Nokia; General Motors of Mobile Industry
Olli-Pekka Kallasvuo took over the world’s largest mobile phone manufacturer in the summer of 2006. Six months later Steve Jobs unveiled the iPhone, and it has been downhill ever since. Nokia’s shares have tumbled by nearly two-thirds. Its profit margins have withered from 15% to 7%. And the firm has all but imploded in America, despite Mr Kallasvuo’s pledge to conquer the region. Since 2005, experts in mobile industry started to predict a very gloomy future for the dying giant. While they stick to their legacy phones and are happy with major penetration in the developing countries; read it as high volume low margin domains, other competitors started to target higher margin products including smatphones. Developing countries will be all using smartphones within the next five years anyway.
Although people think Nokia’s most obvious problem is being squeezed out of the smartphone market, its biggest mistake was lack of vision for much higher margin products that come with them; applications! Smartphones are not only lucrative in themselves; they are the gateway to the even juicier market for services and “apps”. Apple’s iPhone and Google’s Android range compete on “cool”. BlackBerry is synonymous with business. But what does Nokia stand for? As usual Nokia still chases the pack. Mr Kallasvuo argues that the forthcoming N8—an all-singing-and-dancing handset that is due to hit the stores in October after several delays—will “mark the beginning of our renewal”; I guess this the fifth or sixth time they are waiting for such a product in the past five years. But previews suggest that the phone is more about catching up than setting the pace. Nokia’s ads tout its “revolutionary” touch-screen technology, built-in camera and GPS. Yet such baubles are already commonplace. It is time for Nokia board to wake up and consider a new direction. GM was once dominating car industry, but lack of innovation forced them to bankruptcy. Nokia should learn its lessons; things are changed!