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Market Leader Fallen Aside? Nokia’s Revenge

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Leaders tend to be successful. Market leaders tend to shape the industry, guide its trajectory and weave exciting experiences for customers. With the advent of the Internet that has facilitated instant and constant connection among customers, market leaders have also tended to continuously innovate, have a strong feel for the pulse of the market and most of the times preempt customer demand.

This rather broad description can be generalized across industries. And this is even more so applicable to the mobile phone industry that has undergone a sea of change with new players, new technologies and new rules of the game. Brand leaders have been challenged and brand warriors aspiring to lead the market have been successful.

One such market leader – Nokia – is under immense pressure to protect its leadership position in view of a strong competitive landscape and how does its brand equity aides such a fight.

Nokia has been the market leader in the global mobile phone industry for as long as one can remember. This small company from Finland dominated the global mobile telephone market with its customer friendly designs, a powerful reputation for quality and value adding features that endeared customers.

Although Nokia still continues to be the leading mobile phone company in the world having sold 108 million handsets in the first quarter of 2010, which is a 16% increase from last year, it has come under immense pressure from other competitors, especially Apple. And competitive pressures have immensely impacted Nokia.

Its market value of more than US$208 billion in 1999 has fallen to around US$ 45 billion in 2010, in a matter of 10 years. What has resulted in such a drastic change in Nokia’s brand equity and brand value? What caused the market leader to fall aside?

Market leaders are notorious for their arrogance and complacency. The examples abound the global business landscape. Sony, the leader in mobile music with its Walkman, lost the market to Apple’s iPod. General Motors and Ford, two of the biggest car companies in the world slowly and steadily lost the leadership position to Toyota. Dell, once the leader of personal computers lost the market to a resurgent HP and the emerging Lenovo.

All these market leaders rested on their past achievements while not simultaneously investing in new innovations, new technologies and new avenues to create brand experiences. The business models and the brand ideals behind their erstwhile success gradually became too entrenched that they became strategic liabilities rather than strategic assets.

Similar is the case with Nokia. The brand, despite its reputable battery life, customer friendly features and decades of reputable quality, lacked the excitement that some of its newer competitors brought to the market. Nokia followed a strategy of incremental innovation wherein it gradually built on its earlier models.

Although such a strategy may have offered shortterm efficiencies and cost savings, the long-term consequences have been disastrous. It will be hard for anyone to immediately name a Nokia innovation that has shaken the global mobile phone market. In contrast, the then number 2 player Motorola introduced the highly successful RAZR phone line, Apple introduced the hugely successful iPhone and RIM has a whole host of cutting edge Blackberry phones.

Such a conservative strategy has hit Nokia very hard. While it enjoyed a 20% operating margins for most of the past decades, it will only likely to achieve an 11% to 13% this year. Over the past six months, the average price of Nokia handsets has fallen 18% to US$ 206. Its profits have fallen down to US$ 467 million, sending its shares a whopping 14% down on the day of its earnings announcement.

While customers are only too eager to lap up Apple’s iPhone and RIM’s latest Blackberry models, Nokia’s conventional designs and features have fallen short of customers’ expectations. Additionally, the often product delays, and its experiments with new platforms have only worsened the problem.

How Can Nokia Strike Back?
Nokia needs to follow the basic rules of strong global brand strategies to re-establish its brand equity. There are the three important steps that Nokia should implement in order to bounce back and reclaim its brand leadership position in the global mobile phone industry.

First, Nokia should streamline its internal innovation and product development process. Second, Nokia should create a new, more contemporary brand image and experience for the global customers. And, finally, Nokia should redesign its brand strategy to have their CEO as the chief brand ambassador to steer and lead the brand.

Streamline the internal innovation and product development process. Brands in the consumer electronic industry, which encompasses mobile phones, televisions, music systems, and digital cameras, thrives on continuous innovation and a seamless product development process. Such processes are always geared to tap into the pulse of the market, preempt the demands of the customers and imbue strategic flexibility to counter the moves of competitors.

Apple’s success is directly related to its pioneering innovation. Apple’s innovation is cutting edge and more importantly, not incremental. Its iPhone did not just improve some features of an existing model, but it created a completely new industry category with its phone.

Nokia has lacked in this front. Given its global number one position, the brand is more content with incrementally improving features. Nokia will have to streamline such an innovation mindset and replace that with cutting-edge and breakthrough innovation. Such an innovation process should also be streamlined with its internal product development process whereby the innovation is brought to the market at the right time and minimize product delays.

Such a shift will fundamentally change Nokia’s brand vision and will help it in its process strategic turnaround.

Create a new, contemporary brand image and experience. Despite Nokia’s strong quality and userfriendly features, it has not managed to capture a very contemporary brand image among customers. Customers around the world gravitate towards those brands that create excitement, offer immense symbolic value and enhance customers’ sense of belonging to a global community of brand patrons. Given these, dependable quality and user-friendly features become basic ingredients and not differentiating advantages.

For far too long, Nokia built its brand on those basic ingredients, which undoubtedly served it well. But given the changing landscapes, Nokia should focus on the brand experience.

A quick look at Samsung, the second largest mobile phone company in the world after Nokia, makes this point very clear. Although Samsung started out as a poorly diversified conglomerate, it soon emerged as a high valued, highly popular brand across the world, and especially in the most important markets of US and Asia.

Samsung took product quality and user-friendly features as the starting point and built its brand from there. It’s aggressive advertising of world’s more prestigious sporting events such as the Olympics, its flagship store in major cities such as New York that offers a fabulous brand touch point for customers and its series of awards and recognitions for its innovations, design and services have all together created a very contemporary brand experience for customers.

Nokia should learn from such competitors. Nokia probably has the best quality mobile phones with really powerful features. However, the brand experience is very minimal at the best and not existent at the worst. Nokia should actively create opportunities for customers to experience the brand through events, exclusive stores, and other related brand activities.

Furthermore, Nokia should create a sense of pride for its customers by enhancing its global visibility and associations with premier events.

Have the CEO as the chief brand ambassador. The notion of charismatic leadership has been well established and well accepted. Companies with charismatic CEOs are found to do well both socially and financially than those companies without such charismatic CEOs. Similar is the case with global brands.

Examples of such charismatic CEOs being the chief ambassadors for their brands are abound. Steve Jobs of Apple, Sir Richard Branson of Virgin, Ho Kwon Ping of Banyan Tree, Ratan Tata of the Tata Group, Howard Schultz of Starbucks and many more. They are all living examples of the power of having the CEO as the best ambassador of their brands.

Nokia should redesign their brand strategy to have their CEO as the chief brand ambassador. Such a move not only symbolizes that the CEO believes in and is personally interested in promoting the brand but also substantively conveys that branding is considered a strategic discipline with the company and that continuous investment in nurturing the brand can be expected.

Such a move would immensely aid Nokia in achieving a strategic turnaround to its position of a global brand leader.

Leaders can and do make successful comebacks. Such comebacks depend on the strategic brand blueprint guided by a comprehensive assessment of the brand current standing, its trajectory and the realities of the competition. By following the three fundamental branding guidelines outlined above, Nokia can retake its position as one of the global iconic brands.

Market leaders need to stay clear of arrogance and complacency. They are their worst enemies, and ought constant monitoring.

Print ed: 07/10


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