NOKIA as we all know (not sure about a common man in Northern America !!) is the world's undisputed leader in Mobile Devices Technologies especially with greater dominance in Europe, Asia and Latin America markets.
But NOt a King In America !! Why??
To put more light on this conundrum, let's analyze the growth of the mobile devices industry and the contribution of the industry leader over the last four years 2006-2009. This has been a significant phase for the big changes in mobile devices industry (advent and growth of smartphones, with new players entering with smart devices and hurting the incumbents' sales..yes... smartly enough).
(Note: I have approximated Q4'2009 data from the previous industry and Nokia's sales data, as Nokia has still not released its Q4'09 results)
The above graph depicts the consistent market share for Nokia worldwide but there is a dip in market share in 2009 coupled with the industry de-growth in late 2008 and early 2009 due to the recession slowing the growth prospects of mobile devices industry.
There are more causes of this dip in performance from the world leader. Let's see where it has lost its market share, though there is no prize for guessing but let us confirm it…
It's crystal clear from the above depicting NOKIA's dominance everywhere accept North America. The contribution to the sales in North America has been decreasing dramatically for Nokia from the year 2002 with a whopping 35% market share (leader) to 2009 with a below par 8%.
What has been the main reasons in such a developed market like North America where Nokia is not a King? Why isn't it able to leverage from its earned brand equity all over the world here in American Markets. Is it the product portfolio or the operator partnerships or the go-to-market sales strategy or the right attitude or not understanding the North American consumers ?
Issue 1: Birth of Smartphones and Apple iPhone …
The smartphone growth driven by Blackberries and the Palms of the world in mid 2000s was suddenly accelerated with the Apple's first step into mobile phone industry with iPhone, leveraging from its iPod success. This certainly made it difficult for Nokia, as Apple with its good core hardware design, a mind-blowing touch screen interface coupled with the applications and the app store revolutionized the smartphone market. Smartphone was now smarter and available for the local consumer(apart from Blackberries which had more of enterprise users) creating a breathtaking user experience. Nokia had no answer to the iPhone's success which slowly was competing with it's high end product offerings and captured the growing smartphones category along with the incumbent Blackberry.
If we look at a snapshot of Year-on-Year growth of smartphones market-share globally, the situation is evident: Nokia losing worldwide market share in smartphones category from 51% down to 40%. We all know this is the most must have category in any product portfolio with a 15% year on year industry growth. Also, dominance in this category will dictate who will be the global leader in mobile industry in coming years as the advanced wireless networks (HSPA+, WiMAX, LTE) are designed for such data hungry devices.
Issue 2: Product Mix
Continuing with the discussion on Smartphones. Though Nokia is at 46% in global share of its Symbian OS and 40% in global share of its smartphones handset sales, the Symbian OS is equipped with far more clunky user interface and lacks the power of applications which the iPhone ecosystem has in store for the users. Nokia should come up with new smartphone devices available to enterprise as well as normal consumers. The likes of Nokia E71x, N97 and N900 should enhance the Nokia's product portfolio in North America. Almost two of the top three operators in USA runs on CDMA technology (Verizon Wireless & Sprint-Nextel). Nokia never had a focus on CDMA handsets in its portfolio especially in North America. CDMA based handsets comprises to only 14% of the entire Nokia's mobile handset sales. So this explains its focus on the inclusion of CDMA driven handsets in its portfolio.
Issue 3: Mobile Operator Partnerships & Go-to-Market Sales Strategy
I believe this is the key to Nokia gaining market share in North America. "Subsidy" to the end users has been the primary factor in driving any handset sales here and mobile subscribers are habituated to it... But, almost 70% of Nokia's worldwide sales is based on a "direct buy" go-to-market strategy. If a subscriber needs a handset he pays around $100-$300 for a multimedia phone or even $400 to $500 for a smartphone(high-end) and in many of the bigger Asian markets like India & China, Nokia sales are direct without any subsidy to the subscribers. In North American markets this sales strategy won't drive sales but only stronger partnerships with the tier one mobile operators will boost Nokia 's handset sales. Nokia has to be flexible on their price points in North American markets and develop relationships with these operators. The recent success of Nokia E71 series with AT&T is the biggest example for Nokia maintaining the 8% market share almost flat compared to 2008. Nokia should come up with a CDMA/EVDO based smartphone especially to tackle the Korean handset companies (Samsung & LG) who have also captured Nokia's market share over these years and topped the market share charts in North America. I can perfectly relate myself to this situation. I have always been a hardcore NOKIA fan. I always bought expensive Nokia N Series phones costing between INR15000 to INR250000 ($300 to $500) back in India but after coming to USA and bitten by the subsidy bug, it lured me into choosing iPhone 3G($100) offered via AT&T in lieu of buying an unlocked Nokia 5800 for $400 !!
Issue 4: Understanding American Consumers
Along with the subsidy game and touching consumers on price points, Nokia failed earlier in understanding the tastes of American consumers instead mass producing devices for the global market to save on production costs. The lack of flip phones, smartphones with QWERTY keyboard catching up with the "texting" trends and touch screens coupled with great social networking, navigation , utility applications creating a great ease and user experience.
Road to the Throne !!
Summing all this up, Nokia does have lots of issues on its plate but at the same time it does possess the technical as well as business capabilities, brand equity, capital to make amends. Already there has been a lots of improvements strategically from Nokia's end.
Nokia is revamping its North American operations to collaborate more closely with the major American operators. AT&T this year will begin billing customers who use Nokia services branded as Ovi. Those customers will no longer receive a second bill from Nokia. And in Canada, the network leader, Rogers Communications, is making it easier to access Ovi Maps and N-Gage game services on two Nokia models.
There are huge plans to revitalize the Nokia's Ovi App store and with the acquisition of Navteq GPS will help it leverage significantly. In a recent move by Nokia in offering a free turn-by-turn navigation tool for lifetime inbuilt in to its smartphone, it will revamp the location based services roadmap.It is available for 74 countries, in 46 languages, and with traffic information for about 10 countries and detailed maps for more than 180 countries to start with.
The another big step Nokia has taken a leap in is its R&D expenses. It has rose from 5% in 2007 to 12.5% in 2009 which should lay a strong roadmap for new product lines and diverse product portfolio. Nokia has worked on its product's form factor, touchscreen capabilities, inclusion of latest social networking and utility apps, an intuitive mobile web experience and QWERTY keyboard capabilities with their Nokia N900 & Nokia N97 editions. Not sure whether any North American operators have announced their newer commitments with Nokia , but soon we should expect.
Nokia is also planning to make Symbian an open source platform enabling a future full of broader capabilities and a deeper reach in the North American markets .Thus, developers will have access to every single line of code, in other words, to an Open Source operating system, and we would be able to see many more APIs, and induction of more and more functionality to the programs.
To round up, It's a long way to go for NOKIA in regaining the North American throne. It's going to be challenging and worth watching. At the same time, all eyes are now stuck on the fiercest battle between smartphone OS's in the war of smartphones: Symbian Vs. Blackberry Vs. Apple OSX Vs. Android Vs. Palm OS Vs. Win Mobile.
- Neil Shah
References:
Nokia Quarterly and Annual Reports 2006/2007/2008/2009
Yankee Research: The Battle for Smartphone OS Supremacy
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