Table of Contents
In the last decade, mobile phone technology has increasingly advanced to include features that allow their users varied data manipulation procedures, among a host of other application. The mobile phone industry has changed drastically turning Smartphone technology into one of the most significant determinant of performance in this industry. Since the invention of mobile phones decades ago, Nokia has always been considered as a leader in the industry. For the last few years, however, the company has been slowly losing its lead. In the year 2010, there was an estimation that there were half billion smart phones with a projected growth that would see the number rise to more than a billion in the year 2013. Such tremendously growth points to the importance of smart phones in the mobile phone industry. Nokia has continuously lost its market share for smart phones for the last four years. This paper intends to examine the causes of this losing trend by one of the major players in the mobile phone industry.
The invention of the mobile telephones can be traced to the 1970s and 1980s when Scandinavia and Japan launched the earliest cellular networks. The mobiles phones have undergone several evolution stages since then, form professional tools focused on technology to mass product. In the early stages of development, the mobile phones were the tools of the wealthy, and as technology developed, they become more affordable. At some point in mobile telephone development, phones were regarded as showoff gadgets for the yuppies. Since then, the mobile phone technology has undergone numerous advancement and price reduction so as to enhance affordability to the majority and appealing, not to mention highly portable.
Today, mobile phones have become one the most essential communication product in the society. The developments of the information technology sector have largely influenced this new development. Smartphone today with the capability of accessing internet, people use smart phones to access their mails and surf the internet. In addition, today’s gadget come with additional features that enable users carry out other tasks besides calling such as navigation, entertainment and photography. This has seen phones become gadgets that people never leave home without. The earlier versions of mobile phones were not only costly but large in sizes. Advances in technology have seen the size of mobile phones considerably reduced to small handheld pocket able devices that are convenient to carry around. Nokia is one of pioneer companies to mobile telephone market and a leading player in the industry. In the early stages of mobile telephone technology in the 1980s and 1990s Nokia was leading the industry. The company’s success was attributed to their strategy of market segmentation, brand management and continuous adoption of the latest technology and new products innovations. The company has up to date maintained the role as one of leading the industry players. It is the fifth brand that is most valued brand in the world across all industry and leads as the most valuable brand in mobile phone market. The success of this finish company cannot be attributed to a single factor. They have managed to corner the global market through a series of well laid strategy that have kept Nokia way ahead of its competitors.
Since the early 1990s, Nokia mobile phone products have been diverse and allow their consumers to customize their products. This made it possible for consumers to customize Nokia phones by integrating exchangeable and removable accessories such as the skin color to preferred colors. Such unique features made Nokia phones the preferred products to their consumers. This plays a significant role in making Nokia products exceedingly appealing. This convenience and uniqueness saw Nokia phones become preferred products in the mobile phone market. In addition, their simpler features as compared to those of their competitors made them easier to use and appealing to the consumers. Its product diversification enabled the Finnish company penetrate different geographical markets. The continuous adoption of emerging technology helped the company maintain the lead in mobile telephony. This made Nokia the leading mobile phone brand of the 1990s and in this century.
The company made phones that were appealing to different segments of their consumers. They based their products segmentation appealing to differing consumer lifestyles based prices and integrated features on their phones. Their first smart phone, Nokia 7710, was launched in 1999, and had WAP (Wireless Application Protocol) and an internet protocol integrated in the handset. However, these features were not common to all of the Nokia brands. The company successful aggressively market mobile phones as personal accessories in the 1990s and sold itself as the leading brand in mobile telephone market. The company becomes the unquestionable trend setter in mobile phones technology. Nokia realized early that mobile phone consumers' attraction to stylistic interaction user interface.
Smartphone can be described as digital phones that allow users to manage personal information tasks such as emailing, text messaging, time management and accessing the internet among many other functions without interfering with voice communication. In the year 2006, Nokia started using Symbian the most popular operating software. They also incorporated Wibree a blue tooth technology that was developed by the company in their N-series smart phones. One of the principal factors that have seen the smart phone becoming more popular is the rise of social networks on the internet. Having a phone with the capability of accessing these sites from anywhere have seen their demand rise among the tech savvy individuals is a must today. Add this to convergence of applications such as navigation devices, cameras, radios, videos and gaming and their effect is the phenomenon with countless applications.
The company also developed Ovi stores, as their brand for internet services to allow their consumers’ easier access to social networks and for download applications. Ovi allows users to customize their experience and view as well as store videos and photos online. The company’s Smartphone developments have stalled in contrast to other industry players’ flexibility and improvements. This has lead to a drop in their Smartphone market share to thirty seven ercent in the year 2009 from forty seven percent in year 2007. Competition rivalry in the smart phone market for the last five years has increasingly intensified. Smart phones with advanced, innovative, features have been continuously introduced in the market in the last few years with companies introducing new products every other quarter. To undercut their competitors, rivals have introduced aggressive price undercutting strategies to make their products more appealing to consumers and increase their market share. Industry players such as Sony Ericsson and Motorola have increased their market share through such strategies at the expense of profit margins. This has left Nokia with the highest prices for their products in the industry although they have been slightly lowering their prices in the year 2008.
The company still continues to adopt their product diversified strategy, so in addition to smart phones, they still produce less advanced phone models for their lower end consumers. Less advanced models such as the 2330 model that is equipped with the basic services features such as phoning and texting, are still in production alongside their Smartphone. Although this strategy has worked for the company’s bottom line, they are increasing losing in mobile phone market to new entrants. New industry players such as RIM and Android that exclusively caters for Smartphone consumer market are currently, in the lead, in the elevated end section. This means, Nokia is rapidly losing its grip on the mobile phone market. Although the company continues to cater for all market segments, the mobile phone market is increasingly getting tipped to high end consumption. Most consumers are nowadays moving from the basic mobile phones to smart phones despite their higher costs for their appealing features and numerous applications. The company’s high end model such as the E7-00 comes with features that allow their users satellite navigation, HD video and an eight mega pixel camera.
Nokia Smartphone History
Smart phones as noted earlier are mobile phone devices that have enormous data manipulation capabilities. The phrase was first coined by Nokia Company to describe their advanced handheld gadget, in the late 1990s, that combined the features of mobile phones with those of PDAs (Stichbury 2008.pp. 56). Today the Smartphone have been developed to integrate features that allow their users access third party data providers, and have increasingly reduced in terms of size. Smartphones capabilities have also continuously developed to allow their users increase data manipulation capability, increasing their efficiency and capability to the increased appeal of their users. The increased usability of Smartphone often refers to the ability of the modern mobile phones to display advanced interactions, and at the same time reduce communication jargon prominent in the earlier phone models. These interactions include the ability to navigate the Smartphone with non QWERTY key functions such as touch screens, and other easier to use interfaces as compared to what already exists in the market today (Babin and Harrison 2005.pp. 19).
The Smartphone comes with capabilities and advanced features, and other options that appealed to their users. The more features that were added the more popular the Smartphone became. The earlier smart phone versions had few advanced features, but with advances in the information technology, these add -on have increased dramatically. This is to enable these phones access and apply the achievements of information technology and increase their appeal to their consumers.
These advances have also changed the market dynamics of the mobile phone market. This has seen new entries into the industry easily overtake the earlier industry leaders such as Nokia, Samsung, Ericsson and Motorola. Up to the second quarter of 2011 financial year, Nokia has continuously enjoyed a substantial market share of the smart phone market until their sales drastically declined (Pride and Ferrell 2011.pp. 65). Market segmentations have seen Nokia remain a leader in mobile phone market. The company’s strategy to developed products for all market segments has continued to pay off with rising revenues. However, they have not strengthened their high end users market. Smart phones fall under the high end market segment. Nokia market segment for Smartphone dropped in 2008-2009 by five percent. This paper aims to research the reasons behind the significant drop in the company’s Smartphone market share.
Since the introduction, of the Smartphone in the late 1990s Nokia has been in the forefront of this market segment commanding a substantial share of the market. Smartphone technology is dynamic and the features that are available to their users continuously advance every other day. Nokia has always prided itself as companies that continuously adopt the advances in information technology. This has been of their strong selling points that have kept the company in the lead of mobile phone industry. Of late, however, the company has been losing their position as the industry leaders to their competitors. The company has been operating on a market segment strategy. This gives the company competitive advantage over their rivals especially those who deal exclusively to the high end market segment. This advantage, however, has seen Nokia lose its leading role as the mobile phone market leader and its Smartphone market share significantly dropping.
Factors That Determine Consumers’ Mobile Phone Preference
Initially, mobile phone consumers preferred phones with robust perception to quality, operation instruments and features. They preference was also determined by brand names attractiveness, besides the basic features. Smart phones, on the other hand, have capitalized on their advanced features and their application. These new market dynamics have seen new entrant into industry that deals exclusively in smart phones have rise to become key players. According to the law of demand, the relationship between a product’s price and its demand is inversely related. Thus, when all other factors are held constant, the price determines consumers’ preferences for a given product. Additionally the consumers’ buying patterns are highly influenced by add-on features such as cameras, Mp3, FM radios, Net surfing, download application, and HD videos among other features present in smart phones. Finally, customeer loyalty is enhanced by a company’s response to its consumers’ needs and their after sale-services (Ferrell and Hartline 2011.pp. 261). Effective responses to customers’ needs and efficient services are the main ingredients in consumer loyalty and customer retention.
Another factor that is heavily influential in consumers’ preferences for smart phones is the operating software. Nokia smart phones have been operating on the Symbian operation software that was designed in the 1990s. The software has not fared well in the market against competing alternatives such as Android and apple (Agtmael, A, 2007). Software development can take enormous resources and time. These enormous costs have seen Nokia continue to use its Symbian OS. This has played an enormous task in the loss of the company’s market share. The company’s Symbian operating software has been one of the leading causes for the drop in its Smartphone market share. Therefore, continuous, new products development and innovation can also play an influential role in determining their preferred products.
The last has seen the rivalry in the Smartphone market intensify and new entrants grabbing a substantial segment of this market. Apple had an estimated nineteen percent Smartphone market share. Its popularity is mainly driven by it operating software that allows its users numerous applications. Apple continuous innovations have seen it remain a leading player in the industry its latest Smartphone innovation iPhone is expected to help the company acquire a substantial market share (Iacobucci and Churchill 2010, pp. 69). However, OS is not free which has seen the company lose a substantial share of the market to the Android brand that does not charge its consumers for its application software. From the year 2009 to 2011, Google’s Android Smartphone market share grew from three percent to forty eight percent (Pride and Ferrell 2011, pp. 75). Android caters exclusively for the high end consumers who prefer smart phones. Its free operating software platform has seen the brand control half of the market share for smart phones. The entry of blackberry into the Smartphone market in the late1990s was phenomenon. It was the preferred Smartphone brand in the early 2000s; however, RIM failed to introduce innovative products into the market (Ferrell and Hartline 2011, pp. 256). It plans to introduce its own OS QNX in 2012 so as to gain competitive advantage over its competitors.
- What are the causes of significant drops in Nokia’s Smartphone market share?
- Does the Smartphone’s operating software (OS) determine the consumers’ choices?
- What role has competition played in dropping Nokia’s smart phone market share?
The objective of this research paper is to explore the reasons for the dropping sales in Nokia Smart phones. Nokia Smartphone’s OS (operating software) features and their usability, in comparison to those of their competitors Apple and Samsung, differ slightly. Both primary and secondary data collection methods are applied in the study. Primary data are collected with the uses of online surveys, email questionnaires, one on one interview, with the industry key players and through focus group discussion. This is to enable the researcher get first hand unbiased information from sources. The use of primary data collection method is applied to ensure that specific questions are answered, and the gaps that may exist in secondary data are filled.
Secondary data are gathered from market trend surveys that have been done and literature on smart phone from books, financial magazines and websites. Secondary data collection employs the use of all existing literature on smart phones. This is to help the researcher analyze the trends in smart phone markets. The advantage of using this method is that it is faster and cheaper as compared to any other methods.. Collecting primary data on market trend for such an extensive industry as the mobile phone industry can take a long period and a lot of resourcing. The research, therefore, employs the use of existing literature on industry trends.
The research employs the use of both primary data and secondary data collection methods. Primary data usually contains data gathered for a given purpose while the existing data that are gathered for other purposes is referred to as secondary data. Secondary data are faster to obtain and less costly than primary data. Primary data collection can be used to fill the information gap that results when gathering information through secondary data collection. This involves direct gathering of information through such methods as interviews, surveys, conversations with experts and questionnaires. This, therefore, entails collecting information from the source directly (Iacobucci and Churchill 2010). Primary data collection takes a lot of time, but the data collected is often invaluable. This is because the data gathered is unbiased and tailor-made for the research being undertaken, since the questions are designed for research question. The mobile phone industry is mainly driven by continuous innovation and introduction of new products into the market. Nokia should continuously invest in its research and development. This would ensure a steady flow of new products in the market and help the company keep up with its competitors. Nokia smart phones have been operating on the Symbian operation software that was designed ages ago. The software has not fared well in the market against competing operating software alternative such as those used by Android and apple smart phones. Developing operating software can take enormous resources and time, which has seemed to be the main reason influencing continuous use of its Symbian OS. This has played a large role in the loss of the company’s market share. Its recent agreements to license Microsoft operation software for all Nokia handsets should help Nokia level the playing field.
Product prices can affect its market share since consumers will always prefer affordable products. Nokia smart phones are slightly expensive as compared to those of its competitor. The company should, therefore, look for alternative ways to make its products more affordable, and enable its smart phones compete against cheaper models such as Android and Apple.