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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 Nokias 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 Nokias 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 peoples 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 companys 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 Nokias
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 Emkoski in southern Finland
(Nokia, 2008).
Nokias 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 companys 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
noncore
businesses that were previously acquiredpaper, personal computer, rubber,
footwears, 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,
communications world'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 (Nokias 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),
Nokias 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 Nokias 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 Microsofts 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 Komrom. 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
Komrom 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, visa-
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
companys 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 Nokias attitude with respect to the telecommunications
field.
Not musing, these elements were then mirrored in the companys 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 Nokias 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 achilles 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 Unions 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
drivers 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, Nokias corporate social responsibility involves acknowledging
the
companys 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
metatested
already in their previous partnerships.
This case study purported to show how Nokias 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 Nokias 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. Nokias
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
Nokias
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 (Nokias 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 Nokias 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 Nokias 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 Nokias 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 Nokias 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 Nokias 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).
For graphs and references to this article, please login to jofdt.com, or
contact the author at Draluya@jofdt.com or at 714-488-5927

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