by Vivek Sood

July 18, 2017

Virtually all its shareholders gave their approval, and with a stroke of pen the Finnish firm that once dominated the global mobile phone market officially announced the sale of its mobile phone unit to Microsoft Corp yesterday.

The $US 7.4 billion deal will see Nokia transform its business model into a telecom equipment and network services provider, a major step towards re-bundling itself into a super networked business. The move was given a green light by virtually all Nokia equity owners, who saw it was time to let go of a high-fixed-cost and increasingly-low-margin division. The company has been lagging behind at number 8th in the smartphone arena, although it still maintains number two position in the overall mobile phone market according to Gartner. Chairman Risto Siilasmaa told investors. “We have no doubt that this is the right decision.”

Talks surrounded Nokia’s string of wrong turns in the past such as investing in the smart phone technology too early (as noted by former chief executive Jorma Ollila), and reaping poor results from software design efforts. “Nokia’s high fixed costs signal underlying issues in its supply chain management.

The network of supplies has not been optimally selected and articulated to maximize its product offerings to the end customer. At the same time, both Apple and Samsung have created partnerships to leverage their business network to the maximum. For example Samsung’s partnership with Android allowed it to bypass costly software development that plagued Nokia. Similarly, most of Apple componentry is still manufactured by its business network partners” – said Vivek Sood, author of “Move Beyond the Traditional Supply Chains: The 5-STAR Business Network.”

A key reason cited for the poor performance of Nokia’s phone division is not enough innovation. While its rivals such as Apple and Samsung continue to gather momentum with their smart phone lines revamped utilizing the core of their business network partners, Nokia’s only notable attempt was when it embraced the Windows operating system in 2011. Even so, the move did not substantially lift Nokia to its market leading position decades ago. Life after mobile handsets for Nokia will include attempts to make its existing business units profitable, by focusing on its infrastructure. Speculations are already underway about the new moves.

For example acquisition of Alcatel-Lucent’s wireless-equipment unit could build a substantial competency base to enable robust market competition. A super networked business is created by a business forming strong supply networks that allows efficiency and effectiveness in three core competencies: customers, infrastructure and innovation. Vivek Sood, who is the CEO of Global Supply Chain Group, said: “Now that Nokia has freed itself of its past legacies, it is the perfect time to focus on its core competency and cherry-pick its partners that can complement the gaps. If done properly, Nokia can then re-emerge as a super networked business again ready for the next few decades.” Click here to get first three chapters of the book The 5-STAR Business Network


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Vivek Sood

MORE INTERESTING READING
  • Usually, I never comment on blogs but your article is so convincing that I never stop myself to say something about it. You have done a great job to analysis NOKIA case. After reading it, now I know something different from market news about NOKIA.

    • Hey Emma, what you like in this article that is so convincing to you for commenting ?
      Because i too studied over this article and i don’t think so that it is very much convening to comment over here and it is not about the news that you have mention there about NOKIA is it?

  • Microsoft’s acquisition of Nokia’s Devices and Services business looks like it will be the billion dollar plan that pushes Windows Phone into the big leagues. This transformation, turning Microsoft into a devices and services company, is key to the company’s continuing survival, and would be impossible without Nokia. This direct control will mean better integration of handsets with Windows Phone. Apple is the best example of this approach to the mobile industry as they keep the production of both hardware and software in-house.

  • When Apple came out with the iPhone, it showed the industry how the smartphone could be done right. Yet Nokia failed to respond to the iPhone and the shifting consumer demand that came with it. As the years passed, the Symbian platform aged, and that age really showed when compared to iOS and, later, Android. Simultaneously, the smartphone market exploded, more and more consumers opted for pocket-sized mini-computers instead of “feature” phones with tedious WAP browsers.

  • It’s not just the high-end of the market that Nokia’s acquisition will affect. Feature phone still account for around half of all mobiles, and as the market for high-end devices becomes saturated a smart move for manufacturers is to produce cheaper handsets, the imminent coming of the iPhone series. This is not to say that the likes of Apple or Samsung are out of the game but there is a huge potential landgrab for Microsoft here.

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