The success of a company is determined by its ability to respond to crises, and this is demonstrated in the difference in preparation and reaction between Nokia and Ericsson after the New Mexico fire at Royal Philips electronics. The first difference between the two organizations is the caution they took after receiving the message from Philips. Whereas Nokia was extra careful in the steps they would take after realizing the issue, Ericsson was not moved by the potential problems. Nokia improved the monitoring of the various parts of the chips manufactured by Philips in New Mexico to at least once a weak. The incident gave Nokia reasons not to fully trust the products produced by Philips. Ericsson, on the other hand, was reluctant and never observed any problems with the chips developed by Philips and believed that the company would solve the manufacturing problem soon.
Similarly, Nokia reacted quite faster compared to Ericsson regarding the period they both took to seek alternatives. Since Nokia had a connection with one of Philips’s suppliers, Mr. Makki, the company was informed that it would take more than a week to deal with the issue. Consequently, they immediately resorted to new plans while they waited, such as redesigning the chips to be manufactured by non-Philips companies. Contrarily, it took Ericsson the whole month of March to realize the delay would lead to losses. However, it was too late for the company to consider options. As a result, Nokia benefited from their swift reactions with a 42% profit increase by the third quarter of 2000. On the other hand, Ericsson reported an operating loss worth $200 million in the second quarter.
