Lessons from Nokia’s fall

A U.S.-based website last month released a list of brands that will likely disappear next year due to mergers and acquisitions, putting Nokia’s mobile phones on top. Rumors say Microsoft or Samsung Electronics could take over the Finnish company. Nokia’s earnings and prospects, however, demonstrate that the company holds little attraction for acquisition. Nokia CEO Stephen Elop expressed a sense of crisis in February by saying, “We are standing on a burning platform.” Nokia surrendered its lead in the global smartphone market to rival Apple after reporting a steep net loss for the second quarter. The drop put the Finnish company into third place in the global market.

The fall of Nokia`s 20-year reign as king of mobile phones shows that complacency is the biggest risk. While Apple and Google led the smartphone market with iPhone and Android, Nokia relied on the Symbian as its standard operating system. Too much pride was the main cause of the Finnish company`s decline. Consumers consider the operating system more than hardware when deciding to buy smartphones. This is because the speed of network connection heavily depends on the operating system. Nokia plans to sell smartphones late this year using the Windows Phone 7 operating system, but the decision was apparently made too late.

Nokia is the largest company in Finland, a country with thousands of forests and lakes. Starting out as a paper company in a small village called Nokia, the company rapidly grew in the 1970s by expanding into various businesses and started to focus on mobile telecommunications from the early 1990s. It accounts for 25 percent of the Finnish economy and had been called Nokia’s Finland. The beleaguered mobile phone maker will lay off 7,000 employees, which will severely impact its country’s economy. The iPhone game “Angry Bird,” which has recorded more than 200 million downloads since its launch in 2009, has become a symbol of Finland. The game gives a player the chance to right wrongs.

June 29, 2007, when iPhone debuted on the global market, was probably a catastrophic day for Nokia. The company`s fall raises the question of how Samsung is doing. More than half of Apple’s iPhone components are supplied by Samsung, and the two companies are fiercely competing against each other in smartphone sales and patents. Samsung is better than Nokia in risk management but is behind Apple in market creativity, and Samsung must not lower its sense of crisis to survive. The Korean company must keep innovating to make inroads into an untapped and bigger market.

Editorial Writer Hong Kwon-hee (konihong@donga.com)