After largely disappearing from the mobile phone market following its acquisition by Microsoft, 2017 will see the re-emergence of the Nokia brand with products managed by HMD Global in partnership with FIH Mobile (part of Hon Hai Precision) and brand licensed from Nokia. As someone deeply involved with portfolio management at Nokia during the growth and glory days, I would like to take the opportunity to explore whether this is a good time for them to make a comeback?
In a previous blog I analysed the dynamics of the mobile phone market in terms of what facets of the overall business need to be optimised at a given point in time. In brief, my view is that the smart phone market has moved into a plateauing phase where the key strengths needed are brand, distribution and cost efficiency. So the question is whether this new Nokia set-up is well placed for this challenge?
First of all where is the Nokia brand today? Ten years ago Nokia was the leading mobile phone brand across the world except in North America, South Korea and Japan. This position had been built on fifteen years of growth – how much can this legacy be drawn on now? At its zenith Nokia stood for a perhaps contradictory combination of high technology and reliability – you could expect to get the very latest from Nokia and the products would be really tough in real life. The challenges of the 2008-2013 period largely stripped Nokia of the high technology association but today you still hear stories of how good and tough my Nokia was. The UK press has been full of stories about the resurrection for the 3310 over the last week, all very positive. So if I was to describe the Nokia brand today from a European perspective I would use words like: honest, tough and sentimental.
Distribution is the next major part of competing in today’s market scenario as with any fast moving goods business. Here HMD take responsibility for sales and FIH Mobile for manufacturing and logistics. This has the promise of being a good combination with a lot of personnel coming over from Microsoft devices business while FIH are of course a well-established world class manufacturer. Access to market in countries where operator distribution is critical will depend on the right deals being made but there is no obvious reason why this may not be the case. While a split company setup may struggle in a period where the market is changing fast with product innovation at the fore, since this is not the case at the moment there is no reason to believe this cannot succeed well.
Cost efficiency is the key to offering the value for money proposition essential in a plateauing market and in this case to compete against mainly Chinese companies which offer very keen price points. Clearly the advantage of the resonance of the Nokia brand will give the new venture an edge but as a challenger there can be no expectation of premium pricing at the beginning of sales. With the mobile phone chipset business dominated by only a few suppliers, the size of FIH/Hon Hai as a manufacturer will be important to get good pricing as well as the potential of Nokia branded goods making even a fraction of historical volumes.
So in a nutshell it would appear that the timing for a comeback looks good. Leaving re-entry any later would see the continuing in the decline of Nokia as a consumer brand – furthermore the operational mode of separate sales and manufacturing companies in partnership can work when product innovation is not the main route to success.
