No end in sight to Nokia’s woes in North America
Decline of North American market share continues for years
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By Petri Sajari
In spite of years of trying, the mobile telephone giant Nokia has not succeeded in strengthening its position on the important North American market.
The company’s market share in North America has collapsed by 25 percentage points in 25 years to less than ten per cent, according to the market research company Strategy Analytics.
In the past three years the market share has sunk by more than ten points. In the same period, Nokia’s South Korean competitors Samsung and LG have significantly improved their positions in North America.
According to analysts, there are two main reasons for Nokia’s problems: its unwillingness to tailor its handsets to the specifications of telecommunications operations, and a slow reaction to changes on the market.
“Nokia’s position in the products that have grown most powerfully in North America has long been weak”, says Neil Mawston, an analyst at Strategy Analytics.
In recent years, the best-selling mobile phones in North America have been clamshell models, thin handsets, and phones with touch screens as well as phones with a full qwerty keyboard. Nokia’s competitors are ahead in all of these products.
The four largest operators in North America are in a position to dictate terms to mobile phone manufacturers on tailor-made handsets, because their position is so strong in the continent. These operators sell nearly 90 per cent of the phones sold in North America.
“Nokia has tried to tailor products for North American operators, but they are not sufficiently unique. Nokia’s relations with the operators are strained, because it tries to push telephones that everyone else is selling”, says Richard Windsor, a technology expert at the Nomura investment bank.
He mentions as an example the E71x model, made for the US operator AT&T, is simply a version of the E71, which was introduced last year, with new software inside. Windsor also notes that AT&T sells it at the same price as the popular iPhone 3G.
Windsor does not expect Nokia’s North American market share to improve significantly in the next couple of years.
Mawston agrees. He actually feels that Nokia’s weakness in North America is a big threat to the whole company. According to market research, demand for expensive smart phones is expected to have its highest rate of growth specifically in North America.
“Many of the new inventions of the mobile telephone market are made in the United States: subscriptions and systems, software and services. That is why the United States has the world’s most important mobile telephone market, and inventions that are made there spread to the rest of the world.”
Windsor takes a more cautious view of the matter. He does not see problems in North America to be serious from the point of view of the company in general.
“Nevertheless, Nokia has missed a gigantic opportunity in North America.”
The proportion of smart phones in Nokia’s total sales of mobile telephones is about 40-45 per cent. The economic significance of smart phones is important, because they have considerably higher profit margins than cheaper models.
One possible disadvantage could be Nokia’s strong brand, which has spurred the company’s success especially in Asia. In North America, however, operators want consumers to think primarily of the operator and not the manufacturer when they buy their phones.
“It is clear that a power struggle is going on between Nokia and telecom operators in places other than North America as well. For instance, Vodafone has long spoken of how they would like to break Nokia’s stranglehold on the mobile phone market. Vodafone has not yet succeeded, but they are taking determined steps in that direction”, Mawston says.
And what about Nokia’s competitors?
Samsung and LG have listened to the demands of the operators for years, and provided them with phones to order. In addition, they have reacted to changes on the market much faster than Nokia.
When Apple launched its touch-screen iPhone, the South Koreans came onto the market with a similar product just a few months later. Nokia did not get its first touch-screen phone on the market until a year and a half after the introduction of the iPhone.
For Nokia, the issue is one of controlling costs. The more phones are manufactured using the same components, mechanical parts, and platforms, the more efficient they are to manufacture.
It is expensive to interrupt mass production in order to produce models for specific operators.
Helsingin Sanomat / First published in print 8.8.2009
PETRI SAJARI / Helsingin Sanomat
petri.sajari@hs.fi
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| 11.8.2009 - THIS WEEK |
 No end in sight to Nokia’s woes in North America |
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