Question

Q1. Answer the following questions according to the given scenario

As the world’s biggest maker of mobile phones, Nokia, the Finnish company, is a “powerhouse in Europe, Asia, and Latin America, with market shares regularly topping 30 percent”. However, in the United States, Nokia phones have lost popularity over the last few years. In March 2002, Nokia led the American market with 35 percent market share. By June of 2009, its share was only 7 percent. What happened and more importantly, what is Nokia doing about it?

As mobile phone usage skyrocketed, Nokia was the most popular choice. It was the “cool” phone—the one that everyone, from business executive to high school student to stay-at-home-mom wanted. In 2005, Nokia had just launched the N series, an innovative new line with a Web browser, video, music, and pictures in a single phone. That device moved Nokia a generation ahead in the race to build the first real smart phone. The “forecast for Nokia was as sunny and clear as an endless Finnish summer day.” Then came Apple and its iPhone with its clever touch screen and sophisticated software and services. With rave reviews and a reputation for being cool, customers flocked to buy one. However, Nokia executives dismissed the iPhone, saying they were “unimpressed by its engineering.”

Now, three years after Apple introduced the iPhone in 2007, Nokia still has no alternative. It did not anticipate changes in American consumer tastes, like flip phones or touch screens. Another major strategic blunder 246 PART THREE | PLANNING was that its models were based on a European communications standard called GSM when roughly half the United States market used the CDMA (code division multiple access) format. One former Nokia executive said, “Nokia, at the height of its success, decided not to adapt its phones for the U.S. market. That was a mistake and they’re still trying to recover from this.” An executive at a North American network operator said, “The attitude at Nokia was basically: Here is a phone. Do you want it? Nokia wouldn’t play by the rules here, and they have paid a price.” That arrogant attitude and the global economic slowdown have continued to hurt the company’s sales and earnings.

Meanwhile, Nokia set up liaison offices in Atlanta, Dallas, Seattle, and Parsippany, New Jersey, cities where the top American operators have big business units. And it has recently revamped its U.S. operations to collaborate more closely with those major operators. For example, AT&T has begun billing its customers who use Nokia services, keeping those customers from receiving a second bill from Nokia. Best Buy began carrying a Nokia netbook, which is a model for its new collaborative strategy. Nokia also forged a deal with Qualcomm, the largest maker of mobile phone chips for CDMA devices in the United States. It also struck a deal with Microsoft to design Windows Office Mobile software applications for phones that use Nokia’s Symbian operating system. Despite these efforts, however, some industry executives remain unimpressed. One analyst said, “They claim they get it and understand the U.S. market. But the execution still is not there.” Mark Louison, president of Nokia’s North American unit, who has a seat on Nokia’s global management board, said, “In the past, we had a one-size-fits-all mentality that worked well on a global basis but did not help us in this market. That has changed now.” The company recognized that its former strategy had not worked in North America and began trying to lay the groundwork for long-term success. Louison says, “Everything you see us doing is to build the broad set of capabilities to take us broader and deeper into the U.S. market.”

1. Where on the BCG Matrix would you place iPhone and Nokia brands? Where would you place any newly developed products of Iphone on BCG Matrix? Explain. (15)

2. What type of control—feedforward, concurrent, or feedback—do you think would be most important in this situation? Explain your choice (10)

3. What immediate corrective action have been used in this situation? How about basic corrective action? (10)

Answer 1

1. On BCG matrix Nokia can be placed as Dog due to its lesser market share and growth. As can be seen in the case, the popularity of Nokia tanked during 2009 and was limited to only 7 percent.

Whereas the iPhone has been a star lately, with impressive market share and growth. After the later part of 2000, the iPhone grew impressively with its touchscreen and new features, that were groundbreaking. It was soon welcomed by many in the US and across the world.

Any newly developed products of iPhone would be on a Question mark as it may have lesser market share but a high market growth rate. This is due to the fact, that iPhone launches its new model with greater hype and thus creates an environment for the forthcoming products.

2. Here Nokia is seen to be employing feedback control, where after the market has been taken away, they are working on the feedback from customers and market to increase its market space, whether it is collaborating with Microsoft for Symbian OS or other big players like Qualcomm and AT&T. However, they have been late on the scene and this would require time to recoup.

On the other hand, control that was needed here was feedforward and concurrent to take up space before it is lost. Understanding the market and delivering it before the competitors do that. Nokia, unfortunately, failed to do so and lost ground to the iPhone and other players.

Feedforward control means putting up restrictions or analyzing aspects before the work is started, concurrent is during the production or work, and feedback control is put after the work is done to improve the succeeding one.

3. Here, the corrective action used is to get back the performance and market share, which is lost. Thus, problems are addressed at once to get on track. Thus, here they started setting up liaison offices in top American cities. Started collaborating with big players like AT&T, Best Buy, Qualcomm for CDMA devices in the US. It partnered with Microsoft to design Windows office mobile to run on Symbian OS.

These are the immediate actions they have taken.

In basic corrective action, determining and how and why performance has gone off track and sources of it needs to be analyzed before implementing the plans. It involves research and pinpointing the faults is needed. Once that is done, the team can move up to execute the task. Here the action is more deliberate and has high chances of success. It seems that Nokia failed to do this and apply corrective action in haste.