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Upper Echelons of Nokia

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Business Memo to The C.E.O of Nokia

Date: November 25, 2015
To: Rajeev Suri, C.E.O
From: Shreya Chugh, UOM
Subject: Upper Echelons of Nokia

Nokia is one of the leading companies in the sector of advanced technologies and mobile network with an advantage of 100 years of experience and expertise in telecommunications from 2G to 3G to 4G and now the emerging 5G. It has always been and intends to remain at the cutting edge of mobile technology. (Anon, 2015) Its market share was 48.7 percent in the third quarter of 2007. By the third quarter of 2012 the company's market share had slipped to just 3.5 percent (Statista, 2015). Nokia has shown great improvement ever since this decline. Coming in 3rd place, scraping what market share has been left behind from the dominant Android and iOS, it continues to be one of the largest operators in the market (Byron, 2013). This memo attempts to closely evaluate the reasons behind the decline of the market share and will primarily focus on the decision making by the upper echelons of the company that led to this decline. Its main aim is to provide possible interventions based on the upper echelons theory that could help the company regain its lost position and customer base. This memo will dive deep into the cognitive frames and the demographic characters of the CEO and the top management team (TMT) that affect the strategic decisions of a company, based on the theory.

It will be imperative to do a quick historic evaluation of the impact that upper echelons theory had on Nokia’s past performance so that a structured approach can be taken while choosing the right mix of candidates to serve at top management levels. Jorma introduced Stephen Elop as a new CEO to take over Kallasvuo who got hired in 2006 to become the first non-Finnish chief executive at Nokia. While this seemed to be a make-or-break decision, there was a lot of confidence in the management considering the fact that Stephen was serving as one of the top executives at Microsoft and certainly had a contribution towards the extensive growth they got during the last three years of the last decade (Anon, 2015). Interestingly, Elop was a non-Finnish and always enjoyed working and growing platform based software companies like Macromedia, Adobe, Juniper Networks and Microsoft, thus making Nokia as his first Telecom or cellular engagement.

A born Canadian and experienced with USA based work-culture, Elop faced a lot of challenges which resulted in interpersonal conflicts and hence, were highlighted issues like his infamous memos to the employees or the sudden announcements of lay-offs due to lack of communication. While he enjoyed the great level of managerial discretion, there were a lot of conflicts on decisions like moving to solely windows platform or subsequent tie-ups with Microsoft (Singhal, 2015). The power distribution seemed mismanaged during the first-half or current decade and despite extensive friction, the acquisition of Nokia by Microsoft finally happened. Most of the decision making during this entire period was majorly guided and influenced by Elop which has been critically cited by a variety of business thinkers (Anon, 2015).

The current situation if compared to the previous phase, will give us a fair view of how the organization’s performance can be forecasted keeping in mind the upper echelons theory. Samih, Ramzi and Timo are the top executives and also hold an interesting mix of experience which includes sizeable time spent within Telecom and Cellular companies. Timo, adds the balance to power distribution, being an Ex-CFO of the organization and having a respected tenure within the company. Simultaneously, Samih and Ramzi add the fresh mix of ideas and culture being from Finnish and non-Finnish backgrounds respectively.

On Rajeev Suri becoming the CEO; there is a highly balanced managerial discretion aspect due to the extended tenure he has had, his experience within Nokia and Telecom industry as a whole along with his ability to cascade down the various managerial layers due to his thorough knowledge of organizational culture. The TMT demographics also suggest that there is a fair amount of homogeneity within the team and all of the members of the board at upper echelons level are young compared to the average counterparts within the industry. Lastly, from the perspective of firm’s performance it is seen that there has been a significant decline in the variation that Nokia faced during the early years of this decade. Now it seems to take a new direction with various new innovative extensions like virtual reality and fifth-gen phones.

Conclusion

It is recommended as a result of the evaluation conducted in this study that the existing management must have an extensive mix of leadership from different parts of the world depending upon Nokia’s existing market shares. Also, while platform experience is desirable, Cellular company management experience must be imperative for someone to hold a discretionary position at Nokia. Also, distributed leadership strategies have benefitted Nokia’s operations in the past and therefore there must be adequate efforts to get that implemented as part of organizational strategy and it should also act as a selection criteria while making decisions on further additions to the executive board.

References:

Anon, (2015). [online] Available at: http://company.nokia.com/sites/default/files/download/investors/nokia_uk_ar14_full.pdf [Accessed 13 Dec. 2015].

Kandala, R. (2013). Why Nokia failed? What can be learnt from Nokia's failure?. [online] Techulator.com. Available at: http://www.techulator.com/resources/11507-Why-Nokia-failed-What-can-be-learnt-from-Nokia-s-failure.aspx [Accessed 13 Dec. 2015].

Byron, G. (2013). Nokia's current situation | Methys. [online] Methys. Available at: http://www.methys.com/digital/nokia-current-situation/ [Accessed 13 Dec. 2015].

Statista, (2015). Market share held by Nokia smartphones 2007-2013 | Statistic. [online] Available at: http://www.statista.com/statistics/263438/market-share-held-by-nokia-smartphones-since-2007/ [Accessed 13 Dec. 2015].

Sulopuisto, O. (2013). Nokia: Where it all went wrong, by the man who made it the world's biggest mobile company | ZDNet. [online] ZDNet. Available at: http://www.zdnet.com/article/nokia-where-it-all-went-wrong-by-the-man-who-made-it-the-worlds-biggest-mobile-company/ [Accessed 14 Dec. 2015].

Referenceforbusiness.com, (2015). Jorma Ollila 1950— Biography - Education and professional life, History of nokia, Reinventing nokia. [online] Available at: http://www.referenceforbusiness.com/biography/M-R/Ollila-Jorma-1950.html [Accessed 14 Dec. 2015].

Anon, (2015). [online] Available at: http://www.uni-stuttgart.de/infotech/pdf/bma13/BMA13_Nokia.pdf [Accessed 16 Dec. 2015].
Singhal, N. (2015). Why Nokia Failed – Top 4 Reasons - NXTInsight. [online] Nxtinsight.com. Available at: http://nxtinsight.com/why-nokia-failed-top-4-reasons/ [Accessed 16 Dec. 2015].

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