Will Lower Prices Help Nokia Regain Its Edge?

For years the Finnish electronics giant Nokia owned an enormous share of the world cell phone market, easily beating out early competitors such as Motorola and Sony Ericsson. Recently, however, it has found itself facing competition from Apple iPhone, which has begun to lower its prices, and from Research in Motion BlackBerry devices. The company seems to be trying various strategies, but some observers think Nokia has lost its strategic focus. Nokia chief executive, Olli-Pekka Kallasvuo, announced that the company would focus on software, citing a deal with Microsoft to create business-oriented mobile applications. Another executive declared that Nokia would become the world biggest entertainment media network. Indeed, it recently launched its Comes with Music downloading service, which was the first of its kind in the Middle East. But it has done poorly elsewhere due to stiff competition from Apple iTunes. Yet another executive announced the debut of the Booklet 3G, a laptop computer that would make the personal computer more social, more helpful, and more personal.

At a meeting in New Delhi, India, Tuula Rytilä-Uotila, Nokia vice president of products, announced that the company planned to lower the prices of Nokia smart phones. We want to take smart phones to a wider audience by bringing down the prices of such phones. The strategy is to be present in all price ranges. The company hopes to stimulate demand for its low-end mobile phones and perhaps put some indirect pressure on Apple and Research in Motion, whose handsets are more sophisticated. Questions for Critical Thinking

1. Do you think Nokia will regain lost ground with its new pricing strategy? Why or why not?

2. Will Nokia low-end cell phones make good loss leaders (a product sold at a low price to stimulate other sales)? Why or why not?