In the face of changes in business such as declining market shares, companies are compelled to undergo organizational changes in order to remain relevant in their industries, (Spector, 2013). The declining market shares of Nokia in the United States prompted several organizational changes.
Nokia’s drop of market shares from 35% to 7% in less than a decade can be attributed to its failure to match its rivals in meeting the expectations of the American market for smart phones (Hall, 2011). Nokia did not anticipate drastic changes in American consumer tastes. It therefore failed to produce phones to suit the tastes of the American consumers opting instead to produce its phones for the mass global market and save on production costs. This move gave other companies such as Motorola, Samsung and LG advantage as they tailor-made their smart phones to rival the iphones that the American market demands (Hall, 2011).
Nokia failed to technologically adapt its mobile phones to the American market. The company based its phone models on the European communications standard- Global System for Mobile (GSM) communication whereas the American market uses the Code division multiple access (CDMA) format. More than half Americans including those on popular networks such as Sprint Nextel and Verizon wireless use mobile phones based on the CDMA format. Moreover, the Lumia smart phones that Nokia developed were in the long run not compatible with newer versions of Microsoft operating systems.
Nokia responded to the decline in the US market shares by producing Lumia- smart phones which make use of Microsoft’s windows software. Initially the phones were well received in the market, but the strategy has been thwarted since the phones cannot run on Microsoft’s new software. Analysts predict that the company should brace itself for more losses as it struggles to come up with technologically sound phones that can run on advanced software (Virki, 2012). However, Nokia is pursuing other strategies such as teaming up with major operators in the American market such as Verizon, T-mobile, AT&T’s wireless unit and Sprint Nextel among others. The strategy involves rewarding operators who use Nokia’s services branded as Ovi on Nokia models. AT&T customers who use Nokia’s Ovi products do not receive a second bill. Moreover, Nokia has employed the services of a Stephen Elop from Microsoft to help revamp its American market.
Stephen Elop took over as the CEO of Nokia in 2010 and was the first non-Finnish executive to head the company. He discovered several international operational barriers he sought to change the fortunes of Nokia globally. The mobile phones industry was experiencing different dynamics in different countries. For instance, Elop never expected the rapid decline of phone prices in that was witnessed in China after he took over. The decline in prices meant that Nokia had to reduce its production and operational costs to remain competitive in the global market. Unique market demands also posed an operational barrier for Nokia. In India for instance, consumers wanted their phones they could link to new identifications numbers from the government. The regulations issued by different countries to operators also presented barriers to the extent of cooperation between Nokia and the different operators. The use of different technology platforms such as GSM for most of the Asian and European market as opposed to the CDMA format for the American and Canadian market also posed an operational barrier to Nokia’s operations under Elop.
Elop sought to reduce the production costs incurred by Nokia and concentration of resources in developing a product that would help the company gain lost market shares. One of the first moves was to plan a layoff of more than 10,000 employees by the end of 2013 even in its strategic markets such as China (Lee, 2012). Elop emphasized on the need to gain market shares by equaling the smart phones available in the US market. He therefore targeted to conduct more research and development to improve the Lumia model to become adaptable top newer operating systems and endear it to the American consumers. The CEO sought this move to gain revamp Nokia’s American market shares, and gain more profits from the market since the prices of Nokia’s products in other markets such as China was declining drastically.
Hall, B (2011) NokiaThe Sad painful death. Retrieved 2 September 2012, from http://brianshall.com/sites/default/files/THE%20SAD%20PAINFUL%20DEATH%20OF %20NOKIA_0.pdf
Lee, C. (2012) Nokia confirms layoffs, pulls back sales channels in China Retrieved 2 September 2012 from http://www.zdnet.com/nokia-confirms-layoffs-pulls-back-sales-channels-in-china-7000000781/
Spector, B. (2013). Implementing organizational change: theory into practice (3rd Ed.). Boston: Pearson.
Virki, T. (2012) Nokia expected to fall deeper into the red. Retrieved 2 September 2012 from: http://in.reuters.com/article/2012/07/11/nokia-earnings-outlook-idINDEE86A09U20120711