Reference no: EM132653199

1. Nokia's Evolving Organizational Structure

Nokia Corporation has experienced considerable change over the past three decades and its organizational structure has changed just as dramatically. In the early 1990s, The Finnish firm had a product-based organizational structure designed around its diversified businesses: consumer electronics (television, audio equipment), cable for construction and power transmission, industrial rubber (tires, footwear), and its recently acquired telecommunications business.

Nokia became the market leader in cellphones by 1998 (overtaking Motorola), so it sold most other divisions and designed a new organizational structure around its cellphone and consumer electronics businesses as well as several function groups (finance, human resources, etc.). The consumer electronics business was not sufficiently profitable, so it was sold and Nokia drew a new organizational chart in 1999 around cellphones, the emerging business of mobile networks, ventures (emerging internet technology), and communication products (digital terminals).

By 2003, the cellphone market was converging with photography, games, music, and other multimedia content, so Nokia added a new "multimedia" division to keep the company at the forefront of those developments. In 2006, the company's burgeoning network division was spun off as a joint venture with a similar product group at Siemens.

Nokia's earlier organizational structures gave some priority to Internet and multimedia technologies, enough to put the company at the forefront of the quickly emerging "smartphone" market. But with increasing competition from Canada's Research in Motion (which makes the Blackberry) and Apple (which makes the iPhone), Nokia recently announced the new organizational structure that will focus more power and resources around this segment.

The new chart (a simplified version is shown in Fig. 1) includes a "Smart Devices" division, mobile phones division, a "Markets" division (responsible for global sales and supply chain operations), and a few functional groups (e.g., finance, human resources). "Nokia's new organizational structure is designed to speed up execution and accelerate innovation, both short-term and longer term", explain Nokia CEO Olli-Pekka Kallasvuo. "We believe that this will allow us to build stronger mobile solutions".

Fig1. The new chart

Discussion Questions

A. What form of departmentalization has Nokia relied on throughout most of the past three decades? Why have these forms of departmentalization been adopted?

B. Evaluate Nokia's changing organizational structure against the changing characteristics of the external environment over this time. Has the structure mostly contributed to Nokia's success or been a hindrance to it?

C. Although not explicitly described in this case, in your opinion, in what parts of Nokia would you expect to find the most organic organizational structure, particularly low formalization and high decentralization? What parts of Nokia would be most mechanistic?