OPERATIONS MANAGEMENT

CASE STUDY ASSIGNMENT

ANALYZING NOKIA’S DOWNFALL IN MARKET

Lecturer Support: Albert Kriestian NAN, Ph.D.

GROUP 1:
Isabela Purnamasari K 212018504
Melvina Adeline T 212018505
Remart Gumolung 212018511

Satya Wacana Christian University Salatiga

2019/2020
 Analyzing Nokia’s Downfall in Market

I. Introduction

Nokia first started their multinational corporation in 1865. It was

founded by Fredrik Idestam, the headquarter was located in Espoo,
Finland. At first, Nokia was focused on a wide range of industrial
sectors such as cable, paper products, rubber boots, tires, televisions
and mobile phones. As time goes by, in the 1990s Nokia put their
focused on mobile telecommunication devices and start generating its
demands by entering the competition.

On the process of development, Nokia became the top leader of

telecommunication industry. Rapid growth Nokia begins with the
emergence of the first phone with a camera in 2003, it brings Nokia to
the best selling mobile phone in the world. And also, bring the first
phone that supplemented with Symbian OS, General Packet Radio
Service (GPRS), Multimedia Messaging Service (MMS), Infrared, and
Bluetooth Connectivity. Over the time,

II. Problem Statement

This paper has the purpose to discuss and explore about Nokia
product life cycle especially in maturity and declining stage. Look over
on how the company sustain its existence in the competition while
many competitors begins to enter the market with their own
differentiation and positioning strategy.

Question to be answered in this paper:

1. What is the fundamental purpose of Nokia’s to operate their

business and serve the market segment?

2. What product strategy that they used to face their competitors

and keep exist in the market?

3. How Nokia’s market fails to sustain the rapid growth and begins to
decline?

III. Theoretical Background

 The theory of product development system

Product development refers to several stages from

generating the ideas up to launch / release the product in the
market. And the several stages of product development are below
here:
 Analyzing Nokia’s Downfall in Market

1. Generating idea

Ideas from market segment can be in any form and can be

numerous. This stage involves creating a large pool of ideas from
various sources and do some survey what best ideas to
create/decide to serve the market

2. Customer requirement

A customer requirement is a specification that originates from

customers sight to be served. This term basically related with
product function, services and customer experiences.

3. Functional specification

Is a formal document used to describe the product's features,

capabilities, appearance, and interactions with users for R&D
purposes. The functional specification is a kind of guideline and
continuing reference point in generating the product processes.

4. Product specification

The process for any company to develop their new product,

device, or service. During this stage, the new product specification
is defined that include with functional, customer, and
performance requirements into critical and specific requirements.
Initial concept of this stage are more specified output with
specified input.

5. Design review

A design review is the core of product development process

whereby a design is evaluated through its requirements in order
to verify the outcomes and identify issues before committing
further work.

6. Test market

The test market provides measures of consumers' responses

through some survey/observation to those elements consist of the
product, the price, and the function.

7. Introduction

This stage involves the final introduction of the product in the

market. This stage is the initial stage of the actual product life
cycle as the form of launching.
 Analyzing Nokia’s Downfall in Market

8. Evaluation

Evaluation is a systematic determination of a subject's merit,

worth and significance. It can assist the company in assessing the
program, design, project,product, concept, etc. It also, to help in
decision-making in regards to the aim, and finally results in such
action that has been evaluated.

 The theory of product strategy decision

Product strategy divided into 3 focus to meet customer's needs

and wants :

1. Cost leadership

The company utilize the ability to snatch competitor's price by

using low cost strategy/being the low cost producer to attract
market with acceptable of the demanded quality. This strategy
guide the company to lead in low cost yet qualified business
ecosystem, where makes the market segment aware with its
product because reachable for every segment. In this term related
with economies of scale which is a proportionate it cost to gain
efficiency.

2. Differentiation

Take focus on uniqueness competency that will be reflected into

competitive advantage to support the business process and to
lead the competition. Differentiation strategy being an asset to
broaden the reach of other segments. Customers are served with
value of unique features and value characteristics, so they can
perceive the differences to other competitors. It can be in any
form like additional features, durability, reliability, after-sales,
quality, etc. This strategy also tends to learn carefully about
consumer needs and buying behavior by engaging more with the
market.

3. Rapid response

This option of strategy focus on the speed of delivering customer

needs with an overview time is the essence. Put concerns on
accuracy, time frame, and could be traceability especially for
logistics company. Rapid response drive the business in reliable
term because of the accuracy is important to meet with customer
expectations. Therefore, the framework of rapid response could
save the business from any reputational risk.
 Analyzing Nokia’s Downfall in Market

 The theory about product life cycle

Product also act the same like how people have their own
life cycle. In general product life cycle divided into 4 phases which
is introduction, growth, maturity, and decline.

1. Introductory phase

The company has a negative cash flow because they use their cash
to do a)research about how to fulfill the customer needs,
b)product development to generating a new product that didn't
exist yet in the market through innovation, c)customer testing
process which reflect to how customer response to our product /
ideas to the introduction of a product to the market, and anything
needed to launch the product. This stage is the most expensive
stage for the company to face.

2. Growth phase

Usually characterized by the stabilize of the sales of the product,

company profit, in this stage adding or enhancing capacity may be
necessary.

3. Maturity phase

In this stage competitors are appear and they start to imitate our
product, therefore companies have to start improving their
product through several things like modification or create a new
innovation for our product to keep exist in the market.

4. Decline phase

In this stage, product is fail to keep their existence in the market.

It follows with the falling sales, profit falls, and company started to
terminate their offering in the market.

IV. Analysis

People in the world connect through Nokia everyday that

represent their vision “Connecting People”. Their goal also reflects
to their vision which is to build great mobile products that enable
billions of people worldwide to enjoy more of what life has to
offer. Their objectives were to get profit, become number one
electronic company throughout the world, it reach its objective in
the present scenario, and last but not least is maintain good
 Analyzing Nokia’s Downfall in Market

relationship with all the public with good production. It is also

performs these days, by manufacturing standard mobiles of
different models. Nokia used to be famous for its physical
interface design especially in compacting a complicated physical
interface design into small portable device which was the form of
their differentiation strategy.
Design by design, shows the advancement of their
technology to produce its device and nokia keeps continuing offer
devices that reachable for every demographic group plus they
have a broad market segmentation and served with several
designs that support customer needs. They segment the market
based on demographics (high income,mid income, low income),
psychographics through the lifestyle of the customer, behavioral
segmentation through special occasions like Christmas or any
other regional festival. Besides that, Integrating cost leadership
strategy to engage with every demographic group for young to
elder, low income to high income, professional profession to
gamers, etc. and results in customer’s acceptance regarding the
use and the ease of device.
After partnership with Microsoft within year of 2010-2012,
Lumia series emerges and powered by Windows software, are
differentiated from Apple's iOS and Google's Android but the fact
was still couldn’t snatch them enough with such new innovations.
One of the reasons were in design sides, because lack of trendy
and sleek appearance to attract customer but Android and iOS
does it. Regardless of design, many features of Nokia Lumia Series
couldn’t help them to become future ready context that reflects
on unsupportive cameras, operating system, battery, bulky design,
and overheating issue.

The presence of IOS and Android indirectly drag Nokia

lagging in the race, it started with unmatch business strategy
especially in understanding the customer that actually good
looking device with better feature’s experience should be
considered in innovation and product development system.Nokia
keep on their design and unwilling to change their models and
features that made Nokia lost in the competition. It is followed by
the decline of average selling price, market share, and operating
margin of Nokia.
 Analyzing Nokia’s Downfall in Market

Figure 1: Nokia average selling price

This figure shows Nokia’s average selling price, it decreased a lot

from gaining 110 euro revenue per phone in 2004 until only
gaining 45 euro revenue per phone in 2012.

Figure 2: Nokia Market Share

Nokia’s market share dropped dramatically from 40% in 2007 to

20% in 2013, it is because the smartphone popped up and become
booming at that time.
 Analyzing Nokia’s Downfall in Market

Figure 3: Nokia’s operating margin

The operating margin also decreased from 20% in 2007 to -12 in

2012 because they can’t gain profit and not able to sell their
product.

V. Conclusion and Recommendation

Conclusion

Many undebatable statement makes Nokia demise from

King of Mobile. Nokia used to have interesting market share but not
comparable with the growth. Plotted a wrong tactics and strategy
embrace a drastic downward performance. Ignored the customer
needs also become the reason why Nokia didn’t treat market
accurately. Internal things that affect the downfall of Nokia are the
less cooperation and teamwork from the top executive. Overall, this
paper teach us that designing a product that fulfill the market need is
complex and company should be thoughtfull in making decision
towards their business.

Recommendation

As the first mover of telecommunication devices sector,

Nokia should enrich the market strategy rather than enrich the
product by ignoring the market needs. Keep up to date to market
trends are more valuable to improve the business. More cooperation
and teamwork also might be the key factor of the successful in
business.
 Analyzing Nokia’s Downfall in Market

VI. References

1. https://www.nokia.com/about-us/what-we-do/our-history/
2. http://www.ijerd.com/paper/vol13-issue9/Version-
2/D130922227.pdf
3. PowerPoint presentation to accompany Heizer and Render
Operations Management, 10e Principles of Operations Management,
8e
4. http://disruptiveinnovation.se/?tag=collapse
5. http://productlifecyclestages.com/
6. http://www.researchscript.com/wp-
content/uploads/2018/07/IJMH050304.pdf
7. https://file.scirp.org/pdf/OJBM_2015102710294521.pdf
8. https://pdfs.semanticscholar.org/4fb7/7edc63af57dbcd19df473a5bf
00d405ab0fb.pdf
9. https://www.coursehero.com/file/pfr0qi/Nokia-has-adopted-the-
integrated-cost-leadership-and-differentiation-strategy/
10. https://www.econstor.eu/bitstream/10419/101414/1/794346243.pd
f
11. https://www.ukessays.com/essays/marketing/market-strategy-of-
nokia-analysis-marketing-essay.php