Business Essay – Nokia’s Competitiveness

Market Competitiveness Analysis for Nokia’s Mobile Phone Division

Introduction

Nokia was the largest maker of mobile phone in the whole world. The company produced about 17 series which include hundred of mobile phone. However, “faces some significant challenges in our competitiveness and our execution”, Chief executive Stephen Elop said Nokia at the beginning of 2011 (Johnson, 2011). Obviously, the big competitors are Apple and Android. According to research firm IDC, Nokia’s share fell from 38% in 2009 to 28% by the end of 2010 (Johnson, 2011). Stephen Elop said that the company was surrounded by innovative competitors, who are grabbing its market share. He also described the company as standing on a ‘burning platform’. Furthermore, he realized that the industry changed, thus, it was time or Nokia to change faster (Johnson, 2011). This essay will discuss how Nokia change to increase their market share. This paper will focus on cultural change of Nokia and will also emphasis on how that cultural change can be undertaken. The last section will propose advantages and drawbacks of the change process. Overall, the change can be undertaken and it is positive to Nokia.

Background

Nokia was founded in 1865 when engineer Fredrik Idestam established a mill to manufacture pulp and paper on the Nokia River in Finland. Nokia became a mobile phone producer from 1992 when Jorma Ollila became Nokia’s president and CEO. Nokia sold more than 40 million mobile phones in 1998 to surpass Motorola and become the world’s number one mobile phone company (Reinhardt, 2002).

Nokia’s culture was rooted in the Finnish national character-frugal, honest, very direct, serious, with little tolerance for ‘fooling around’ – mixed with a good does of engineering culture-‘can do’, pragmatic, and hands-on (Smith, 2002). A typically Nordic egalitarian and communitarian side to the Nokia culture is that emphasized joint achievement and rewards. In everyday interaction, the most important were shared vision, goals, knowledge, openness, speed and integrity. For instance, managers were willing to share skills and information with team members to create greater commitment. Another characteristic of the Nokia’s culture was honesty, which means staffs were expected not just to avoid politicking, but also to be open in expressing disagreement.

Nokia’s employee-value proposition framework remains strong. Firstly, Nokia Way and Values are fact-based and value-based leadership. Providing equal opportunities to employees and using internal communications and feedback channels. Secondly, they used performance-based rewarding system and connected people bonus and incentive payment (Pringle, 2002).

Nokia had launched various initiatives to help foreign hires understand the Finnish culture. Through ‘cross-cultural training’, new recruits learned that Finnish business meeting were not like American ones, where executives wanted to be sold on an idea in an entertaining way. According to a Nokia training manual, a Finnish meeting meant drinking lots of coffee and then ‘listening patiently without interruption’.

Nokia’s flexible structure went hand in hand with decentralized decision-making. Typically, strategy was not imposed top down, but was the combined result of decisions made throughout the organization. Moreover, department managers had the freedom to find extra money for promising ideas, even within the six-month planning and budgeting cycle (Dano, 2003). In addition, in 1997, the company introduced a buns plan that paid all employees in the organization (apart from those with options) 5 percent of their base salary if earnings per share grew by more than 35 percent.

Project Feasibility Study for Nokia

Change culture

Kotter and Heskett (1992) argued that culture represents an interdepended set of values and ways of behaving that are common in a community and that tend to perpetuate themselves, sometimes over long periods of time. Organizational culture is something an organization is, Pacanowsky and O’Donnell-Trujillo (1982) said. As mentioned in the background section, one of the main cultures of Nokia is Finnish Culture (Kotter and Heskett, 1992). They through ‘cross-cultural training’ help new employees to understand and follow Finnish Culture. That is to say Nokia particular emphasis on Finnish Culture and insulated from outsiders. On the other hand, they lack of innovation and they always spend so lengthy time to develop products. Another problem is that they lack of focus, which means they produce too many products on the market. In response to these problems, Nokia should change their organizational culture. There are a variety of methods in examining how organizations change their cultures including strategic planning, training, organization redesign to promote teamwork, and changes to appraisal systems (Burnes, 2009).

Cummings and Worley’s six steps to culture change- For Nokia change culture process

Figure 1. Cummings and Worley’s six steps

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This section will apply the model of Cummings and Worley’s six steps to the culture change process of Nokia. Firstly, they should set up a clear vision of Nokia’s new strategy and shared values and behaviors needed to make it work well. In addition, this vision should provide straightforward purpose and direction for cultural change (Burnes, 2009). The purpose and direction is that accept more foreign culture and employees to absorb more great ideas to improve their innovation. Secondly, this cultural change must be managed from the top level of Nokia, such as senior managers. In the second step, senior managers and administrators need to be strongly committed to the new direction and values (Cummings and Worley, 2001). Moreover, senior managers and administrators also need to create constant pressure for change. Thirdly, the senior executives must communicate the new culture through their own actions (Cummings and Worley, 2001). For instance, the communication can be done using a variety of methods such as one-to-one interviews and quality circles. Furthermore, their behaviors need to symbolize the kind of values and behaviors being sought. The fourth step, Nokia must modify in organizational structure, human resource systems, information and control systems, and management style to support the cultural change (Burnes, 2009). For example, they can abolish the rule that relevant to Finnish culture in the control system. Instead, Nokia can set up rule as they welcome talent people from the whole world. It is very important because these organizational features can help to orientate people’s behaviors to the new culture.

The last two steps are most important for cultural change. In the fifth step, Nokia should select the people who can fit with the new culture and provide with an induction clearly indicating desired attitudes and behavior (Cummings and Worley, 2001). For existing staff, they can terminate their employment who cannot adapt to the new ways. Changing organizational membership is one of the most effective methods for changing culture. This is especially important in key leadership positions, where people’s actions can significantly promote or hider new values and behaviors. Finally, on the other hand, if one of the key steps in pursing culture change has to replace existing staff with new recruits (Cummings and Worley, 2001). That is not only can send out the wrong message to newcomers and the remaining staff but, depending how staff are selected for replacement, it could also break employment laws. Therefore, Nokia needs to be especially aware of these potential ethical and legal pitfalls.

Advantages and drawbacks

According to a major study of cultural transformation in 530 organizations, organizations experienced both positive and negative outcomes, with senior managers reporting that quality and productivity improved and employees reporting that morale decreased and workload increased (Shein, 1990). Therefore, there are many pitfalls they have to consider. First of all, Nokia’s managers must make their own choices based on their own circumstances and perceived options as to whether or not to attempt to change all or part of their organization’s culture in the absence of unambiguous guidelines on the new culture (Smircich, 1983). That is to say, they have to try to come up with clearly guidelines. In changing the behavior and values of some existing members, directive and coercive methods to culture change may be successful and they may allow the recruitment of staff more amenable to the new ways of working. However, these approached may also let a considerable number of staff feel that they are being forced to change (Smircich, 1983). In such cases, there will be some resistance to change may rise with the organization dividing into warring camps rather than a unified body. Finally, in the strong or appropriate cultures that bind members together in a common purpose and legitimate and guide decision-making. Nokia’s managers may find it difficult either to agree amongst themselves or to gain agreement from others in the company. In such a case, there is a potential for conflict and power battles to take place (Robbins, 1987).

On the other hand, there is still a great deal of advantages of the change process of Nokia. Firstly, according to the bad situation of Nokia nowadays, they must make some change to survive. In addition, their CEO Stephen Elop argued that they have to change faster than industry change. The change process of Cummings and Worley’s six steps undertake from the top of Nokia. That is a good start point due to senior managers can affect their staffs by training, interview or their own behaviors. Moreover, cultural change is mainly focused on getting rid of those who oppose or cannot fit in with the new culture (Fullerton and Price, 1991). Therefore, putting supporters in key positions and ensuing reward systems reward those who support the new culture is most important. Especially for the last step, this approach concern about the real feeling of employees. That is a good condition to help with the change process undertaking.

Conclusion

To sum up, this paper consists of two main sections, which are the background and cultural change process of Nokia. First part introduced the established and organizational culture of Nokia. Moreover, first section also argued that nowadays Nokia is in a bad situation surrounded by many competitors such as Apple and Samsung. There is an outline of problems of the culture of Nokia. The most serious problems are the focus on Finnish culture, lack of innovation and too many products. In the second section, it applied Cummings and Worley’s six steps of change culture to the change process of Nokia. As shown in figure 1, these six steps are combined with the situation of Nokia. The second section is also come up with some examples applying to the situation of Nokia. In the last, this essay analyzed some drawbacks and advantages of the cultural change process. The core resistance of the cultural change is that how to let all of the employees, newcomers and existing staffs, accept the new culture. And the main advantage is that Nokia must change because of the bad position in the electric market. If Nokia does not take any change they should lost more market share. Overall, after analyzed these advantages and drawbacks, the cultural change process of Nokia can be undertaken successful.

Bibliography

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