A strategic analysis of Nokia: Kenyan consumer perspectives on the suitability and value of the company’s products

1.0 Introduction

1.1 Study background

The competitiveness of organisations in the mobile phone industry is dependent on their ability to manufacture products that meet the expectations of their clients. Being in a technology based industry, consistency with market trends and the ability of the organisation to make ground-breaking innovations is among the factors that fuel their competitiveness (Das, 2008; Deloitte, 2011). As a leader in the global mobile phones industry, Nokia has been one of the drivers of innovation in the market (Nokia, 2013). It spearheaded the adoption of the digital technology by being the first large player to invest in developing the 2^nd generation phones. It thereafter led the pack in introducing new features such as video games and music player functionalities hence transforming mobile phones into tools of entertainment: in addition to the core benefit of facilitating communication (Ammisetti, 2012). However, the competitive landscape has changed significantly with the emergence of smartphones that have placed the popularity of Apple and Samsung above that for Nokia. As a matter of fact, the profitability trend of Nokia has been indicating a downward spiral while that of the emerging rivals has been on a constant growth path.

These dwindling fortunes lead to the question on whether Nokia can be said to have a bright future in the global mobile phones industry. The answer to this question lays in market research as it is the ability of the organisation to satisfy market demands that determines their level of competitiveness (Giachetti and Marchi, 2010). Some of the factors that mobile phone users take into consideration are the communication capabilities, general appearance, consistency with fashion trends, presence of entertainment functions, and others. This forms the basis for this research.

1.2 Research aims and objectives

The main aim of the research is to establish the extent to which Nokia can be considered to be competitive in the Kenyan market. The specific objectives are as outlined below:

•           To establish Nokia’s preference as compared to rival products

•           To determine factors that affect consumers’ preference for mobile phones in Kenya

•           To establish future trends in market preferences

•           To generate strategic options for industry players to guarantee competitiveness

1.3 Rationale for the study

Nokia is currently on crossroads having apparently lost its innovative edge to companies like Apple and Samsung. Its decision to follow the two into producing smartphones has not been very fruitful and its fortunes have continued to dwindle. Faced with the prospect of losing its market leadership, it is important to conduct surveys for specific markets to determine the extent to which the company’s dominance can be maintained by focusing on specific markets and their unique needs. This research accordingly evaluates the Kenyan market and the perceptions of the consumers on Nokia and the mobile phones as a whole. The research will provide a platform for providing possible strategic options for Nokia both in the Kenyan market and other’s whose demographic characteristics resemble those of Kenya.

2.0 Literature review

Nokia is a major player in the global mobile phones industry alongside other multinationals such as Apple, Samsung, LG, Motorola, and Panasonic among others (Giachetti and Marchi, 2010). The company operates in an industry where competitiveness is driven by innovation and the ability of the industry players to remain ahead of the pack in innovation. In fact, Nokia’s industry dominance was due to its ability to out-innovate other competitors in the development of new products and product features. A good example is drawn from the market events that led to Nokia emerging as the industry leader in the 1990s. Having entered the mobile phone industry in the 1980s, Nokia was the industry follower struggling to match up to the more established player, Motorola (Miyashita, 2012). The products at the time targeted limited number of clients and the mobile phones were mainly fixed onto vehicles. The communication technology was analogue.

With the discovery of the digital technology in the early 1990s, Nokia became the first player to invest heavily in research and development using the digital technology (Das, 2008; Ewing, Edwards and Schenker, 2008). This strategy paid off as Nokia was able to overtake Motorola as the global industry leader, a position it hold to date. However, just as it was able to use its innovative prowess to gain dominance, emerging rivals are using the same to cut down Nokia’s dominance in the market. Mobile phones have evolved with time in terms of size, features and usability (Ammisetti, 2012). In the initial stages, mobile phones were merely tools for communication. They later evolved into being tools of entertainment and expression of personality. In the latter stages, mobile phones have been turned into personal computers through which users can literally have a version of personal computers with full functionalities of the same. It is in this latter stage that Nokia has been outwitted by emerging innovators such as Apple and Samsung.

The figure on emergent technologies in the industry below showcases how different mobile phone technologies gained prominence in the market over time.

Figure 1: Evolution of technologies through the industry growth cycle

Miyashota, 2012

Before the emergence of smartphones, Nokia had been the lead innovator in the industry. It was leading the pack in generating products with different features and functionalities. This can be illustrated in the figure below where Nokia is undoubtedly the dominant force for innovation between 1997 and 2007 where it was the first to introduce features such as video games (snake), WAP, infrared, SMS chat and colour screen among others (Miyashota, 2012). Nokia continues to maintain a range of products that have been quite popular in selected markets.

Figure 2: Trend of innovations in mobile phones from 1997 to 2007

Source: Giachetti and Marchi, 2010

Currently, the company’s performance for the different markets is as follows.

Figure 3: Nokia market coverage

Source: Nokia, 2013

Nokia employs over 97,000 employees after downsizing from its workforce of 130,000 in 2011. It remains the industry leader going by the absolute sales volumes (Nokia, 2013). From the 2012 figures, Nokia has a strong market leadership with a market share of 24.7% ahead of its closest rival Samsung which is at 20.7% (Miyashita, 2012). This is as illustrated below.

Figure 4: Market share for mobile phone companies

Source: Miyashita, 2012

Despite the strong performance of the company, relative figures paint a grim picture as its financial position in the recent past has been dwindling when compared to some of its main rivals. The figure below illustrates the trends in the profitability of the organisations and some of its rivals demonstrating that Nokia is in danger of losing its market leadership if the trend continues.

Figure 4: Growth trends for leading industry players

Source: Giacheti and Marchi, 2010

Nokia’s dwindling performance is largely related to the fact that it has lost its innovative edge in recent years. Apple and Samsung are said to have taken the market by storm through the launch of smartphones which radically transforms phones into forms of personal computers with greater functionalities (Desai and Desai, 2013). Nokia later launched its version of smartphones in partnership with Microsoft. However, they have been unable to recapture the imagination of consumers with many viewing Apple and Samsung smartphones as being superior to theirs.

This prompts the need to evaluate the consumer psychology in the mobile phones industry and understand the factors that inform their choices. Various studies have been conducted in this regard with findings largely being centred on the fact that the average consumer would want to purchase products that are innovative and containing the latest features in the market (Doz and Kosonen, 2011; Kharif and Reinhardt, 2009). Innovation drives technology-based industries and the organisations that fail to master it are bound to be rendered obsolete. Customers are therefore likely to embrace new technologies and product features. This is a preferable option to settling for cheaper products whose demand is already dwindling. This has indeed been the trend since the 1980s with each new technology outmatching preceding technologies within a relatively short time (Desai and Desai, 2013). Analogue phones were easily replaced by the 2^nd generation phones. The third generations are now very popular but it is projected that the 4G technology will be driving mobile telephony in the next decade.

Nokia continues to market many of its second generation models tapping into markets that are price sensitive and therefore not able to afford the relatively more expensive smartphones. At the same time, it has made attempts to recapture lost ground by launching smartphones to try and win back the premium markets. At the centre of all these considerations is the need to conduct thorough market research to determine the changing tastes and preferences in the market. The level of rivalry in the industry has increased the level of sophistication among consumers and them quite sensitive to product features and prices (Doz and Kosonen, 2011). There is however the likelihood for there to be different characteristics in different markets. The market characteristics as currently understood is a product of Western-dominated views on products hence the unequivocal projection in the growth in demand for premium products.

This research concentrates on the Kenyan market and aims at not only determining the level of popularity of Nokia products, but in identifying features that Nokia can introduce in its products to become the brand of choice within the Kenyan market.

  

3.0 Methodology

The research approach used was inductive approach where no preconceived theories or conclusions are applied prior to research. It is purely from the facts collected that any conclusions are made and the same compared to past studies in related fields.

The data collection method was through questionnaires. Written surveys provide the benefit of preserving records for latter analysis. The questionnaire designed was that of structured questionnaires. While this could have the risk of excluding important aspects of the study, it provides the benefit of facilitating responses (Kumar, 2005; Saunders, Lewis and Thornhill, 2003). This makes it easy to get the respondents targeted to complete the questionnaires.

The population of study was the Kenyan consumers of mobile phones who were targeted through the sales outlets for the Nokia and other popular mobile phone brands. Choice of population is based on the fact that they are the ones that are most likely to have readily available information about features that they’d look for in mobile phones.

A sample size of 80 was targeted. Sampling was through stratified random sampling where a total of 10 sales outlets were targeted and 8 respondents from each of them selected randomly. Analysis and interpretation of data was both qualitative and quantitative.

The main limitation for this research was the scope. In the interest of time and resources available, a sample size of 80 was picked. This may be limiting in terms of predicting the perceptions of the whole market. Besides, the research focused on the general perceptions of all Nokia products. A more specific approach is recommended for the future where the popularity of specific products is gauged for purposes of determining which ones are likely to perform best within the Kenyan market.

4.0 Results and discussion

The demographic characteristics of the respondents are as shown below:

Age	Frequency			Percentage
1. 18-24 □	27			34%
2. 25-30 □	31			39%
3. 31-35 □	12			15%
4. 35-40 □	6			8%
5. 41 and above □	4			5%
	80			100%
Marital status		Frequency			Percentage
1. Married □		31			39%
2. Single □		43			54%
3. Divorced □		6			8%
		80			100%
Gender			Frequency			Percentage
1. Female □			58			73%
2. Male □			22			28%
			80			100%

Over 78% of the respondents acknowledged to have used Nokia before. This cements the fact that Nokia has been a dominant player in the Kenyan mobile phones market.

On the features that consumers find most attractive about Nokia, the results are as shown below:

Product feature	Preference	Percentage
1. Price □	21	26%
2. Entertainment features	9	11%
3. Smartphone capabilities □	8	10%
4. General appearance □	7	9%
5. Network reception □	25	31%
6. Consistency with trends □	10	13%
	80	100%

These results can be contrasted to the ones below where the general preference for phones is compared to the features that customers find most attractive about Nokia. The results on general preference for phones are as below:

Product feature	Preference	Percentage
1. Price □	18	23%
2. Entertainment features	12	15%
3. Smartphone capabilities □	14	18%
4. General appearance □	7	9%
5. Network reception □	19	24%
6. Consistency with trends □	10	13%
	80	100%

When the two are compared, there is a confluence on network reception qualities and the pricing of the phones. This means that these qualities can be utilised in favour of Nokia. On the other hand, the qualities attributed to Nokia on Smartphone capabilities (10%) is lower than the general market preference (18%), meaning that customers are less satisfied with this feature than they would want to. This finding gives credence to earlier studies which have found that Nokia’s competitive edge has waned with time, especially with the strides made by Apple and Samsung in spearheading innovation of the smartphone technology.

This finding is also very relevant to the core aim of this research: to establish the specific preferences of the Kenyan consumer. Prior studies have place innovation (smartphone capabilities) among the main drivers of sales in the global mobile phones industry (Desai and Desai, 2013). However, the result above indicates that this is among the less significant considerations among the consumers and this means that Nokia could still stand a good chance despite its relative innovative disadvantage when compared to Apple and Samsung.

The features that the consumers like most about mobile phones are listed as follows:

Product feature	Preference	Percentage
1. Samsung □	27	34%
2. Apple □	21	26%
3. LG □	10	13%
4. Motorola □	14	18%
5. Alcatel □	8	10%
	80	100%

Samsung leads the pack among Nokia’s main rivals followed by Apple, Motorola, LG and Alcatel in that order. The implication of these responses lays in the need to identify the company’s closest competitors hence the knowledge on which competitor should be watched out for and a better knowledge on consumer preferences. Understanding competition is the first step towards being competitive as competitor actions affect the relative preference for an organisation’s products (Dobson, 2004). With a keen eye on developments among competitors, Nokia can come up with an effective competitive strategy.

For purposes of interpreting these results, the percentage of responses that scored ‘high’ and ‘very high’ was provided to create a picture of how Nokia products are perceived in the Kenyan market as opposed to those of the main competitors. From the results tabulated below, the strength of Nokia products is drawn from the following qualities (in order of ranking): Network reception, Price, General appearance, Consistency with trends, Entertainment features, and Smartphone capabilities.

Quality ratings	Very Low	Low	Average	High	Very high	Total percentage of 'High' and 'Very High'
1. Price □	6	13	14	28	19	59%
2. Entertainment features	15	19	23	14	9	29%
3. Smartphone capabilities □	9	18	32	15	6	26%
4. General appearance □	7	16	15	20	22	53%
5. Network reception □	6	11	12	28	23	64%
6. Consistency with trends □	11	21	25	12	11	29%

The implication of this schedule is that Nokia would either need to bolster its features on smartphone capabilities and entertainment features; or enhance its strengths on network qualities as well as general appearance and pricing. Organisations prosper by doing either or both of the following two things: bolstering their strengths, and eliminating their weaknesses (Mckeown, 2012). This means that Nokia’s chances of success can be improved by bolstering their price and network qualities, and invest in innovation to improve its product features to make it have better smartphone capabilities. To this end, Nokia has made efforts to introduce smartphones while establishing an alliance with Microsoft to drive future innovations (Ammisetti, 2012). It would need to come up with better innovations to regain its image as the driver of innovation in the mobile phones market. 

On the question on whether the customers would want to purchase from Nokia in future, 52% answered to the affirmative. This is a reflection that Nokia’s chances in the Kenyan market are still good and that better performance can be enhanced with aggressive marketing. Consumer perceptions are indeed critical to the competitiveness of the organisation and positive perceptions about a brand are an indicator that a company can excel in such a market (Newth, 2013). This implies that Nokia’s chances of excelling in Kenya are good. However, the figure indicates that there is a low level of brand loyalty in the market.

5.0 Conclusion and recommendations

This research finds that the Kenyan market prefers Nokia products to those of competitors mainly due to its network reception qualities and its pricing. The study indicates that Nokia still has a strong brand with few customers being averse to using their products in future. In other words, Nokia stands a good chance at excelling in the market even without bolstering its smartphone capabilities. Its brand is well recognised as featured by the fact that over 78% of the respondents had used their products before.

Nokia remains the most dominant force in the global mobile phones albeit with dwindling fortunes in the recent years. At the global scene, the smartphone technology drives sales with Apple and Samsung recording superior growth. This research however establishes that the smartphone capabilities are not the main drivers of demand for mobile phones in the Kenyan market as has been projected by studies on the global market. This justifies a focus strategy where Nokia products can be used to target similar markets and revive its performance. The following recommendations can therefore be applied to Nokia.

The traditional approaches to strategy should be applied to Nokia: eliminating weaknesses and exploiting strengths. The strengths identified in this study include a strong brand image, good network capabilities, and suitability of pricing. The brand image can be used effectively in making marketing messages very acceptable in the market hence the capacity to drive sales. Network capabilities on the other hand improve the quality of communication and it is the primary function of mobile phones. All other features are useless where the phones are not usable for communication purposes.

The second dimension of strategy lays in the elimination of weaknesses. Despite the efforts made by Nokia to catch up in terms of technology and production of smartphones, the company has continued to lag behind with few viewing their smartphones as comparable to those of smartphone and Samsung (Miyashita, 2013). This makes it necessary that innovation be done. The best approach would be to make a ground-breaking innovation that can easily outdo the smartphones and provide much better functionalities.

Nokia remains a dominant force and can easily overcome its poor performance in recent years with the application of proper competitive strategies.

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