CLARO M.

RECTO ACADEMY OF ADVANCED STUDIES

CASE STUDY:
ORGANIZATIONAL CHANGE IN NOKIA

A Case Study
Submitted to the Faculty of the
Claro M. Recto Academy of Advanced Studies
Lyceum of the Philippines University Cavite

In Partial Fulfillment
of the Requirements of the Degree
Master in International Hospitality Management

MALORY BLANCHE V. CANLAS

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TITLE : ORGANIZATIONAL CHANGE IN NOKIA

I. Profile of the Company

II. Case Background / Problem
III. Intervention
IV. Result of the Intervention
V. Conclusion
VI. Reference List

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I. Profile of the Company

From its humble beginning in 1865 as a single paper mill operation, Nokia has found
and nurtured success over the years in a range of industrial sectors including cable, paper
products, rubber boots, tires, televisions and mobile phones.

Nokia Corporation is the world’s largest manufacturer of mobile phones, serving

customers in 130 countries. It is divided into four business groups: Mobile Phones,
Multimedia, Enterprise Solutions, and Networks. The Mobile Phones group markets
wireless voice and data products in consumer and corporate markets. The Multimedia
segment sells mobile gaming devices, home satellite systems, and cable television set-top
boxes. The Enterprise Solutions group develops wireless systems for use in the corporate
sector. Wireless switching and transmission equipment is sold through the company's
Networks division. Nokia operates 15 manufacturing facilities in nine countries and
maintains research and development facilities in 12 countries.

Nokia’s transition to a primary focus on telecommunications began in the 1990s. The

first GSM call was made in 1991 using Nokia equipment. Rapid success in the mobile
phone sector allowed Nokia to become by 1998, the best-selling mobile phone brand in
the world. In 2003 Nokia introduced the first camera phone. In 2011, to address
increasing competition from iOS and Android operating systems, Nokia entered into a
strategic partnership with Microsoft. In 2014 Nokia sold its mobile and devices division
to Microsoft.

The creation of Nokia Networks, following the buy-out of joint-venture partner

Siemens in 2013, laid the foundation for Nokia’s transformation into primarily a network
hardware and software provider. The 2015 acquisition of Franco-American
telecommunications equipment provider Alcatel-Lucent greatly broadened the scope of
Nokia’s portfolio and customer base. Additional acquisitions have positioned Nokia to be

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an industry leader in the transition to 5G wireless technology by offering the only end-to-
end 5G network portfolio available on a global basis.

In 2016 Nokia re-entered the mobile handset business with a licensing agreement
with HMD Global allowing them to offer phones under the Nokia brand. (Nokia, 2019)

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II. Case Background / Problem

Nokia was one of the leading producers of mobile phones in the world during the 90s
and 00s. In 2007, Nokia was considered to be one of the most valuable brands in the
world and is the number one seller of mobile phones to its consumers, especially in Asia
and Africa.

Nokia was one of the pioneers in the smartphone market, however, it has faced
decrease in sales in 2012. This was due to the popular demand of Apple and Samsung for
their new smart phones released last 2007. The Symbian Series operating system of
Nokia failed to maintain its lead as Apple introduced its iPhone, and Samsung had
Android as its operating system. Nokia neglected its possible partnership with Windows
phone until 2011 even when the decline of sales was evident.

Nokia underestimated its competitors and was confident with the strength of their
brand, being them as the number one seller of mobile phones. It has only continued to
improve the mobile phones’ hardware and overlooked the competitiveness of its
software’s features. The company believed that they will be able to innovate and match
the products of their competitors through the improvement of the products’ hardware
design rather than focusing on its software components. This has proven to be
unsuccessful for Nokia, leading to a huge loss of sales and profit for their company.

Due to the arising problem, it was only then when Nokia decided to sell their
company to Microsoft. This change in the company focused in leadership and operational
structure, with the idea that it will have a laudable competitiveness in the smartphone
market.

Digging deeper to what really caused this slow movement from Nokia against their
competitors was that employees find the company’s top managers to be “extremely

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temperamental” who regularly shouted at people “at the top of their lungs” (Huy & Vuori,
2015). Although employees at Nokia knew that they needed a better operating system to
match the competitors’ iOS and Android, it became difficult for them to let the
management know about this as making a new operating system would take years and
that they did not want to be the bearer of bad news. Their top management was
deliberately lied to as middle managers were afraid of disappointing their bosses. Middle
managers were also forced to remain silent, and provide optimistic and filtered reports to
the top managers.

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III. Intervention

Huy and Vuori (2018) state that:

Nokia’s mobile-phone downfall – from a 40 percent market share to near
bankruptcy in just a few years – has become a familiar cautionary parable on the
perils of industry disruption. Less well-known is the equally instructive tale
of how Nokia clawed its way back from the edge of destruction. Indeed, since
touching bottom in 2012, its market capitalisation, while not at the level of its pre-
smartphone heyday, has increased more than five-fold.
Nokia’s recovery was due to a wholesale strategic shift towards
telecommunications networks, culminating in the US$16.6 billion acquisition of
Alcatel-Lucent, a deal completed in 2016. Rarely has any large company
reinvented itself so quickly and radically. But before the strategic redirection
could be accomplished, the company needed to repair deep-seated cultural
problems. Nokia’s revamped board of directors (a new chairman was appointed in
2012) proved integral to this effort.

Nokia made a change in their organization by revamping their organizational

structure. The company has appointed a new Chief Executive Officer, Mr. Stephen Elop,
to drive strategic change in Nokia. This was the time when Nokia decided that it is time
to change the operating system for their mobile phones/smartphones—however, it was a
debate between choosing Android or Windows. Since Mr. Elop was a former Microsoft
employee, it was an obvious decision that Nokia would be leaning towards choosing
Microsoft as their partner.

In 2012, Nokia has also replaced its Chairman, along with three board directors (Huy
& Vuori, 2018). The new CEO, Mr. Elop, was also able to refocus the business on
leadership, with managers taking decisions and responsibility; and markets, with
innovation driven by people competing in key mobile phone segments. (Roy, 2013)

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Still with the decline of sale and profits for Nokia, the company has decided to pursue
the retrenchment strategy, laying off four thousand (4,000) employees in Mexico and
Europe as it moved its manufacturing in Asia.

IV. Result of Intervention

The result of Nokia’s intervention to prevent further losses was a success as the
partnership with Microsoft was able to keep Nokia afloat. The company was also able to
address the issue between the top management, to middle management, down to its
employees. They were able to improve the emotional relationship between the board and
management, thus helping it to communicate with each other better. The board influenced
the hyper-cautious and self-protective managers out of their shells with principles such as
“No news is bad news, bad news is good news, and good news is no news.” This made
conversations and discussions between the directors and managers to be more honest and
fuller of depth. (Huy & Vuori, 2018)

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V. Conclusion

It was evident that Nokia was the leading mobile phone during the 90s to 00s.
However, the resistance to change the perspective of its managers/directors lead to its
major losses when their competitors have proven to do better in terms of sales. The
change done in Nokia, and its partnership with Microsoft, has made Nokia still relevant
in the mobile phone industry, however it was never able to redeem its spot in being the
number one brand/provider for its consumers.

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VI. Reference List:

History of Nokia Corporation. (2014). Retrieved from

https://www.referenceforbusiness.com/history2/35/Nokia-Corporation.html

Huy, Q.N., & Vuori, T.O. (2018). How Nokia Bounced Back (With the Help of the
Board). Retrieved from https://knowledge.insead.edu/strategy/how-nokia-
bounced-back-with-the-help-of-the-board-10211

Huy, Q.N., & Vuori, T.O. (2015). Who Killed Nokia? Nokia Did. Retrieved from
https://knowledge.insead.edu/strategy/who-killed-nokia-nokia-did-4268

Nokia Organizational Change. (n.d.), Retrieved from

https://www.studocu.com/en/document/conestoga-college/organizational-
effectiveness/mandatory-assignments/nokia-organizational-change/3602725/view

Nokia Our History. (2019). Retrieved from https://www.nokia.com/about-us/what-we-

do/our-history/

Roy, M. (2013). Change Management in Nokia. Retrieved from

https://www.slideshare.net/MoumitaRoy8/change-management-in-nokia

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