Why Nokia might soon find itself behind Apple and the iphone
First off – I need to admit I’ve had an on again, off again love and hate affair with Nokia. They’ve sold me many horrible phones over the years but there’s one thing they’ve always managed to get right and that’s user interface (UI). They’re also pretty good on the vast number of features as well. Given that the iphone also has a pretty good UI and may just fix all its feature flaws in the some time to be up and coming third generation this leaves Nokia in between a rock and hard place in terms of compelling things to offer. I also have to admit I hate iphones. I can’t get used to using such a tiny touch screen keyboard and I find the UI a bit like playing with Duplo or Lego.
Apple still have a long way to go to beat Nokia. Just because every trendy in the US, UK and Australia has an iphone (especially in Sydney) doesn’t mean that the iphone has taken over the world while Nokia and everyone else were sleeping. The iphone has practically zero penetration in most of Europe and all of Asia and South America.
The chart above breaks down the first million sales of the iphone. Sales in Japan in particular have wavered dramatically since launch. You can also see that the vast majority of sales were in the US. When it comes to mobile phones at least the US is not the largest market. There are many countries with over 100% mobile phone penetration. Fully half the people on the planet now have a mobile phone
Nokia still has a 40% share of the global mobile phone market whilst the iphone just hit 1.1% global share. The iphone is hardly a huge threat one might think. Well you need to remember that this is total mobile phone sales. Where the iphone is catching up and will likely overtake Nokia if they don’t do anything about it is the smart phone. You know the one that’s like your desktop when you’re not at your desktop. Accounts vary as to what percentage Apple has managed to grab anywhere between 15% and 30%. Either way that’s huge for a product launched globally just over 6 months ago and you can bet a whole heap of that market share was taken from Nokia.
I believe Nokia has dropped the ball in a few key areas. Apple, to Nokia’s disgust seems to have grabbed the ball straight off the ground before it could even bounce twice and kept running. Pulling further and further ahead in the features race.
1. A massive product lineup. Australia is a fairly small and mainly consolidated market. For the most part we have a single type of network (GSM) operating on only a couple of major frequencies. Nothing as complicated as the US. We’re also a small market. Probably about 15 million handsets in use out there. However, as I browse Nokia’s local website I can’t help but notice there are 121 different models of phone for sale right now. Ok a few maybe the same phone in a different case but not all 121 of them. Talk about spreading yourself too thin. Can you imagine the number of engineers, document writers, marketing staff, support people etc that would be needed to deal with all of them? Nokia really doesn’t need to put so many phones out. Apple need to put out more, Nokia less.
2. No one phone that does it all. Nokia are notorious for releasing phones targeted at different types of consumers. With the N-gage series targeted for media and games, the E series for business and the rest of the lineup for not doing much at all apart from making phone calls. The only problem with this is that as an E series user myself. I occasionally might want to play a game or actually be able to listen to a song. Why should I have to choose between one or the other?
3. Consolidated application and media market. Admitedly Nokia is slowly playing catchup here with their music service and the soon to be launched “app store” but at this point its still a frustrating experience trying to find games and applications for your phone. I just want one trusted website where I can download games, apps, music and video for my phone. There’s probably more applications out there for any given Nokia phone than for the iphone but I don’t seem to able to find them.
Now down to the really juicy bits. What could Apple do to really kill Nokia’s lead? The answer to that is … start competing in the greater mobile phone market.
Imagine an “iphone nano”. No not just a tiny iphone but more like the ipod nano is to the iphone touch. It would be a standard size “candy bar” phone with a decent screen and an affordable price tag. Not just affordable to you and me who are most likely loaded technophiles in first world countries but affordable to Joe Blogs and even people in the third world. By capturing this market, by far the largest market, Apple would have the market cornered not just a chunk of the small but lucrative smartphone market.
I believe Apple will end up ruling the mobile phone market, at least if they take the logical route (and my advice) and of course Nokia and the others will have to keep sitting on their collective hands.
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Apple tends to compete in (relatively) niche markets though – look at their computers. They could probably kick ass if they pumped out a cheap netbook, but they choose not to compete in that market – they leave it up to dell and asus and sony. Those guys are constantly cutting their margins to one-up each other. Apple choses not to do the same. Instead they target markets like educational (imac, macbook), music & video & photography (mac book pro, mac pro). They don’t cater exclusively to those markets of course (they target rich people too
), but that’s their bread and butter. That’s where you’ll find people most loyal to apple’s products, and that’s where you’ll find the people willing to spend that bit extra for what the products offer.
I don’t really see apple following a radically different strategy for their phones. I think they’ll continue to target the loyal, cashed up markets. Slashing their margins to compete in the ultra-cheap market just isn’t their style.
@bob – That’s a very insightful argument and whilst you’re correct I still believe Apple could take a go at the larger market. Of course, unlike Nokia they don’t like to spread themselves too thin. Hence niche markets like you said.
Dude you need to look at REVENUE, if Nokia have a 40% share what good is that when Apple has 1% and eventually makes more money than Nokia with one phone?
Apple don’t need to bring out more phones, they will eventually beat Nokia on pricepoint. The N96 I had was horrific and it cost more than an Iphone. Remember all this fuss about taking over Nokia and its only been two years!
You are right Nokia do bring out the same phone in a new case. N96 is basically an N95 with a better camera and more storage, nothing innovative whatsoever. Its painful.
The one thing you can bet is that the new iPhone will make the front of the newspapers, never seen a Nokia phone do that. Oh and expect something innovative from Apple, Nokia have forgotten how to do that and are now in a ‘me too’ stage.
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