Research Problem: The analysis of the case of Nokia leads to the identification of the main research problem which has been the declining market share of Nokia despite having huge R&D investment made by the company. The case analysis revealed that Nokia spends excessively on R&D as compared to entire industry expenditure on R&D, but despite making such huge expenditure, the company is not able to introduce smart phones that can compete against iPhone as produced by Apple Inc. This has adversely affected the market shares of the company and it has become a significant managerial issue for the company to revive its brand name.
Rationale for Investigating the Problem: The main rationale behind investigating this managerial issue is that despite making significant efforts in terms of R&D expenditure, Nokia is not able to present a smart phone that can compete strongly against iPhone. Thus, the investigation of this issue will lead to the identification of the factors that caused company to face such severe threat of declining market share and the actual reasons for the problems could be better identified.
Argument in Carrying out this Investigation: On the basis of analysis of Nokia’s case, it has been argued that R&D activities alone would not enable a company to achieve higher market success; rather, it should be used in combination with the managerial leadership abilities to effectively utilise the findings and investment made in R&D.
An Analysis of the Case of Nokia
The performance of a critical analysis of the Nokia’s case indicates that the major issue with the company is its declining share price because of its inability to bring newer products into the market. The case of Nokia revealed that it spent $40 billion on research and development which is almost equivalent to four times what Apple has spent in the same financial year. Despite making such huge R&D expenditure, Nokia was unable to launch a smart phone that can effectively compete against the iPhone. The managerial issue as evident in the case of Nokia suggests that the management has not been able to introduce the right smart phones in the market that can compete with Apple and Samsung. The managerial problems as faced by Nokia is also clearly evident from the fact that Nokia has actually developed few products and designs, but the managers within the company failed to introduce them into the market on time. This is the major strategic blunder on the part of management of the company. Further, its inability to compete with the iPhone has resulted into the shift in its focus from smart phones to its basic phones. This is the major contributing managerial problem which led to the problem of declining market share of Nokia (Smith, Collins and Clark, 2005).
According to a study conducted by Rosier, Morgan and Cadogan (2010), the principle challenge to firms is with respect to the ways in which strategies developed are implemented successfully by them. The managers within the organisations have a critical role to play in performing the successful implementation of strategies in order to achieve success. But this aspect has been lacking in respect to Nokia in the case, as the management of the company has failed to cope up with the market situation. As per the case, Nokia led the wireless revolution in 1990 and it was the first company to enter into the world of smart phones. However, with the introduction of the smart phone era, the company is racing to roll out the competitive products, as its share prices have collapsed significantly. Instead of bringing new smart phones to the market, the company seems to withdraw as it is unable to launch a competitive smart phone as against Apple iPhone. This aspect clearly indicates that the lack of sufficient ability of the management at Nokia to revolutionise the market through its smart phones (Rosier, Morgan and Cadogan, 2010).
Another major area of problem as identified from the case analysis of Nokia is that the company has recently introduced a series of Nokia Lumia phones which is basically a type of windows phone. But such introduction of Nokia Lumia phones has not been successful in allowing the company to achieve the lost market shares. Despite making huge expenditure over the R&D function, Nokia is still struggling to turn its new ideas into its product and the resulting impact is its further decline in the sales and market position across industry. On the basis of analysis, it has been argued that the innovation is essential to be performed in order to achieve success in the market, as the introduction of windows phone by Nokia has resulted into similar kinds of phones being brought by Samsung into the market. This has affected the performance of Nokia’s Lumia phones significantly and it is clearly evident over the market shares of the company (Bowman and Gatignon, 1995).
The fact that innovation is crucial to a firm’s success is also supported by Panne, Beers and Kleinknecht (2003) by indicating that innovation allows the firms with opportunities to offer something new and distinctive apart from their competitors. However, in order to achieve success in innovation, there are various factors that act as determining factors and these include firm’s culture, the experience with innovation, the multidisciplinary character of R&D team and the support from the top management. The analysis of the case of Nokia suggests that all these aspects are mostly lacking in respect to the company, as the managers were not able to introduce the new concepts into their products, the R&D team failed to utilise the key findings in introducing new products into the market and finally, the management’s approach also seems to be highly laggard, as despite introducing new and innovative smart phones, the management has undertaken decisions to take back their approach from introducing new and highly advanced smart phones to other small range of phones (Panne, Beers and Kleinknecht, 2003).
The analysis of the case leads to the identification of another major significant issue as faced by Nokia is the timely introduction of new products into the market. It has been argued that the higher level of benefits can be achieved from a product provided it has been introduced in the market on timely basis. This requires a proactive approach on the part of management of an organisation, as the important findings from the R&D activities should be reflected in their products on timely basis so as to achieve maximum level of benefits from it (Baker and Sinkula, 2005). However, in respect to Nokia, this aspect has been significantly lacking, as the analysis of the case revealed that Nokia has devised the concept of a colour touch screen phone which is set above a single button and this concept is mainly planned by the Nokia team seven years before Apple Inc. The device was shown locating a restaurant, playing a racing game and ordering lipstick. But the main issue was that it remained a plan for the company, and it never launched its innovative ideas into the market through its product offering. If the company have introduced all such innovations in its product offerings to its customer for the first time, it would have better position throughout the entire mobile industry.
Thus, the analysis of the Nokia case indicates that there are various managerial issues as faced by the company which has resulted into significant decline in the level of market share. Despite making efforts in the form of huge spender in R&D activities, Nokia failed to introduce new smart phones that could compete against iPhone and the inability to introduce its innovative ideas into the market through its product have all caused the mobile phone company to bear significant amount of loss in its market share.
Conclusion and Recommendations
In this report, a critical investigation of the management issues as faced by Nokia from the analysis of a case study has been performed, and the investigation revealed significant number of issues that are faced by the organisation behind its core problem of declining market shares. The analysis of the case leads to identification that Nokia made huge R&D spending and despite such effort, it has not been able to launch a smart phone that can compete in the industry. The major managerial issues as identified from the case analysis suggest that Nokia has failed to successfully integrate the strategies as developed by it into its products. Secondly, it has performed innovation in launching new smart phones, but they were not that innovative to compete against iPhones and other smart phones by Samsung, and thirdly, even after devising important innovative concepts, it failed to introduce them into the markets. This is mainly because of ineffectiveness on the part of management at Nokia, as they failed to create an impact in the market with their windows smart phones.