In a span of four years since Kallasvuo took over as CEO of Nokia, the company remains the overall mobile phone dominant market leader. But of late, the leading handset manufacturer finds its position growingly threatened by competitive trends. Clearly, a major transformation is in order, and the sooner the better. by Virat Bahri
Recession was a rude awakening for many. But the problems for Nokia actually began when the smartphone category caught the fancy of consumers in the high-end segment globally — a segment where Nokia has been unable to find its footing till date in front of competitors like Research In Motion and Apple. Smart phone sales grew at a brisk 48.7% to 54.3 million units for Q1 2010 (17.2% of total mobile terminal sales) according to Gartner. But interestingly, pure smart phone player RIM made a maiden entry into the top five. The company still dominates the low-end segment, but the margins there are very hard to get, as competitors are springing out from all nooks and corners (in India itself, Micromax has gained so much ground in no time, with other players like Karbonn, Lava, Spice, Onida, et al locked in internecine pricing battles). Morningstar analyst Joseph Beaulieu has increased the fair value uncertainty rating for Nokia to high from medium in June this year. “While its scale still gives Nokia considerable cost advantages, these have become less relevant as software expertise and the ability to create a viable developer ecosystem grow in importance,” Beaulieu says.
Alarmingly, Nokia’s operating system Symbian also continues to lose market share to rivals like Android and Iphone OS, with market share at 44.3% in Q1 2010, compared to 48.8% for Q1 2009. Nokia hopes that the Meego platform based on Linux (being developed with Intel) is expected to address their problems on the software front, but that will take some time. The Symbian^3 powered Nokia N8 will be the last N-Series device to use Symbian, though the OS will still feature in the mid-range. “Although Nokia’s mid-tier products sold well, Nokia lacks a high-volume driver in the high-end. MeeGo-based devices and other high-end products will not rejuvenate Nokia’s premium portfolio until the end of the third quarter of 2010 at the earliest, and Nokia will continue to feel pressure on its average selling price (ASP) from vendors such as HTC, RIM and Samsung,” says Carolina Milanesi, research vice-president, Gartner. Lower than expected ASP and competitive market has compelled Nokia to project a flat market share, but a slightly lower value share for 2010, compared to 2009.
In the current market situation, offense can only be the best defence. Even its worst critics would admit that Nokia’s cash situation remains quite healthy and it still has the market reach that competitors could kill for. The way forward is to be nimble, and for that the company management has recently divided operations into mobile solutions for high-end mobile computers and smartphones — mobile phones for feature rich mobile phones and markets — which will handle all go-to-market strategies. Moreover, Nokia is a leader under siege, and its best bet forward has to be leading the market trend rather than bucking it. Kallasvuo’s transformation strategy was on target, but it still has to clear the test of the market.
Alarmingly, Nokia’s operating system Symbian also continues to lose market share to rivals like Android and Iphone OS, with market share at 44.3% in Q1 2010, compared to 48.8% for Q1 2009. Nokia hopes that the Meego platform based on Linux (being developed with Intel) is expected to address their problems on the software front, but that will take some time. The Symbian^3 powered Nokia N8 will be the last N-Series device to use Symbian, though the OS will still feature in the mid-range. “Although Nokia’s mid-tier products sold well, Nokia lacks a high-volume driver in the high-end. MeeGo-based devices and other high-end products will not rejuvenate Nokia’s premium portfolio until the end of the third quarter of 2010 at the earliest, and Nokia will continue to feel pressure on its average selling price (ASP) from vendors such as HTC, RIM and Samsung,” says Carolina Milanesi, research vice-president, Gartner. Lower than expected ASP and competitive market has compelled Nokia to project a flat market share, but a slightly lower value share for 2010, compared to 2009.
In the current market situation, offense can only be the best defence. Even its worst critics would admit that Nokia’s cash situation remains quite healthy and it still has the market reach that competitors could kill for. The way forward is to be nimble, and for that the company management has recently divided operations into mobile solutions for high-end mobile computers and smartphones — mobile phones for feature rich mobile phones and markets — which will handle all go-to-market strategies. Moreover, Nokia is a leader under siege, and its best bet forward has to be leading the market trend rather than bucking it. Kallasvuo’s transformation strategy was on target, but it still has to clear the test of the market.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri's Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
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