Behavioural strategy of Nokia Harvard Case Solution & Analysis

Behavioural strategy of Nokia Case Solution

Introduction:

Claim:

Nokia failed to seize and transform the opportunity to dominate the smart phone era due to top management team homogeneity which led to identity trap and made them unable to adapt to the changing environment from the period of 2006 to 2013. By 2013, the company was sold to Microsoft for $7.2 billion. (Alcacer, 2017)

However, since then the mobile phone landscape had experienced a fundamental shift starting from 2006 onwards with the advent of the likes of iPhone and Android, causing Nokia’s market share to plummet. As shown in figure 1, Nokia’s market share decrease can be contributed to pressures from iPhone and Android, in addition to the internal top management and identity trap issue which affected how Nokia responded to pressure from competition. It can also be seen from figure 2 that not until 2010 that their market share decreased dramatically.

This case study aims to explore the extent that top management team’s homogeneity played in fuelling Nokia’s identity trap causing their downfall between the years 2006 to 2013, drawing primarily from Juan et al case: The Rise and Fall of Nokia and also from literature around behavioural strategy.

Background:

Mobile industry

Mobile phones were once seen as the symbol of richness has now become an important necessity. Mobile phone industry is one of the fastest growing industries right now in the world. The first mobile phone was launched in 1982 but due to its weight and price, it did not gain popularity back then. Mobile phones have developed drastically since the development of its first prototype. Today when someone goes to buy a phone, they do not want something that can just make a call but look for other features as well. (mobilephones, 2017)

IBM’s Simon Personal Communicator, introduced in 1994, despite not being the first smart phone, was the first device to feature a phone with additional capabilities to act like a personal digital assistant, which paved the way for future development of the mobile phone industry. It has come a long way from the first Blackberry 5810 in 1999, to the Motorola RAZR in 2004, and eventually the iPhone and Android in 2007 and 2008 respectively, which ushered in the new age of smart phones.

Nokia

Nokia started off as a paper manufacturing company in 1865 and transitioned into a manufacturing cables and electronics company in the late 1960s. Its name originated from the town of Nokia. In early 1970’s Nokia became more interested in telecommunication business. For a short time in 1970’s it’s the network production was separated into another company named as Telefenno. In the 1990s with the fall of the Soviet Union, demand for infrastructure for wireless network grew because Finland telecom infrastructure sector was deregulated due to an economic crisis at that time sooner than other European countries, which helped catapult Nokia even further. In late 1970’s Nokia merged with Salora and that resulted in the manufacturing of mobile phones for NMT. Nokia, later in 1984 bought Salora and launched in the same year world’s first transportable phone. The phone became a huge success and was considered as a symbol of belonging to a high status. In 1989 it became Nokia Mobile Phones. In 1996, with the launch of Nokia’s first “smart” phone, the Nokia 9000 communicator, they plunged into the mobile phone industry. Fast forward to 2006, the industry was flooded with a range of both flip and feature phones and Nokia was dominating the mobile phone industry. (Pothitos, 2016)

Romano Prodi, president of European Commission in his speech in 2012 talked about the success of Nokia, “Their achievement in mobile telephones helped to create two vibrant clusters, around Oulu in Finland and Stockholm in Sweden, which have attracted a large number of start-ups as well as investment from foreign companies. These examples demonstrate that European regions are capable of developing new, high-tech clusters." (scribd, 2010)

Behavioural strategy of Nokia Harvard Case Solution & Analysis

 

Nokia and the Smartphone Revolution

Nokia failing to seize the opportunity and transform with time can be explained by Upper Echelon Theory where top management team’s homogeneous experiences such as having similar educational background played a role in their interpretation of the situation, causing them to have bounded rationality and agree with each other thus causing their choice to be biased. Organizations need to change and grow as the world grows and the market develops. (R, 2004)  Successful companies are driven by market and industry. (G.S., 1990) (F., 1994) And the companies with this perspective make strategies considering their environment first. (Jaworski, 1993) That Nokia failed to do so. Kallasvuo being with Nokia for 14 years has contributed in their interpretation of situations and made Nokia trapped in its own identity due to long tenure and caused them to make similar choices. (Alcacer, 2017) As suggested by S. Finkelstein and Hambrick, “Tenure is associated with increased rigidity and commitment to established policies and practices, (Sydney Finkelstein, 1990) as well as prescribing to persistent unchanging strategies’................

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