Nokia's cheapies strategy bombs
For a decade after 1998, when it first grabbed the top spot, Nokia was a bellwether of the mobile handset business. So much so, that small modulations in Nokia market share caused earthquake scale upheavals across the industry. That's because Nokia was credited with understanding (and blanketing) the world with phones so comprehensively that a stumble may perhaps indicate the market signaling something important.
This was certainly the case in 2004, after Nokia's market share fell 6 per cent (from 34.6 per cent to 28.4 per cent).
Nokia acknowledged it had neglected its mid-market feature phones (Sony Ericsson's were much nicer) and placed too much emphasis on smartphones: yet the infrastructure that made a high-end phone sing wasn't really in place. In 2004, hardly anyone was on 3G. It responded by temporarily abandoning its policy of rationing out the goodies across its product line, and trying to make one phone really attractive. With the 6230 and 6230i, it succeeded – these are still a fairly common sight today.
Nobody thinks that now.
Nokia's risky strategy on cheapies – and we were the first to report those risks four years ago, here – has failed. Competition from emerging manufacturers is far stronger than the company anticipated. As Elop himself wrote in the most neglected part of his "Burning Platforms" intranet post:
At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, "the time that it takes us to polish a PowerPoint presentation"... They are fast, they are cheap, and they are challenging us.
IDC reports that Nokia has lost a fifth of its market share in a year, falling from 33.8 per cent to 24.2 per cent. It is still No 1 overall, the analyst company reckons, but this is a pyrrhic victory, since others are taking the profits. Motorola is shipping lots of well-received Android handsets, but making a loss on them. Apple increased its distribution, and its market share doubled to 5.6 per cent. Not very much – but it meant that Cupertino is now soaking up two-thirds of all the profits being made in mobile handsets.
The Crash of 2011
Y-axis: percentage market share (Source:IDC)
In a fit of the corporate vanity that occasionally envelops market leaders, Nokia has at times positioned itself more as an NGO than a commercial operation. It turns up in an emerging market, and does the locals a favour: so very Victorian. But Nokia is not an NGO, it's answerable to its shareholders.
It may be time to cast off the cheapies altogether, and focus on areas where potentially profitable smartphones will prosper. That's a blow to its pride, but a commercial necessity. Nokia did get rid of its cables and rubber boots businesses. ®
New Nokia strategy suggestion
Move back to making wellies...
It seems that almost everything they have done in the last few years is just accelerating them downhill even faster.
Nokia need cheapies
They use technology researched and developed years ago. Their cost is practically nil, they just slap an FM radio, extend the battery life a little bit more to something ridiculous like a week and a half, and put a new case on yesterday's model and on the software side include the bugfixes to the standard apps and update Ovi integration, and Bob's your uncle.
What they don't need are cheap smartphones. They need to get the value back on those but they've just announced a price cut two months ahead of time (who in their right mind does that?). All the details have been done while the rest are still working on them: They sync without being tied to Google or MobileMe, it's just the phone and the computer. They've got a power saving mode. If you're really low on power you turn them off and all the alarms and calendar reminders still work. Bluetooth is not nobbled and you've got complete control over connectivity. They're the last to give up when it comes to dropping a call or data connection. Battery life is obviously not like their dumphone range but much better than Android or iOS. With the dishonourable exception of My Nokia and the E-mail setup wizard they don't slurp data. Ovi Maps beats any other map app hands down. They just don't tell anyone this.
They're not going to get value with Windows Phones, but they're in some kind of self-imposed death spiral where they're refusing to roll out mid-range and top-end phones in any meaningful quantity. They've practically sorted out their own platforms but nobody believes them, destroying confidence in their own Symbian and MeeGo as they treading water for an expensively licensed WP7 which isn't impressing anyone.
The icon could be a facepalm or could be me covering my eyes because the car crash is too horrible to watch.
@ how's about we wait ...
er... you and Nokia can wait.
The world is moving on.