How and Why Did Nokia Fail?

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Nokia was a global leader in telecoms and digital infrastructure. It was the world’s largest vendor of mobile phones from 1998 to 2012. However, a series of bad decisions resulted in a Nokia failure.

We all know the story of how Apple and Samsung, two relatively small companies at the turn of the century, rose to dethrone Nokia from its perch. A company valued at $250 billion is now worth less than $14 billion. The company that shipped 463 million phones in 2007 sent only 4.4 million in 2013.

Nokia fell into a trap that most companies face at one point or another. Nokia thought that product innovation was not a necessity. So, they continued to release products with minor changes and kept thinking that their market share won’t be affected.

They failed to keep pace with the changing times and technology. This article revolves around the key reasons–how did Nokia fail?

Nokia’s Timeline

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● Nokia Corporation was formed in 1865 by Fredrik, Eduard, and Leo.

● Later on, in 1998, Nokia was termed one of the fastest-selling mobile brands globally.

● Nokia’s profit was hiked to 4 billion by the end of 1999.

● In 2003, Nokia created its best-selling mobile, the Nokia 1100.

● But, when the other companies were looking to bring innovations to the market, Nokia was still on cloud 9 with its last creation.

● As a result, Apple came up with the iPhone, which disrupted the market and gained popularity very quickly.

● To compete with Apple, Nokia did come up with an innovation known as the “iPhone killer,” which failed miserably in the market leading to the downfall of Nokia and paving the way for Samsung and Apple to rule the market.

● In the next five to six years, Nokia failed miserably; its market share declined and was negligible by late 2010.

● In 2011, Nokia was finally acquired by Microsoft.

Why Did Nokia Fail?

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The failure of Nokia is one of the most well-known examples of a disruptive technology wiping out an established player in a market. Nokia was one of the most dominant mobile phone brands in the world. Many of us still remember carrying the bulky Nokias (3310, anyone?) and proudly flaunting them to our peers.

Nokia’s response to the smartphone revolution was the Nokia N95, released in 2007, with GPS, Wi-Fi, stereo speakers, and a 5 MP camera. These specifications weren’t revolutionary.

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But perhaps it wasn’t this particular release that led to the failure of Nokia, but rather its unwillingness to change and develop with the times. We look at five reasons behind Nokia’s failure.

1. Not adapting to the environment

Nokia remained adamant about its feature phones as the world moved toward smartphones. As a result, it is believed that the future of mobile technology will be dominated by feature phones. This misinterpretation was the start of its downfall.

Nokia was hesitant to upgrade to Android because it believed Android was not the mobile industry’s future, and customers would not migrate to it. Moreover, the company’s management did not think of touch screen smartphones as a necessity, which proved a failure for Nokia.

Nokia remained stubborn when mobile phone manufacturers were busy improving and working on their smartphones. Samsung soon launched its Android-based range of phones with QWERTY keypad layouts that were cost-effective and user-friendly. They understood the requirement of people, which is why they succeeded in making their brand stand out in the market.

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2. Microsoft offer

Once a household name in the mobile phone industry, Nokia lost its market dominance and was forced to sell its handset business to Microsoft.

As Nokia’s market share slid from 50% to less than 5% globally, there was a lot of speculation about what led to Nokia’s failure. One of the primary reasons for that debacle was Nokia’s inability to cope with change. As a result, the company lost sight of changing consumer preferences and failed to keep up with the competition.

In turn to this cause, Nokia had to sell itself to Microsoft, which created a lot of buzz around the world about its incapability of coping with the changing environment and thus violating the fundamental rule of business–dynamic nature.

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3. Poor marketing strategies

When you look at the company’s most successful strategy today, i.e., Apple, you will find that the company has never unpredictably launched any new product. Instead, the company keeps adding new products to its existing product portfolio.

The Nokia marketing strategy failed, and it tried to launch entirely new models with different brand names, such as the N series, E series, etc. As a result, consumers were confused while making a choice. Also, it was unable to create a brand appeal for these products.

If Nokia had used the umbrella branding strategy, it would have been easier for the company to increase its market share. In addition, with this strategy, the company would have been able to generate a better recall value for its products and create brand loyalty among its customers.

The model of umbrella branding has been successful for Apple and Samsung. According to this model, the flagship product serves as a catch-all brand. When people think of Apple, they think of iPhone, and Samsung Galaxy. But Nokia is not the same as Nokia. People still associate Nokia with Symbian OS and their feature phones and disguised Nokia marketing strategy.

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4. Adapting too slowly to the industry trends

Nokia was founded to make simple phones for people who didn’t want to be bothered with complicated technology. The company was successful in that endeavor but failed to keep up with the times and eventually lost its market share to Apple and Samsung.

And then, Nokia had a significant setback in 2007 when Apple launched the iPhones. This proved to be a turning point in the history of Nokia as they got their taste of defeat after years of unchallenged dominance in the mobile phone industry.

This made Nokia realize that they needed to change their strategy, and they also came up with new smartphones, but it was too late as Samsung had already taken its place by then.

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5. Overconfidence

Nokia was a market leader in mobile phones for 14 years. It had 70% of the market share, and it was the largest vendor of mobile phones. But within five years, the company failed in the market.

The company overestimated its brand value. They believed that people would still flock to stores and purchase Nokia-manufactured phones would retain market leadership if they used just better software. This is far from reality.

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Nokia failure analysis-

With a history dating back to 1865, Nokia had climbed its way up from being a paper manufacturer to one of the best telecommunications companies in the world. It was not just a prominent brand name but a symbol of how far technology could go.

Nokia’s failure started when it decided not to adapt and embrace change. The company failed to recognize that people were no longer interested in purchasing feature phones; instead, they wanted phones that could do more than just make calls and send texts – smartphones.

Nokia underestimated the power of software in the mobile market. So instead, the company relied on hardware and got into serious trouble.

The company could not stay afloat when Apple entered the industry with iPhone, which revolutionized the smartphone industry for good. The failure of Nokia was primarily a result of poor marketing strategies, rapidly changing consumer preferences, and technological advancements.

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Key Takeaways

● Nokia was formed in 1865, and within a few years, it gained a monopoly over the market.

● It entered the market as a paper manufacturer but found its way eventually in the mobile industry.

● It ruled for many years; however, leading to its non-adaptive nature, it failed miserably and lost its market share to giants like Apple and Samsung.

● Nokia was under the impression that it did not need to improve itself and launch more often, which helped Apple and Samsung pave their way to success.

Conclusion

Nokia is a global brand and has been the world leader in the smartphone market since 1997. Its market share stood at 39%, and it was the most recognized brand till 2007.

However, things began to change with the entry of Apple and Google in 2007. Nokia underestimated the threat from new entrants, failed to understand the changing customer preferences, and delayed its smartphone segment entry.

The Nokia fail is an example of how even massive corporations can lose market share if they don’t cope with the changing environments and keep an eye on their competitors.

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