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Is Apple going to be the next Nokia

Is Apple going to be the next Nokia

  • In this blog, we will discuss on whether is apple going to be the next nokia. We shall discuss on the smartphone industry, slowdown the industry is facing and the impact of US China Trade war on Apple – The world’s leading smartphone manufacturer.
  • The smartphone industry has matured due to the entry of number of players especially after the influx of low cost chinese smartphones manufacturers like Xiaomi, Huawei and One Plus.
  • The Chinese smartphones makers are using predatory pricing approach offering the best specifications at a discount price to take the market share from incumbent leaders like Apple and Samsung
  • How will this impact the premium smartphone maker Apple who is reeling under a double whammy with slowdown in smartphone sales and US China Trade war.

How to avoid being the next Nokia

  • In a recent article, when the leaders of smartphones makers – Samsung and Xiaomi were asked what is keeping them awake every night, they had an unanimous response – Avoid being the next Nokia.
  • This was further exacerbated after Apple cut its revenues forecasts at the starting of this year which stoked fear among the analysts whether Apple is in the danger of following Nokia. This is too early to speculate especially with Apple strong business fundamentals and innovative culture.
  • Although the smartphone competition between Huawei, Samsung and Apple has increased, none of them would follow the footsteps of Nokia.

Is this a transition time for Apple

  • With the decline in smartphone sales, Apple has decided to shift to services business to focus on ecosystem related activities such as content distribution, cloud hosting, payments business and in Intelligent home.The firm is relying more on Partneships and Alliances, the one with Lego on Augmented education and entertainment being a prominent example.
  • Measuring the profitability of a ecosystems business is tougher than measuring a physical product.Hence it is difficult to estimate the long term potential of this business shift.
  • One common link between Apple and Nokia is that like Nokia, Apple is a victim of its own success.The company had a record sales in smartphones from 2007-17 and when it growth declined, it disappointed the analysts. This was evident after it lost one-third of its market cap in the beginning of the year after it cut its revenues forecasts.
  • Apple has been an excellent innovator, have built a superior brand, excellent design and user friendliness with efficient global supply chain.The above strengths were the reasons for Apple success in iphones and iPods.The big question is which of the Apple next product would be the next big thing.
  • Apple foray into connected watches was not a resounding success.Apple is investing its efforts in Smart homes and Smart cars, but they have a strong competitor in Google, Amazon and Tesla.Hence there is not enough proof available for the analysts on Apple success to move from product business to services businesses.

Apple is no Nokia

  • Nokia demise in smartphones was more due to self destruction with wrong choices in Product management, its inability to build on an operating system to take along the likes of android and iOS and huge emphasis on Product management mindset.
  • Nokia demise started much earlier than after Google and Apple became its competitors.Internal conflicts led to deterioration in product quality.Even after Nokia collaborated with Microsoft to build a seperate operating system, it was not able to compete with Apple and Google.
  • The current smartphone leaders – Samsung, Apple and Huawei have built strong assets.Samsung is strong in Home Appliances, Huawei is strong in AI, Big Data analytics and communication equipments where Apple is focusing on ecosystem led services.

Conclusion

  • With increasing commoditization in hardware, the smartphone companies has shifted its focus on service led business to improve its margins.This is further aggravated by the entry of chinese hardware competitors that offer products at a cheaper price.
  • Apple problems are also more external with trade wars between US and China affecting its supply chain. Hence it might need to shift its supply chain to another low cost country which might impact its margins.
  • To the question whether Apple will be the next Nokia, any company that compromise it’s long term strategic vision and innovation to meet short term shareholder demands could have a similar fate like Nokia.


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