For many years, Nokia has been one of the main players in the mobile phone sector. However, from 2008 the company has been losing its competitiveness; struggle with market share; declining share price and reputation. These issues can be attributed to internal and external risks including;
Key internal and external risks to Nokia
Product and Market Risk
The Apple iPhone and devices operating on Google Android have adversely affected Nokia products. This has made the brand Nokia miss the opportunity to take the competitive smartphone market. While Nokia has manufactured its series of smartphones, the sales volume of Lumia brand is significantly slow. The phone not only lacks distinctiveness but also Nokia cannot keep the speed with its competitors. Due to intense competition in the smartphone market, Nokia is not on the list of top five smartphone manufacturers as demonstrated in Figure 1. According to the figure, Nokia is negatively affected by considerable market risks. If an organization cannot comprehend the market and develop distinct products before its rivals do, it would eventually lose the market share.
Figure 1. Market share of smartphone manufacturers in 2012
Nokia partnered with Microsoft and the firms regarded the move as an effective smartphone strategy. Nonetheless, Nokia is not the only maker of gadgets that use the Windows platform. When Nokia launched Lumia 920, HTC and Samsung also introduced a smartphone operating on Window (Savov 2011). Nokia is experiencing strategic risks since it failed to develop its software (Keen 2012). Apple and Google have their unique software while Nokia relies on partnering with Microsoft and chances are Lumia 920 cannot succeed since it is not distinct or innovative.
In the recent past, Nokia has been attempting to squeeze cash from its operations, so as to prevent bankruptcy. Following unsuccessful product launches, Nokia wanted to sell its Finnish headquarters, use patents and royalties to raise funds (Milne 2012). The bankruptcy would materialize if the firm does not make payment on a timely basis.
Nokia has a global manufacturing facility; therefore political risks take a center stage in decision formulation. Additionally, the company made about 4,000 workers redundant to move production facility to Asia (Nokia n.d). In turn, the shift is attributed to the closeness to customers and suppliers; and cheap labor. Nevertheless, outsourcing is associated with considerable political risks including quality aspects; hidden expenses, cultural alignment; theft of information and intellectual property that are essential in the electronics sector.
Globally, electronic wastes are a threat to the environment. Moreover, Nokia is a battle with its rivals to create sustainable products. Already, Nokia is lagging behind in development technology; it may be slow in adopting greener practices. Nokia has to ensure the safety and health of its employees globally that might be challenging to manage.
Strategies to manage risks
Product development and diversification
To effectively manage internal and external risks, Nokia should use diversification and product development (Kaplan & Mikes 2012, p. 27). This strategy can help the organization to tackle different risks. To create a competitive edge over its smartphone manufacturers, the firm launched Nokia Collection app and the NAV SET structure that operates without internet connectivity. This led to the launch of Lumia 900, which was very successful. Therefore, Nokia should focus on new product development and innovation to remain competitive in the changing smartphone market.
Another strategy is alliances, which would help Nokia to share resources as well as risks. Currently, the organization relies on Microsoft. Therefore to deal with the element of reliance, Nokia should be innovative and develop distinct software or form a strategic alliance with other firms.
Nokia is already attempting to ensure environmental sustainability. During production, the company emphasizes on material and energy efficient. Additionally, it cautiously selects suppliers to ascertain that they adhere to environmental sustainability. Regarding electronic wastes, Nokia has advanced measures like awareness creations on recycling and offers the world, the biggest take-back initiative for old phones. As a result, Nokia should continue its sustainability strategy to address environmental risks.
Control and Assessment
This strategy is used by the company to deal with outsourcing risk. Control and assessment can be used to observe political situations in nations it has operations and stringent measures to choose whether to retreat or not.
Enforcement techniques would involve harmonizing best practices, measures and legal procedures. Unclear practices hinder successful enforcement. Nokia should harmonize standards needed to determine activities that attract fines and personal liability. Enforcement must emphasize harm to employees, acceptable safety procedures and best practices. Basically, enforcement would stakeholder and contractors comply with safety procedures, best practices, and measures.
Sanctions can also be used to ensure contractor and stakeholder adherence with best practices and safety measures. Specifically, contractors and stakeholders are encouraged to exceed adherence requirements via sanctions as well as incentives