Nokia once ruled China, but the Finnish company has suffered a dizzying decline. Today, Nokia no longer ranks among China’s top 10 smartphone brands, it simply disappears into the vast number of brands that are offered in the Middle Kingdom. The situation in China is actually even worse for Nokia because competitors like Apple are moving quickly to shore up market share in the world’s largest mobile phone market.
Where Nokia Lost It’s Way
Like Best Buy and Home Depot, Nokia didn’t pay enough attention to local consumer needs. They lost the surging upper-middle class market because of a foolish strategy to go down-market on pricing rather than understanding that even poorer consumers are often willing to pay premiums for phones For many Chinese who cannot afford a house or a nice car, the mobile phone becomes the status symbol to show off. They will save months of salary to buy the latest gadget, which is why many buy an expensive iPhone 4 that costs 30 percent more in China than in America. But Chinese consumers barely use their iPhones for voice calls, having saved so much money to buy the iPhone in order to gain status.
Nokia cheapened its brand by going too low-end to attract a wider range of customers. Wealthier and more aspiring consumers started to shy away from the brand because it became too common. Lower-end consumers also stopped buying the phones because they were watered down versions of what they saw wealthier consumers carrying. Plus, the lower-end phones lacked the functions available in phones made by competitors and sold in the same price range.
There is Still Hope for Nokia
Nokia is in the same position that Motorola was in three years ago, and Motorola is starting to bounce back. But Nokia will have to move fast. A key advantage it has over Apple is its excellent distribution network across the country. Apple has grown far too slowly from a retail standpoint and is woefully behind (as the recent reports of a fake Apple Store in Kunming have suggested) because consumers want the real deal but cannot find it. If Nokia can go premium with its new handsets, it can still take back market share before Apple arrives in earnest.
The good news for Nokia is that younger, upper middle class Chinese consumers change their mobile phones every nine to twelve months, so there is still time for Nokia to claw back market share. Such consumers are also not particularly brand loyal when buying phones. They look for the latest, hottest phone that will confer status on them, and many still remember Nokia’s status as king from just three years ago.
This gives Nokia an opportunity to roll out new phones in more areas before Apple is able to penetrate the market.. If it can once again offer products that consumers will want to be seen using it has a chance to get its groove back in the world’s largest mobile phone market.