A case study of Nokia Corporation leading to the acquisition by
Microsoft
The significance of Nokia case study to leadership shows how a giant technology
communication that permeated today’s organizational systems can easily be acquired by
Microsoft for $7.2 billion US dollars (Versace, 2013; Swisher, 2013). In this analysis, did
Nokia Corporation deviate from its core competences in terms of technology? Did
pedagogical historical data that catapulted Nokia from local to national, international,
then into a saturated global wireless communication giant, now unable to reinvent
itself? Despite Nokia’s promenade of innovative technologies, why was Technological
Situational Happenstances (T.S.H.) not applied to then organization? These myriads of
questions will be analyzed, explored and synthesized.
To start, understanding the historical background of Nokia in a global continuous
changing environment of technology is necessary for learners. Nokia was a
multinational corporation in the late 21st century headquartered in Finland. Nokia was
structured into three main business segments. Markedly, the segments included (a)
Nokia Mobile Phones, (b) Nokia Networks, and (c) Nokia Ventures Organization. Mobile
Phone segment included the development, manufacture, and supply of wireless data
products and mobile phones. Globally, Nokia segments’ services wide range of mobile
phones for the arcade analog systems to digital standards and to Jigsaw. Most recent
advanced research was on Jigsaw emulated pattern-recognition algorithms that can
identify wide range of behaviors and logs detailed than past similar applications (Hong,
2010).
More than 1.2 billion, over 5% of the world population uses Nokia’s device from
mobile phones to advanced smartphones and high-performance mobile computers
(Aluya, 2013; Versace, 2013). Nokia integrates its devices with innovative services
through Ovi, which includes music, maps, apps, email and more. Nokia's NAVTEQ is a
leader in comprehensive digital mapping and navigation services, while Nokia Siemens
Networks provides equipment, services and solutions for communications networks
globally (Nokia Corporation, 2010a).
In the network segment, Nokia engaged in providing services related to the
network infrastructure of mobile and Internet Protocols (IP). Ubiquitously, the network
segment was entrenched in the areas of radio, broadband access for network providers,
operators, and to core of the internet protocol mobility. Nokia Ventures Organization
was formed for the purpose of creating new businesses outside the company's natural
growth path and core segment of operation. This segment engaged in venture capital
activities associated with a portfolio of new ventures. Essentially, these ventures
included the commercial enterprises of Nokia Internet Communications and Nokia
Home Communications (Reuters Investor, 2004).
Company background
In terms of communication, Nokia was one of the world leaders in mobile
communications. Nokia dedication enhanced people’s living standard from exotic
products to populist ubiquitous aesthetic seductive newbies. As a disrupter, it
consistently and persistently was disrupting the disruptors during its halcyonic days.
Nokia conjecturally have gone into hiatus and hypodermically under the Apple spell.
Productivity through easy-to-use and secure products like mobile phones, solutions for
imaging, games, media, mobile network operators and businesses were enhanced by
Nokia. Without any doubt, Nokia sells three of every 10 mobile handsets manufactured
(Brown-Humes, 1999). Nokia now, unfortunately falls on the categories of Ericson and
Motorola. Why? Nokia failed to effectively and officiously use ─Technological
Situational Happenstances (T.S.H.) illustrated below (see Vignette 1) to reinvent itself,
particularly understanding the situations on the global terrain. This is despite the
company’s success in establishing a strong brand recognized throughout the world
(Kipp, 2001).
Vignette 1: Global impact of TSH Source: (Aluya, 2013b)
Illuminated in the above vignette, critical components in this saga indicated why
Nokia failed to take into deep consideration the following: a) adaptation, b) culture, c)
economic environment, d) creative destruction, f) leadership and above all, g)
sustainability. Contra-analyzing the above factors were what led to the flaring and
flaming out of major technology companies irrespective of how solid or robust their
financial indicates. Scholarship discussions continue with the concatenations of Nokia
historical events leading to Microsoft acquisition pro anon.
Moving along, misconception about Nokia was that the name connotes a
Japanese company. Far from it, the company background showed European, a company
pigmented and entrenched with European culture- Finnish Group Company. Toted up,
the company has managed growth and innovation exceptionally well through the use of
TSH back in embryonic stage. Staff numbers increased from 25,000 in 1993 to more
than 44,000 in 2013. Bureaucracy then did not stifle the culture of innovation or deep
capital creative destruction. Transmuted, the company was Europe's fifth largest and
single-handedly accounts for more than 50% of the Helsinki exchange and a substantial
chunk of Finnish GDP growth (Brown-Humes, 1999). Robustness of Nokia’s successes
then propelled the Finnish group to be one of the world's most respected and reputable
companies.
Socio-psychological view and background
Holistically, Nokia's business sojourn began in 1865, when engineer Fredrik
Idestam established a wood-pulp mill in southern Finland and started manufacturing
paper. In the European industrialization and the general consumption of paper and
cardboard, Nokia became successful. This was a slight pendulum shift toward the
fabianic economic doctrine. Nokia's products were exported first to Russia, to the UK
and finally France. As a quintessential company, it became a major employer and the
employees evolved into a paternalistic community. Presently, there remains a
community called Nokia that existed on the riverbank of Emäkoski in southern Finland
(Nokia, 2008).
Nokia’s social, economic and historical analysis continued after World War II
when the Finnish Rubber-Works bought majority shares in the Finnish Cable Works.
Due to the quixotic need for power transmission, telegraph, telephone networks, the
Finnish Cable Works Company grew and expanded. Eventually, Rubber Works and the
Cable Works companies consolidated and a creative destruction machination eschewed.
In 1967, the companies merged to form the Nokia Group. Later, seed money was planted
into making Nokia a global success in telecommunications. Electronics generated 3% of
the Group's net sales and provided work for 460 people (Nokia, 2008).
At the end of the 1980s a common standard for digital mobile telephony was
developed through innovative method of using TSH. Present technology standard now
commonly referred to as the GSM (Global System for Mobile Communications) was
innovatively created. In 1991, Nokia made agreements to supply GSM networks to nine
European countries and by August 1997 Nokia had supplied GSM systems to 59
operators in 31 countries (Nokia, 2008).
Stephen Elop was the president and chief executive officer (CEO) who led the
company into the hands of Microsoft. Markedly, many scholarship critics’ contraposes
how Elop made so many gaffs by not understanding the changing environment;
however, Elop is still the most interoperable person in the world today. No need to be ad
hominem against his character. Stephen Elop was appointed the CEO on September 21,
2010, a day after the former CEO Ollila-Pekka Kallasvuo resigned (Nokia Corporation,
2010). To understand the political and social historical background, it becomes
imperative to mention former CEOs who have led the organization to significant
successes. In the embryonic stage, Kari Kairamo was the CEO who transformed the
company. Kari Kairamo ideological eruption led the company in the acquisition and
expansion of 80 subsidiary companies with an estimated 26,000 employees spreading
over nine countries before his death in 1980. Simo Vuorilehto became the successor to
Kari Kairamo in occupying the seat of the CEO. According to Mayo and Tony (1994), one
of the biggest acquisitions of the 1980s was the Datachecker (USA Based) and the Unix-
telecomms, Danish Company Regnecdentalen-ICL. In the 1980s during the recession,
the CEO made some strategic moves to liquidate the unprofitable business ventures and
subsidiaries
Nokia Data bought Ericsson. This group extended the technical capabilities to
the continental Europe during the same period of political liberalization of the European
market. In 2010, Nokia acquired Motally's mobile analytics service that enables
developers and publishers to optimize the development of their mobile applications
through increased understanding of how users engage. Speciously, the service offered
planned to be adapted for Qt, Symbian, MeeGo and Java developers (Nokia
Corporation, 2010a).
In 1992, Jorma Ollila, the former President and CEO critically examined the
company's technological capabilities and realized the need for a stronger R&D
department through TSH. Aptly, the CEO analysis led to the acquisition of the Matra
Nortel Communications' GSM Terminals in Ulm, Germany. Streamlining and
concentrating on the company's strengths became paramount to the Jorma Ollila.
Within a decade, refusing to kowtow to the big labor, the company shielded itself from
unprofitable businesses. Matra Nortel Communication GSM in Ulm, Germany was used
as a stepping-stone to transform Nokia into one of the world's largest mobile phone
suppliers. And this was a shifting sand of economic integration and deepening of
capitalization.
Historically, Nokia grew to national recognition from the 1960s and through the
1980s. During this period, Nokia bought various companies, such as Finnish Rubber
Works, Finnish Cable Works, a Finnish telecom company, Luxor (Sweden owned
electronics and computer firm), and Ericson's Data Division, to become a powerful
conglomerate in Finland. Jorma Ollila (former CEO and later Chairman) developed the
company strategy to focus more on the telecommunications business during the 1990s.
Nokia, from the pedagogical cognitive and effective antiseptic experiences, successfully
developed the first fully digital smart telephone exchange system in Europe and the first
phone anchored inside a car. Subsequently, the stage was set for uncloaking the digital
telephone deployment to customers or end-users.
In Nokia's (2002 Annual Report), Nokia "made a strategic decision to
concentrate on telecommunications as the core business, with the goal of establishing a
market-leading presence in every major global market" (p. 19). Nokia was pouring
fountain of creative newbies from golden chalice. Nokia divested non-core businesses
that were previously acquired—paper, personal computer, rubber, footwear’s, chemicals,
and power plant, aluminum, and television businesses. In order to infiltrate the U.S.
market and other countries globally, Nokia collaborated seamlessly with other
companies in the telecommunications industry to supply phones and networks to
potential new markets. For example, "in 1999, Nokia penned deals to put its wireless
application protocol (WAP) software into Hewlett-Packard's and IBM's network servers"
(Nokia Corporation— History from Hoover's Online).
Nokia high-risk strategic decision-TSH on telecommunication business led to
gaining market shares and profits (Bernstein, 1996). Remarkably, the nonlinear
technological methodology and realignment led Nokia to be the world leader in
seductive mobile phones. "Nokia became a world leader in mobile,
communicationsworld's leading supplier of mobile phones and a leading provider of
mobile and IP networks" (Nokia's 2002 Annual Report, p. 20). Based on the 2002 and
2003 financial information for Nokia, mobile phones and Nokia's network make up
approximately 99% of all net sales for the company. Not resting on its laurels, Nokia
continue to gain substantial market share in disruptive mobile phones. In 2010, Nokia
reports Q3 2010 net sales of EUR 10.3 billion ($13.6 billion), with non-IFRS EPS of EUR
0.14 Mobile device ASP up EUR 4 from Q2 2010 (Nokia’s 2010 Annual Report).
According to a Nokia press release dated January 27, 2004, TELESTET, who was
prime leader in mobile communications in Europe, introduced commercial 3G services
to Greece. Actions of this purchase launched the country's first WCDMA (wideband code
division multiple access) network, enabling top-of-the-line mobile services such as
advanced multimedia messaging, high-quality streaming, browsing and video calls with
speed of up to 384 kbps" (Nokia press release, 2004, January 27, p.2). Gallantly, Nokia
provided the equipment used for 3G WCDMA network so that customers can access the
network via the Nokia 6650 and 7600 mobile devices. In a capitalistic market, in the
domain of creative destruction, most recently, time have overtaken some of the Nokia
mobile phones. Surreptitiously, this is where Nokia lost its mojo or its whizbang
technological du jour.
Comparing Nokia to other competitors (Ericsson, Motorola, and Siemens),
Nokia’s annual sales bypass all competitors except Siemens. Nokia, however, was a
better-performed company than Siemens as outlined below:
Gross profit margin was four times greater than Siemens;
Nokia has A-1 debt rating and very little debt outstanding;
Market valuation was approximately 25% greater than Siemens although
Siemens’ annual sales almost triple Nokia’s sales;
Nokia hordes cash, $US 14 billion at the end of 2007.
In 2010, Nokia reports Q3 2010 net sales of EUR 10.3 billion ($13.6
billion), with non-IFRS EPS of EUR 0.14 Mobile device ASP up EUR 4
from Q2 2010 (See the table and graph for 2012 net revenue).
Nokia relied upon creative innovative products from its R&D groups. Risingly,
the company also maintained a high cash balance conjecturally to purchase start-up
businesses horizontally or vertically to enhance its telecommunication products. For
example, in 2007, Nokia acquired Avvenu, Enpocket and Twango (Nokia, 2008). Most
relevantly, Masalin (2003) stated that Nokia engaged with various leading business
schools, universities and consulting firms to stimulate the employees’ minds, thence
enhanced thinking outside the normal boundaries-pedagogically (learning the
unthinkable possibilities). Strategically, Nokia does not appear to quash or suppressed
competitors, unlike the formal management philosophy that was once outlined as one of
Bill Gates and Microsoft’s strategy that sees Microsoft suffocating competitors.
Nokia was backed by experience, innovation and user-friendliness-secure
solutions. Unpolemically, the company was the leading supplier of mobile phones, a
leading supplier of mobile, fixed broadband and IP networks. By adding mobility to the
Internet, Nokia created innovative new opportunities for companies and thus further
enrich the daily life of people globally. Nokia was a broadly and publicly held company
with listings on six major exchanges (Activision, 2003).
Nokia invested in 1998 HUF 25 billion (approx. EUR 100 million) in Greenfield
Hungary to increase capacity of phones manufactured. Ascendly, the notion to maximize
and increase manufacturing capacity was due to enabling infrastructure established in
Hungary and the Komárom. Another reason for the massive infusion of cash and
investment was the already human capital availability within the region. Scholastically,
the region had the presence of a well-educated workforce. Financially, in the third
quarter of 2007, Nokia's net sales totaled EUR 12.8 billion (USD 24.9 billion).
Apparently this was a tale-tale sign of what is yet to come. Headquartered in Finland
Nokia was listed on the New York (NOK), Helsinki, Stockholm, London, Frankfurt and
Paris stock exchanges and employs more than 68, 041 people (Nokia, 2007).
In a rapidly growing mobile phone industry, efficient, flexible logistics processes and
manufacturing capabilities were benchmarks for success. Losing sight of this significant
process, Nokia was indirectly undermining its own existence. For example, the new
Komárom site within Nokia's global logistics structure was significant. "Nokia has
always had well-established historical ties with Hungary, which was amongst Nokia's
key countries today. Thanks to the central geographic location, positive corporate
environment and the availability of well-educated workforce; Nokia has expanded its
activities” (Nokia, 2007, p.3). Nokia was then able to tap into the historic technological
trends to establish essentially a new market. Concomitantly, Nokia leadership however
lost sight of the changing marketing trends even when it was glaring obvious. Sad!
Nokia through historic technological trends and the use of TSH did then set new
industrial innovative standard that got lost in the shuffled. Competition amongst
competitors is at par and all navigating through the turbulence of the white Water.
Nokia should have learned the “strategies for survival in a world of permanent white
water” (Veil, 1996, p.1).
Moving along the historical lane, epistemologically, the consensual belief indicated
that the average age of Nokia employees was then around 30 years old. Crafty young
employees’ perspectives were inherently geared toward a global changing environment
mindset. Energetic, innovative, and meritocratic employees of these age calibers
conjecturally placed the company at competitive vim. Crafty young employees with
creative minds for new invention tend to adopt, change and were technologically
innovative with the use of T.S.H. Nokia uses certain criteria in hiring young employees
at the beginning of their career with the company; these actions were deliberate avenue
of promoting the company culture (Gupta & Govindarajan, 2004). Now, a culture that
equally inhibited Nokia inability to shake itself off the cobweb or move the great titanic
ship to a different direction, vis-a-vis reinventing itself using TSH.
To elaborate and expatiate, during the political disintegration of the Soviet
Union, and the tearing down of the famous Berlin Wall, Nokia management plunged
right into the political quagmire by hiring redundant Soviet technicians and scientists to
develop the third generation mobile phones (Anonymous, 2001). Without any dot,
Nokia leadership at that time understood the strategic change in the global
environment. Ibid, Nokia hired these expatriate workers to perform, innovate, and
reengineer the new creative generational mobile phones. Reasonably, these expatriates
were given the political and authoritative power to discharge duties without any
interference from corporate offices. Basically, these expatriates were then divided into
five groups: (a) middle managers, (b) business managers, (c) establishers, (d) customer
project employees, (d) research and development personnel. In continuation, Nokia
took advantage of the political liberalization of the European market by acquiring ICL
information technology group that later formed the basis for research and development
into the 4G (fourth generation) mobile phones (Aluya, 2008).
Practically, the incentive, the motivation and spirit that drove this small Finland
community group to embark on mobile phones, was one of necessity. Basically, the real
possibility of digging underground cable with landlines was very remote; the country
was strategically located in the north cold poll of Europe. Bubbled up with the exigencies
of the circumstances, this group of individuals became the pioneers of the early
invention of mobile phones in the 1980s. Politically, the spirit of Nokia collaborating
and contributing to political parties as a good corporate citizenry helped booster the
company’s interest. Without hesitation, Nokia continues to contribute funds to political
campaigns inside and outside of Finland in order to protect its interest from the
Nationalists within and its financial interest outside of the country.
Nokia culture to organization leadership Poignantly, Nokia remain the symbol of Finland's prowess in the mobile Internet.
Blau (2003) proffered that the source of Nokia's transformation anchored on its core
intrinsic values. Despite the acquisition of Nokia by Microsoft, these values of (a)
customer focus, (b) respect for the individual, (c) achievement, and (d) continuous
learning, have been translated into an unprecedented entrepreneurial spirit still remain
high. Entrepreneurial spirit or behaviors were embedded directly into the selection
process of new staff and the performance of management systems set in place. TSH
enables curiosity, openness, and imaginative futuristic ideas reflected on Nokia’s
attitude with respect to the telecommunications field. Not musing, these elements were
then mirrored in the company’s personality makeup. Like other elements of personality,
Nokia antecedents and historic makeup in the early developmental stages formed an
anchored unshakable culture of the company. Nokia does not have maneuvering room
to further cultivate curiosity, openness amongst existing employee because Nokia’s
greatest degree of freedom lies in the spiritual culture of the founders. And at the same
token, the intrinsic anchored culture of the founders became the achille’s heels that was
exhausted, that inhibited and clouded the vision of the leaders for creative innovation.
Fortuitously, an interesting selection of employees at the time and it illustrated how the
company manages its demographic makeup for future growth and development that
then gave the company competitive edge over its competitors (Gupta & Govindarajan,
2004).
According to Yates and Skarzynski (1999), Nokia used situational happenstances
in technology to lead in creative telecommunications-creative destruction doctrine.
Creative destruction was the concept advocated by Joseph Schumpeter in 1942. An
erudite and witty economic thinker, in his typology, he indicated that the semi perennial
gale and objective of creative destructiveness is the idyllicta purpose of scrapping off the
old and failing existing technological products and systems and replacing them with
newly creative ones(Aluya, 2013b). Creativity led to the development of innovative
technologies integrated into the mobile phones and network market segments. Blau and
Wolff (1996) suggested that Nokia's past success was due to "flat hierarchy and
youthfulness to beat the competition" (¶ 14). Average age of the Research and
Development (R&D) at Nokia was approximately 30 years old at this time. Creating new
and innovative products was an impetus to success. Yates and Skarzynski espoused that
companies that extrapolate from historical trends do not lead to better products. Young
employees in Nokia were inventive, creative and adaptive to the changing times. They
created their own history. Ambitious young employees brought the new products to the
market as the disruptors and the market shift in their favor. Nokia could only be good as
the product they produce today. Delphically, the core question to learners was what
happened to the concatenation past-historical antecedents. Ostensibly, the past could be
divulged or could be completely irrelevant to the future. Core to the research of this
magnum opus work becomes apparent to where the epistemologists collide with the
pedagogists. While Nokia has almost doubled their spending in R&D, they have reduced
the numbers of R&D centers from 28 in 1996 down to 11 by 2003.
Given these circumstances, the real issues of contention were (a) whether or not
Nokia could continue to operate R&D with a youthful group (who age over time and
were burn-out) who were able to continuously create new and innovative products to
enhance the mobile phones and network business segments which will capture more
market share or even create a new market demand; (b) the growing concern that the
current global economic downturn may negatively affect the growths of both Nokia and
the Finnish economy; and (c) the charges that Nokia was susceptible to inflexibility as it
becomes more mature was apparent and why Microsoft acquired the company. These
were the “ifs” that needed to be considered if the company would continue to have
comparative and competitive advantage.
Significance to leadership
Nokia lost business opportunities during the Soviet Union’s 1980s era of closed
iron curtain. This was an era of clicked, flicked, bubbled up and eventually busted up
decade. There was recession during this period (Nokia, 2004). European market was
impermeable with new innovative technologies triggered from changes in TSH. Despite
the business losses, Nokia was able to develop and distribute one of the largest mobile
phones in the world today, until Apple took the driver’s seat. Another folder for thought
was how did Nokia become the largest mobile phones distributor in the world?
Disintegration of the Soviet Union coupled with the liberalization of the European
market during the 1980s and early 1990s provided the impetus that allowed Nokia to
acquire and expand its markets through using TSH. Nokia expanded its markets by
using the existing enabling and incubated technologies to maximize markets share in
the late 1980s, thus increasing capabilities.
According to Stephen Elop, the former CEO, maybe the new CEO to Microsoft,
“In the five weeks since joining Nokia, I have found a company with many great strengths and a history of achievement that are second to none in the industry. And yet our company faces a remarkably disruptive time in the industry, with recent results demonstrating that we must reassess our role in and our approach to this industry. Some of our most recent product launches illustrate that we have the talent, the capacity to innovate, and the resources necessary to lead through this period of disruption. We will make both the strategic and operational improvements necessary to ensure that we continue to delight our customers and deliver superior financial results to our shareholders.”(Nokia Corporation, 2010a)
Circuitously, Nokia’s corporate social responsibility involves acknowledging the
company’s range of opportunities to be realized and the risks to be minimized. Acting
responsibly brings the company improvements in risk management, legal compliance,
enhanced reputation, and improvement in company efficiency issues like productivity,
quality, and costs. Conspicuously, Nokia brand was one of the most valuable in the
world, and it had a good reputation that was vital in order to maintain company
standing among employees, investors, network operators and consumers (Nokia, 2004).
More significantly was to maintain the company standards and good reputation that
would lead to longevity. Longevity has become relative in the field of technology.
Leaders in technology must be ahead of the curve, or at worst be clairvoyant about the
strategic short-term changes. Imperatively, continued creativeness from scion of
aesthetic seductive products would have led to the sustainability of the longevity, a
beneficent future for Nokia.
Nokia core philosophy was using TSH innovate new technologies for the benefits
of the society and the company. Social responsibility was cardinal. Nokia acts
proactively while integrating programs into its core business activities as well as making
a sustainable effort. Succinctly stated, doing business in a responsible way economically
makes business sense to Nokia. Social responsibility that exemplified good corporate
citizenship helped create a sustainable product life cycle, sustainable employment,
sustainable corporate reputation, and ultimately sustainable economic growth (Nokia,
2004).
Finland gradually lost competitive advantage as a home for the corporate
headquarters of many parent companies. As Nokia ages, the tasks altered at higher
levels, and the type of leadership that was needed also changed. In 1992, for example,
the former CEO Ollila delineated the four key areas to the multinational's futuristic
success. These keys areas challenged the firm to be (a) more telecom-oriented, (b) more
globally focused, and (c) highly sensitive to the value-added effects of their ventures, (d)
continuous innovative improvements-TSH.
According to Masalin (2003), the uniqueness of Nokia's management approach
was novel to its organization. "Nokia relies on a strong corporate culture and the
company's values: customer satisfaction, respect for the individual, achievement, and
pedagogical-value-based leadership was an integral element of the Nokia way" (Nokia,
2004, ¶ 4-5). Blau and Wolff (1996) described a flat organization structure enables
companies to be flexible and quick in making decisions. Actually, this structure appears
to be a good fit for Nokia. Overall, Nokia's management and leadership philosophy
could be similar to that of Microsoft philosophy. Glaring obvious, Microsoft and Nokia
have had similar culture, leadership styles, philosophy, all tested and meta-tested
already in their previous partnerships.
This case study purports to show how Nokia’s transformation from exotic to
ubiquitously distribution of its mobile phones to individuals globally with TSH as
enabler. It elaborated how technology companies are at par in the creation of newbies.
Not musing, even the so-called giant companies like Apple must continue to innovate or
they will have an Icarus fall like the Ericson or Motorola. Distribution of mobile phones
globally was extrapolated from the company’s past experience, now bubbled to the
surface as a mistake (Aluya, 2013b). Past anesthetic experiences of the company were
used to predict future of technological innovativeness used to gauge trend. According to
Davidson (2003), Nokia management and strategic planners were not only distributing
mobile phones, but they were permeating into the rapidly growing games market,
electronic Arts, the Sega market, and more recently into Jigsaw or smart phones (Hong,
2010).
Nokia promotes a culture where good communications practice was integrated
into every day interaction. The interactions were with and between employees. These
interactions were ensconced in the shared vision and goals, shared knowledge,
openness, speed and integrity to be at the top hierarchy. Nokia’s global mindset and how
leadership could learn through extrapolation of past concatenation of experiences to
predict the future was at the core of this case study. And this was an elegant idea that
could be confuted. This analysis showed how development enhances curiosity about
future telecommunications world, exposes diversity and novelty. Constructively, this
analysis articulated current mindset, how integrated critical scholarship and the
development of a new global mind shift of reasoning were applied (Gupta &
Govindarajan, 2004). During this time a burgeoning demand for Nokia’s products
resulted in profit maximization. But, concurrently past experiences do die like summer
flies unfortunately for Nokia.
Nokia's profit included 1.47% of Nokia's total sales that occurred in Finland and
Americans hold a 90% share of the company. In 2010, Nokia reports Q3 2010 net sales
of EUR 10.3 billion ($13.6 billion), with non-IFRS EPS of EUR 0.14 Mobile device ASP
up EUR 4 from Q2 2010 (Nokia’s 2010 Annual Report). From this study, high taxes
damper initiatives; however, high standards of education have been a key factor in
Nokia's success. Studies failed to establish a correlation between high taxes and
employees’ turnover among skilled foreign workers. Recently, studies have determined
that Finland depended on the company to underpin the economy (Aluya, 2010).
Overwhelmingly, operating profit for Nokia has been on a steady rise.
In a study that more clearly specifies behaviors, Nokia enjoyed a healthier phone
business, although lags in network sales, which hurts overall company performance.
This leads to uncertainty about whether or not the industry and corporate structures
that were established a decade ago were very different from what present business
environment needed for sustainability. A cultural sea change triggered by creative
destruction-TSH might breath fresh air into the organizational psychology hence; the
management reshuffle with should be wise as the company struggles for growth has
occurred in the replacement of the CEO (Nokia Corporation, 2010). Reshuffling of
management has been addressed in more recent studies. Interestingly, despite changes
in sales growth over the past decades, results have supported those latest earnings
forecasts. Nokia was then quick to enter key markets, and the company strategically was
located within refined manufacturing centers capable of meeting rapid demand changes
anywhere in the world and using Just-In-Time cryptic methods.
Based on the literature coalesced and gleaned from the review and research
materials, Nokia's leadership and management philosophy do not represent a new
framework model in the general sense. Many of the attributes examined in the Nokia
organization also existed in other companies such as Microsoft, Dell Computers,
Hewlett-Packard, and General Electric. Technology companies have similarities in
leadership styles, visions, business strategies, and corporate cultures. Flexibility,
resilience and unencumbered by rigid internal regulations, Nokia appears to have the
advantage in creativity, innovation, and entrepreneurial attributes due to their
inclusionary philosophy.
Global economy recession and recovery affected Nokia’s net sales
Nokia like any other global industry was not immured nor inoculated from the
global economy collapse that started from 2008. Nokia sales plummeted in the four
quarters of 2008 and 2009. As the global economy recovery, consumers’ confident and
purchases abated the sales decline. Vignette 2 graphically depicted below showed three
quarters net sales in 2010, far exceeded the 2008, 2009, 2011 and 2012.
Table 4: Global impact on Nokia’s sales in EUR in millions
Years 2012 2011 2010 2009
Quarterly
(Months)
(Q1-Q4) (Q1-Q4) (Q1-Q4) (Q1-Q4)
Net Sales 30, 176 38,659 42,446 40,984
Source: Nokia Corporation, 2013
Vignette 2: Global impact on Nokia’s sales in millions of EUR
From the above vignette 2 graphically depicted revealed that the precipitated
global recession that started in 2008 negatively affected Nokia net sales. There was a
quarterly declined to 6% in total net sales. Combination of the total four quarters in
2009 illuminated Nokia’s net sales decreased of 19 % to EUR 40 984 million (EUR 50
710 million in 2008). Net sales of Devices & Services for 2009 decreased 21 % to EUR 27
853 million (EUR 35 099 million). Net sales of NAVTEQ * were EUR 670 million in
2009 (EUR 361 million for the six months ended December 31, 2008). Net sales of
Nokia Siemens Networks decreased 18 % to EUR 12 574 million (EUR 15 309 million).
Europe on the contrary, accounted for 36 % (37 %) of Nokia’s net sales, Asia-Pacific 22
% (22 %), Greater China 16 % (13 %), Middle East & Africa 14 % (14 %), Latin America 7
% (10 %), and North America 5 % (4 %). Ten markets in which Nokia generated the
greatest net sales in 2009 were: China, India, the UK, Germany, the United States,
Russia, Indonesia, Spain, Brazil and Italy, together representing approximately 52 % of
total net sales in 2009. In comparison, the ten markets in which Nokia generated the
greatest net sales in 2008 were China, India, the UK, Germany, Russia, Indonesia, the
0
10000
20000
30000
40000
50000
2012 2011 2010 2009
Net Sales
United States, Brazil, Italy and Spain, together representing approximately 50% of total
net sales in 2008 (Nokia Corporation, 2013)
As the global economy recovery begins, Nokia net sales increased from 1% to 7%
on a quarterly basis, however this increase was unable to sustain the spiral decline in the
company overall market. Lifted from Nokia financial statement(Ibid), last quarter of
2009 to the quarter of 2010, net sales increased Devices & Services EUR 7.2 billion, up
4% year-on-year and 6% sequentially (down 5% and up 2% at constant currency). Nokia
services net sales of EUR 159 million, up 7% year-on-year and 1% sequentially; billings
of EUR 325 million, up 89% year-on-year and 10% sequentially. Nokia total mobile
device volumes of 110.4 million units, up 2% year-on-year and down 1% sequentially.
Converged Mobile Device (smartphone and mobile computer) volumes of 26.5 million
units went up 61% year-on-year and 10% sequentially. Nokia mobile device ASP (include
services revenue) of EUR 65, up from EUR 64 in Q3 2009 and EUR 61 in Q2 2010
respectfully.
Furthermore, Devices & Services gross margin of 29.0% was down from 30.9% in
Q3 2009 and 30.2% in Q2 2010. Devices and services non-IFRS operating margin of
10.5%, down from 11.4% in Q3 2009 and up from 9.5% in Q2 2010. NAVTEQ non-IFRS
net sales of EUR 252 million, up 52% year-on-year and flat sequentially (up 47% and
down 2%). Nokia Siemens Networks net sales of EUR 2.9 billion up 7% year-on-year
and down 3% sequentially (flat and down 4%). Nokia Siemens Networks non-IFRS
operating margin of -3.9%, down from -1.9% in Q3 2009 and 1.7% in Q2 2010. Nokia
operating cash flow of EUR 439 million, and cash generated from operations EUR 1 206
million. Total cash and other liquid assets of EUR 10.2 billion and net cash and other
liquid assets of EUR 4.4 billion toward third quarter of 2010 (Nokia Corporation, 2010).
PS: For references to the above study, and further reading logon to Jofdt.com or purchase the entire book: Leadership, Real Estate and Disruptive Technology: Technological Situational Happenstances (2nd Edition).