Nokia has been the brand when it came to mobile phones for multiple past decades. 7 out of 10 top mobile phones sold in the world are made by Nokia. In 2008, they had a market share of around 39% and had sold 472 Million phones. No company could even match that numbers even today. They practically had a total monopoly in the mobile phone market. 

But that all tumbled down quickly in just a few years. They went from a net profit of 7B Euros in 2007 to a negative 3B Euros in 2012. So what went so wrong?

Higher costs

Nokia’s stronghold in mobile phones is mainly in feature phones which have been popular and mostly the only ones sold till 2007. And these phones are reasonably straightforward and had the same design and underlying parts. So Nokia didn’t need any R&D, and manufacturing costs were lower. Hence they had higher profit margins.

But this all changed with the advent of smartphones, R&D costs have increased significantly alongside the cost of parts that went into the phone and the manufacturing costs. 

Ignoring the changing trends

When Apple came up with the iPhone in 2007, it positioned itself as a lifestyle product and made smartphones mainstream. Android came in a year later with its Open Source software and a similar product approach which expanded rapidly.

But Nokia was reluctant to let go of the utilitarian mindset and continued with their feature phones. They saw Apple as a higher-end product meant only for business and the affluent, and Android as just another OS that was too young to take any competitive advantage. After all, they had a 50% market share after 1 year of the iPhone’s launch, while Apple had just 5%.

Persisting with their legacy Operating System

Nokia is really good at making long-lasting and efficient hardware, but their software is just basic and has functionality limited to calls and SMS. And this carried over to smartphones with their Symbian OS. This was lackluster and looked both aesthetically and functionally bad compared to Android and iOS. But they kept on persisting with it despite it being bad and no developers making apps for the OS. Even though they kept selling well due to Nokia’s brand pull, once people started finding another OS way better, these sales didn’t last. They tried revamping Symbian OS and also tried to build a new OS from the ground up, but it never worked out.

Windows partnership and the eventual sale

After realizing that Symbian OS is going nowhere, they finally made the switch, but to Windows mobile OS, which also is plagued by the very same problems. And that turned out to be a worse disaster. They never took off, and Microsoft eventually bought Nokia mobile division for $7B and then wrote it off as a loss in 1 year. This was the final nail in the coffin for Nokia.

Currently, the Nokia branding is licensed by HMD Global, which is making Android smartphones now under the branding. But they have less than 1% share in the market.

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