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Storytelling In The News: #127

The story of Nokia and Samsung: who's hot and who's not

April 22, 2004

A few months ago, a colleague was telling me about his cool new phone and showing off its bells and whistles. My daughter was listening in and soon she had bought the same phone. I don't own a cell phone, and it was only later that I realized that they had both discarded Nokia phones to buy what they saw as cooler Samsung products.

Samsung is hot - Nokia is not

Now John Gapper reports in the Financial Times that my observations are instances of a global phenomenon. Although Nokia's share of the global market for mobile handsets is still large, its South Korean competitor, Samsung, has momentum. Samsung's camera phones, with twisting flip-up screens that allow users to take, send and display photos quickly and easily, are hot; Nokia's are not.

The financial impact of this assessment became apparent last week as news came last week that Samsung's market capitalization exceeded that of Nokia, following Nokia's disappointing first-quarter results. Even more galling to the Finnish company is the transfer of the intangible narrative quality known as market leadership. The high end of the market - phones that retail for $300 or more in the US - is no longer Nokia's. Samsung makes the expensive camera phone that a young consumer wants to tell friends about.

Gapper argues that Nokia realizes how potentially serious is its predicament, even if its initial response - six of its 40 planned new models are clamshell-shaped - is a bit scatter-gun. But two obstacles stand in the way of its regaining authority. One (product design) should be soluble, given the company's heritage. The other (that Samsung is South Korean) will be harder to tackle, as other western companies are likely to find as well.

According to Gapper, design should be Nokia's forte, since it originally overtook Motorola by turning handsets into handsome and desirable consumer goods, rather than bland technological objects. Yet in its recent models, Nokia appears to have forgotten the first precept of modernist design - that form follows function. Instead, it has placed most emphasis on making its handsets colorful and zappy, with snap-on fascias.

Gapper argues that Nokia should be able to regain its poise in design. But Samsung has another advantage, which is more difficult for any European rival to counter: the willingness of young South Koreans to pay high prices for new electronic devices. In terms of access to broadband and telecommunications infrastructure, Samsung happens to be sitting in one of the world's most wired - and wireless - markets.

In the end, that is a bigger problem for Nokia than being ambushed by Samsung's designers. Design skills are transferable in a way demographics are not. Western companies often talk of Asia as a vast market waiting to be tapped, but Samsung has shown that it can bite back. Every western business executive visiting the continent probably experiences that fear: they're hot and we're not.

Bottom line

The narrative line is the same among consumers and analysts: Samsung is hot - Nokia is not. Whether people really need a camera in a cell phone, or a twisting flip-up screen that swivels back, or the capacity to have multiple musical tunes to be assigned to different callers, hardly matters. What really counts is whether customers and analysts are telling positive stories about these features. Regardless of the inherent quality of the products, the stories that customers and analysts tell about have a huge impact, first, on what people are thinking and talking about, then on sales, and then on profits and market share.

Read The Financial Times

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