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Nokia`s spectacular fall greatly affecting Finnish economy

Nokia`s spectacular fall greatly affecting Finnish economy

Posted July. 23, 2011 07:03,   


Nokia has lost the title of the world’s largest producer of smartphones to Apple, an honor the Finnish company had kept over a decade.

Nokia announced Thursday second-quarter smartphone sales of 16.7 million units, down 34 percent from the same period last year. By contrast, Apple sold 24.2 million smartphones over the same period in earning 7.37 million U.S. dollars in net profits.

Nokia was also overtaken by Samsung Electronics. Korea’s largest handset maker sold an estimated 18 million units in the second quarter, forcing the Finnish company to finish third.

The fall of Nokia holds many lessons as it lost the market lead by failing to cope with big changes in the IT sector. The struggle of the telecom giant is also significantly impacting the national Finnish economy.

The share of Nokia in Finland`s GDP fell from 4 percent to 1.6 percent. The company used to account for a fourth of Finnish exports. Thus, the Finnish economy is sputtering as a result.

Many experts blame Nokia’s collapse to arrogance over its No. 1 position. As early as 1996, it unveiled the primary form of a smartphone, the Communicator, which enabled email communication. In 1998, the company introduced the mobile operating system Symbian.

Nokia, however, solely relied on the established theory in business management circles that “choice and concentration” based on its competitive edge will do the trick.

The company’s rule of success, however, has become that of failure in this paradigm- shifting market.

When Google released its mobile operating system Android, Samsung boldly abandoned its own operating system and joined hands with Google. In contrast, Nokia stuck to the Symbian, saying the market leader will not team up with Google, which has little influence on the mobile market.

Shin Dong-yeop, a business professor at Yonsei University in Seoul, said, “Nokia has failed to keep up with the rules of the game that Apple has changed.”

Nokia had turned Finland, once in the periphery of the world economy, into Europe’s IT hub. The company, however, is now a headache for Finland.

The promotional Web page for Finland says, “As recently as a year ago, Nokia led the country’s economic growth. Now, however, small software companies are driving our economy.”

One representative product of such small software companies is “Angry Birds,” the world`s most popular smartphone game.

The game industry generates high added value but creates relatively few jobs. Late last month, Nokia announced a plan to lay off 7,000 workers, including 1,400 in Finland.

Finland’s tax revenues have also declined as a result of Nokia`s fall. According to the Finnish Economic Research Institute, Nokia paid taxes in 2007 of 1.3 billion euros (1.9 billion dollars) but this figure fell to about 100 million euros (144 million dollars) in 2009.

The Wall Street Journal described the problem this way: “Nokia’s pain becomes Finland’s.”