Nokia - The Branding Challenge, Part 1
Nowadays, innovation and branding go hand in hand. But when it comes to the U.S market, Nokia seems to be falling behind on both. What can it do to revitalize itself in the North American smartphone war?
Since the beginning of the 1990's, Nokia has been seen as a telecommunications innovator. Its strategic redirection into mobile phones brought in massive revenue in Europe, North America, South America and Asia. So much so, in fact, that it lead to a logistics crisis in the mid 1990's that prompted the organization to overhaul its logistics operations. The combination of early GSM investment and innovation in telecommunications made Nokia the undisputed king of the global mobile phone market. By 2001, the company's turnover had increased from €6.5 billion to €31 billion. Nokia went from strength to strength, continuing to dominate through a combination of efficient logistics, and cell phones that seemed to push telecommunications technology to new heights.
But something happened in the mid 2000's. Names such as Apple, Samsung and RIM were steadily gaining power. No longer was Nokia seemingly the sole king of the stage. Something also happened to Nokia internally. Considered a result of corporate complacency, the company's status as the pioneer in telecommunications innovation waned. Its logistics, while still significantly better than its competitors, was not what it used to be.
However, despite these weaknesses, Nokia has managed to earn huge sales in emerging markets. As of 2007, it is the number one brand in Asia. China provided an US$8.6 billion in revenue for Nokia in 2009. Apple, in contrast, experienced a huge flop when its iPhone was released in China and India.
But Nokia cannot simply rely on developing markets. 40% of its shares are held by American investors. According to Dr Dan Steinbock, author of 'Winning Across Global Markets: How Nokia Creates Strategic Advantage in a Fast-Changing World', “Nokia needs to succeed in the US if it is to ensure its long-term global success.”
Nokia must establish wins in the United States market. If it fails to do so, not only will its American market share continue to rapidly deteriorate, but this will have a knock-on effect on other western markets, primarily due to North America's cultural and media significance.
Has Nokia realized this? Well, in 2006, Olli-Pekka Kallasvuo announced the goal of increasing Nokia's market share in the United States, which at the time was 20%. Now, that number has fallen to 8%. Since then, the situation hasn't gotten much better. Nokia still struggles to protect its U.S market share from Apple. Currently, the Finnish giant continues to dominate global markets, but it somehow cannot replicate this power in the United States.
Why is this so? Why can't Nokia capture the hearts of Americans the same way Apple does?
It can be stated simply that Nokia did not understand the U.S market. This took place in a two-fold way.
Firstly, this occured through a lack of relationship development with American mobile service operators. Nokia's assumption that North American success would function exactly like it did in Europe is fairly evident. While LG, Motorola and Samsung all customized their products for the American mobile service operators, Nokia did no such thing. It did not realize to what extent these operators dominate American telecommunications.
The second aspect that made up the company's U.S market failure is an inability to develop consumer based brand equity (CBBE). Nokia has a poor brand image in North America. According to a list of the most hated brands in America compiled by 24/7 Wallstreet, Nokia ranks second. Factors affecting the placing included employee opinions, shareholder return, consumer satisfaction, brand value, media coverage, and perception of influencers.
Nokia needs to improve its brand in the eyes of American consumers. How can it do this? In the next part we will go over some methods to do this.
Modified 2011-05-09 11:34:33
The Story of Nokia: Leading the world
Nokia's Magnificent Mobile-Phone Manufacturing Machine, BusinessWeek Online Europe. http://www.businessweek.com/globalbiz/content/aug2006/gb20060803_618811.htm
Apple vs Nokia: the Smartphone Rivalry
Will Nokia's Global Strategy Win? http://www.theedgemalaysia.com/management/174631-will-nokias-global-strategy-win.html
Asia's top 1000 brands for 2007 http://www.synovate.com/news/article/extra/20070824/Asia%27s%20Top%201000%20brands%20fact%20sheet.pdf
The Fifteen Most hated American Companies of 2010
Research question: How can Nokia revitalize its brand in order to compete in the United States market?