Tuesday, August 2, 2011

Nokia's fightback in Emerging Markets

Nokia has been subject to huge battering in the last one year. The Finnish company has had a much needed change in leadership with Stephen Elop taking on the role of president and CEO. Nokia has lost market share, suffered from declining profit margins and scrapped its smartphone operating system for future models, creating significant uncertainty for the firm’s future.

There have been five major problems for Nokia.
  1. Transition from Symbian to Windows Phone 7 : This has brought about uncertainty in the minds of investors and has been seen as a sign of Symbian’s failure.
  2. Android based devises have gained market. Samsung was the highest gainer.
  3. Success of Low-cost emerging market firms like ZTE, Micromax, etc, have hurt Nokia.
  4. iPhone apart from Samsung has individually hurt Nokia in the touch screen segment and Blackberry in the business phone segment. Moreover imagine what a cheaper iPhone in emerging markets would do to Nokia?
  5. Price pressures in Europe have caused Nokia to cut margins in Europe.
The fightback in emerging markets shows a change of strategy. Nokia is planning to change the rule. Their new strategy has a clear focus on after sales service, a factor very important in repeat purchase. It has the potential to thwart all phone manufacturers due to Nokia's extensive coverage and service centers. This is lacking for Apple, RIM and low cost handset manufacturers. Moreover the shift to a franchisee model to increase the after sales service touch points is a good aggressive move to regain share.