B.

Change Forces that Affected Nokia

Nokia has been unable to adapt to changing market conditions created by the
introduction of smartphones and the rise of aggressive competitor such as Apple Inc. and
Samsung. The company struggled in their financial and market ranking during the year
2012 wherein their share value dropped from $60 in year 2000 to $2 in year 2012. What
are the change forces that lead to this downfall?

The following are the analysis of the Change Forces that Affected Nokia as a
Technological Leader to an Obsolete Mobile Phone Producer:

PESTLE Analysis of Nokia

 Political Factors Affecting Nokia

Nokia as located in a European nation of Finland had struggles during the acquisition
of Microsoft. Finnish government refused to give special favors to foreign companies
which results to lack of government support.

Additional issue in terms of politics is the American-Chinese rivals wherein China

continuously penetrates the market and disrupts the production of Nokia.

 Economic Factors Affecting Nokia

Due to European economic chaos, Nokia suffered heavily on its buying power in the
market. Comparing to Apple, Nokia had a hard time tapping into the fast-growing Chinese
Market and making them lack economic resources as well versus the other brands such
as Google and Samsung.

Lack of research and development is a factor which lead the other competitors of Nokia
take advantage of the scenario. Nokia failed to support its R&D due to financial incapacity
and efforts unlike the efforts of its competitors can do.

 Social/Cultural Factors Affecting Nokia

In terms of social factors, Nokia was not able to cope up with the widespread adoption
of the market to smartphones and growing use of apps. Most of the apps available in the
market were specialized for Android phones and Apple IOS therefore making it difficult
for them to penetrate the smartphone industry as it utilizes Microsoft Window Phones.
Limitation on its features de-align its growth in the market.

Culture of buying one brand and the latest has been shaped by Apple, making Nokia
lost its popularity in the generation of buyers. There is already the idea of only two brands
competing for smartphone which is Apple vs Samsung which keeping many customers
consider Nokia products anymore.
  Technological Factors affecting Nokia

This is the root cause or the main factor that lead Nokia to its downfall in the market.
The development of open sourced OS such as Android and applications radically
changed the mobile phone market. Mobile phones were transformed from simple
communication devices into handheld computers.

Customers wanted to perform a wide variety of task with just one device including
photographs, entertainment, business and leisure functions which is the problem of Nokia
in being acquired by MS. This limited customer’s choices made it difficult to sell their
products to younger consumers.

It also did not adapt to change in product line such as tablets and smart watch or wearable
technology. It is a possible competitive edge if they were able to go with the trend of the
market.

 Legal Factors Affecting Nokia

Nokia had a challenging legal aspect because it operates within the European Union.
That body’s regulators have been investigating Google’s use of Android for a possible
antitrust case. EU action against Google could lead to radical changes in Nokia’s market,
such as Android being spun off into a separate company.

It is not clear how exactly such action would affect Nokia, but it could create a more level
playing field and increase Nokia’s access to the European market. One possible game
changer could be that popular Google solutions such as Gmail could be taken off of
Android, which could limit its popularity.

 Environmental Factors

Nokia’s products had difficulty in terms of proper disposal as it faces the problem of
safe discarding in an environmentally-friendly manner. Electronic devises are hard to
dispose that laws are enforcing the manufacturers to recycle the used devices which is a
costly expense on their end.

Another environmental concern that could affect Nokia is increased costs for materials
and components, particularly lithium for batteries. Increased demand for lithium for other
uses such as electric cars could limit its supply and raise costs. Lithium have metallic
components as they have potential hazard to environment as they are thermal in nature
that can cause fire due to short circuit, cell failure and overheating when expose to heat
or energy.

A long-range challenge could be climate change created by global warming, which

could disrupt transoceanic shipping and Nokia’s supply chain. New environmental laws
in China designed to curb greenhouse gases could increase production costs in that
country and affect Nokia’s costs.
C. Resistance to Change in Nokia

Whenever there is change, you cannot avoid the fact that there will be factors that
resist from the adaptation. When change strategies are to be implemented, there is a
possibility that employees, managers and even the whole organization could resist and
voice out their complaints, work slowdown and threatening of strike. These situations can
be handled by consultants or change management expert to overcome the resistance.

In the case of Nokia, what are the major forces or situation that resulted to
resistance to change? There are three categories to consider:

1. Individual Source Resistance to Change

 Top managers were afraid of the external environment and not meeting their
quarterly targets
 Executives were afraid to publicly acknowledge the inferiority of Symbian (By this
stage, Nokia was trapped by a reliance on its unwieldy operating system called
Symbian. While Symbian had given Nokia an early advantage, it was a device-
centric system in what was becoming a platform- and application-centric world. To
make matters worse, Symbian exacerbated delays in new phone launches as
whole new sets of code had to be developed and tested for each phone model.),
Nokia’s operating system
 Top managers intimidated middle managers by accusing them of not being
ambitious enough to meet their goals
 Top managers lacked technical competence which influenced how they could
assess technological limitations during goal setting and by comparison, the top
engineers at Apple were all engineers
Nokia people weakened Nokia people and thus made the company increasingly
vulnerable to competitive forces and in short, a domino effect

2. Organizational Sources for Resistance to Change

 At that time Nokia suffered from organizational fear wherein the fear was grounded
in a culture of temperamental leaders and frightened middle managers
 Instead of allocating resources to the achievement of long-term goals such as
developing a new operating system, Nokia management decided to develop new
phone devices for short-term market demands
 There was a challenge in shifting the company’s culture upon the acquisition of
Microsoft
 Weak establishment of research and development in order to cope up with the
rapid change in technology
  Being too much complacent wherein the company profoundly underestimated the
importance of software, including the apps that run on smartphones, to the
experience of using a phone.

Nokia’s Solution to Resistance

Overcoming to resistance to change means to use the tactics to reduce the

intensity of the resistance to change. Nokia implemented the following in order to
overcome the resistance, but did it work?
1. In 2010, Stephen Elop – VP of MS construct a strategic review to better Nokia’s
performance levels
2. Partnership with Microsoft in 2011 and adaptation to their technology and
software
3. Nokia shifted its focus to MS Windows Phone flatform
4. Sold QT software division to Digia and Vertu to EQT VI
5. Mass launching of the Lumia Series – from low to high end

Still, resistance within the company remain and these are the results of the above:
1. Employee protest after Elop started wherein 1000 people walked and waves
resignation that followed
2. Disagreement with CEO wherein whether Meego should be the main flatform from
Microsoft or not
3. Intensifies cultural differences where first non-Finnish CEO of Nokia in 148 years,
Layoff’s in Finland, and the culture of Canadian versus the Finnish culture wherein
very masculine and dominating.

How they should have overcome the resistances?

Kotter and Schlesinger suggest that there are 6 ways of overcoming resistance to change:
 Education and Communication
 Participation and Involvement
 Facilitation and Support
 Manipulation and Co-option
 Negotiation and Bargaining
 Explicit and Implicit Coercion
In application, Nokia should have done the following:
1. Molded a culture of change agent wherein they encourage people to think outside
the box and continue to improve and innovate
2. Invested in research and development in order to correctly anticipate the trends of
technology
3. Build a culture of supportive participative, and fair implementing change fairly
environment
4. They should have considered different investors rather than Microsoft alone so that
they were able to choose and identify the best path for the company
5. Considered education and communication – as mentioned, Apple have a good
structure of employees which are engineers making it an edge to the company in
innovation and knowledge

References:
https://pestleanalysis.com/pestle-analysis-of-nokia/
https://knowledge.insead.edu/strategy/the-strategic-decisions-that-caused-nokias-failure-7766
https://medium.com/multiplier-magazine/why-did-nokia-fail-81110d981787
https://www.newyorker.com/business/currency/where-nokia-went-wrong
https://prezi.com/-f3ve_kur8c7/nokia-the-resistance-to-change/