A case study of Nokia Corporation leading to the acquisition by

Microsoft

The significance of Nokia case study to leadership revealed how a technology

communication giant that was an industrial leader could easily be acquired by Microsoft

for $7.2 billion US dollars (Versace, 2013; Swisher, 2013). In this analysis, Nokia

Corporation deviated from its core competences in terms of technology and from its

pedagogical historical data that have catapulted the company from local to national, to

international, and then to a global wireless communication giant, now found that it was

unable to reinvent its products? 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 as well

synthesized.

To start, understanding the historical background of Nokia in a global continuous

changing environment of technology was 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 had a wide range of

mobile phones for the arcade of the analog systems to the digital standards and to the

present Jigsaw technology. Nokia most recent advanced research was on Jigsaw

emulated pattern-recognition algorithms that could 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 used Nokia’s device from

mobile phones to advanced smartphones and high-performance mobile computers

(Aluya, 2013; Versace, 2013). Nokia integrated these devices with innovative services

through Ovi, which included music, maps, apps, email and more. Nokia's NAVTEQ was

a leader in the comprehensive digital mapped and navigation services, while Nokia

Siemens Networks provided equipment, services and solutions for communications

networks globally (Nokia Corporation, 2010a).

In the network segment, Nokia provided services related to the network

infrastructure of mobile and Internet Protocols (IP). Eventually, the network segment

was entrenched in the areas of radio, broadband accessed 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 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 had enhanced people’s living standard from its once

exotic products to populist ubiquitous aesthetic seductive innovative products. As a

disrupter, it had been consistently and persistently disrupted other new technology

companies during its halcyonic days. Unfortunately, Nokia conjecturally have gone into

hiatus and hypodermically under the Apple spell (Yarow, 2013). Productivity through

easy-to-used and secured products like mobile phones, solutions for imaging, games,

media, mobile network operators and businesses were enhanced by Nokia. Without any

doubt, Nokia sold three of every 10 mobile handsets manufactured in the 1980s and

1990s (Brown-Humes, 1999). Nokia now, unfortunately have fallen into the enclave of

companies like Ericson and Motorola. Why? Nokia had failed to effectively and

officiously used ─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 successes after establishing a strong recognized

brand 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 what was indicated in their

robust financial statements. Scholarship discussions continued 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 during its 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.” Creative destruction the inability of the company to

effectively used business modular changes to radically change its platforms. Creative

destruction was 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 or

failing existing technological products and systems (Garrison, Harvey and Napier,

2008; Greenspan, 2008; Smith, Ward and Schumacher, 1993). Schumpeterian scholars

advocated that “creative destruction” and the historical nuances inculcated in the theory

remains a pathway to growth in capitalism (Koster, 2012; Perry-Smith, 2006).

According to Koster (2012), “creative destruction” have helped deft leaders to: a) filter

through the overwhelming data generated by genomic sequencing and continuous

sensors, (b) how to ensure equal access for all to these resources, (c) the potential of

eugenics, (d) protection of genomic data from authorities and corporations, (e) how and

when the exorbitant upfront cost would offset current fiscal inefficiency, and (f)

preventing the formation of "cyberchondriacs.”

There was a complementary or competing hypothesis to the Schumpeterian

growth theory. Some scholars advocated that “Creative destruction” destroys job and

does create massive economic slowdown. That creative destruction standalone

significantly does not lead to the environmental (TSH) conditions for creative

innovations rather it was an outcome of the processes that have resulted to the creation

of innovative jobs (Aghion & Howitt, 2009; Kolb and Kolb, 2005; Perry-Smith, 2006;

Wallas, 1926). 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 et al, 2013; 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 had become 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’ contra-posed

how Elop made so many gaffs by not understanding the changing environment;

however, Elop was one of the most interoperable persons during his time at Nokia. 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 had

become imperative to mention former CEOs who have led the organization to all time

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 company’s 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

enabled developers and publishers to optimize the development of their mobile

applications through increased understanding of how users were engaged. Speciously,

these services offered and was 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 the

unprofitable businesses within the company. 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 have 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 of the

digital telephone deployment to its customers.

In Nokia's (2002 Annual Report), Nokia "made a strategic decision to

concentrate on telecommunications as its core business, with the goal of establishing a

market-leading presence in every major global market" (p. 19). Nokia was pouring

fountain of creative technologies (newbies) from its 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 out deals to

put its wireless application protocol (WAP) software into Hewlett-Packard's and IBM's

network servers" (Nokia Corporation, 2010).

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 had

continued to gain substantial market share in disruptive mobile phones industry. 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 from 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 could 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 was 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 horded cash, $US 14 billion at the end of 2007.

In 2010, Nokia reported 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 saw Microsoft suffocating competitors.

Nokia was backed by experienced, 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 yet to come. Headquartered in Finland

Nokia was listed on the New York (NOK), Helsinki, Stockholm, London, Frankfurt and

Paris stock exchanges and employed 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 was at par and all navigation 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, or with creative destructive mindset. Nokia used

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 and 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 illuminate, 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 iota of

doubt, 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 and 2014).

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 citizenship helped booster the

company’s interest. Without hesitation, Nokia had continued 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 had remained 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 that 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 and innovative diffusion enabled curiosity, openness, and imaginative futuristic

ideas were 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, inhibited and clouded the vision of the

leaders to be creatively innovative. Fortuitously, an interesting selection of employees at

the time had illustrated how the company managed 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 circumstances

in technology that led to 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 was the idyllicta purposed 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 extrapolated from historical trends do not necessarily led 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 burnt-out) who were not able to continuously create new and innovative products

to enhance the mobile phones and network business segments which have captured

more market share or even create a new market demand; (b) the growing concern that

the current global economic downturn might have negatively affect the growths of both

Nokia and the Finnish economy; and (c) the charges that Nokia was susceptible to

inflexibility as the company had become more mature was apparent and this led to why

Microsoft acquired the company. These were the many “ifs” that needed to be

considered if the company would have continued 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.

According to scholars, 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 (Junod, 2011; Isaacson, 2011; Hong, 2010). 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 enabled 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 have led to longevity. Longevity has become relative in the field of technology.

Leaders in technology should 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 then management of 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, all lost in shuffled (Nokia, 2004).

Finland gradually lost competitive advantage as the home for the corporate

headquarters of many parent companies. As Nokia ages, the tasks were 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

appeared 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 purported 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 had been at par in the creation of

newbies. Not musing, even the so-called giant companies like Apple and Samsung 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 Nokia’s past

experiences, now bubbled up to the surface as a mistake (Aluya, 2013b). Past anesthetic

experiences of the company were used to predict future of new technological

innovativeness used to gauge trends. According to Davidson (2003), Nokia management

and strategic planners were not only distributing mobile phones, but they were then

permeating into the rapidly growing games market, electronic Arts, the Sega market,

and more recently into Jigsaw or smart phones (Hong, 2010).

Nokia had promoted 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 enhanced

curiosity about future telecommunications world, exposed diversity and novelty.

Constructively, this analysis articulated the current mindset on 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 till most recently

losing its complete market share to Apple and Samsung (Ashley, 2008; Deutschman,

2011; Lashinsky, 2009; Yarow, 2013).

In a study that clearly specified behaviors, Nokia had enjoyed a healthier phone

business, although lags in network sales, which had hunted its overall company

performance. This study led to the uncertainty about whether or not the industry and

corporate structures that were established a decade ago have now become different from

what present business environment needed for sustainability. A cultural sea change

triggered by creative destruction-TSH might breathe fresh air into the organizational

psychology hence; the management reshuffled with should have been wise idea as the

company struggles for growth that have resulted in the replacement of its 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

business 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 had similarities in

leadership styles, visions, business strategies, and corporate cultures. Flexibility,

resilience and unencumbered by rigid internal regulations, Nokia appeared to have had

the initial advantage in creativity, innovation, and entrepreneurial attributes due to

their inclusionary philosophy. Scholars have emphasized that former Nokia leaders

failed to explore, exploit and implement deft leadership philosophy doctrine that could

have changed its business models (Aluya, 2014; Manyika et al, 2011; Spakes, 2012).).

Global economy recession and recovery affected Nokia’s net sales

Nokia like any other global industry was not immured nor inoculated from the

global economic collapsed that started from 2008. Nokia sales had plummeted in the

four quarters of 2008 and 2009. As the global economy recovery, consumers’ confident

and purchases abated the sales was still on the 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, the graph depicted and 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

0

10000

20000

30000

40000

50000

2012 2011 2010 2009

Net Sales

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

United States, Brazil, Italy and Spain, together representing approximately 50% of total

net sales in 2008 (Nokia Corporation, 2013)

As the global economy recovery began, Nokia net sales had increased from 1% to

7% on a quarterly basis, however the 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).

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