pp.651-655.
Stipe, (2018). NOKIA CAPTURED 1.1% OF THE SMARTPHONE MARKET IN Q1 2018
(VIA COUNTERPOINT) *UPDATED*. Available from
http://nokiamob.net/2018/05/03/nokia-captured-1-1-of-the-smartphone-market-in-q1-2018/
[Accessed 06/10/2018].

FUNDAMENTALS OF MANAGEMENT 10
Velásquez, S., Kanniainen, J., Mäkinen, S. and Valli, J. (2018) Layoff announcements and
intra-day market reactions. Review of Managerial Science, 12(1), pp.203-228.
Vuori, T.O. and Huy, Q.N. (2016) Distributed attention and shared emotions in the
innovation process: How Nokia lost the smartphone battle. Administrative Science
Quarterly, 61(1), pp.9-51.