Strategy management
Content
Analysis of Strategic Alliance: Nokia – Microsoft
Strategic Management II Course
8/20/2012 MDI, Gurgaon
Submitted to: P Ramakrishnan
Section A - Group 4 Abhinav Sharma Amitesh Kamani Aseem Jagadev Balaji Kunjeti Nirmal P Prateek Singh Malhan Saurabh Bhandari 11P001 11P008 11P012 11P024 11P029 11P033 11P041
Table of Contents
Nokia - Microsoft Strategic Alliance.............................................................................................................. 3 Why the alliance was much needed? ....................................................................................................... 3 What‘s most important in US to be successful in mobile space? ............................................................. 3 Market share and revenues of different Mobile manufacturers.......................................................... 4 Market share of different Mobile OS –Globally .................................................................................... 4 Nokia – Microsoft Strategic Alliance Structure ......................................................................................... 5 How Nokia changes from the deal ................................................................................................................ 6 Advantages for Nokia ................................................................................................................................ 6 Disadvantages to Nokia ............................................................................................................................ 6 What is in for Microsoft in this deal.............................................................................................................. 7 Motivations to Microsoft .......................................................................................................................... 7 Disadvantages to Microsoft ...................................................................................................................... 8 Issues with the alliance ................................................................................................................................. 9 Organization structure of Nokia ............................................................................................................... 9 Cultural Issues ........................................................................................................................................... 9 Other issues .............................................................................................................................................. 9 Impact on the industry due to this Alliance ................................................................................................ 10 Future challenges ahead for this alliance ................................................................................................... 10 Bibliography ................................................................................................................................................ 11
Nokia - Microsoft Strategic Alliance
In 2011, Nokia and Microsoft were very happy to announce a strategic alliance between the two companies. Stephen Elop of Nokia described it as a step in building “new global mobile ecosystem”. Nokia will be producing smart phones running on Windows phone 7 OS. He further explained about the alliance in the press meet that “Nokia and Microsoft will combine our strengths to deliver an ecosystem with unrivalled global reach and scale. It’s now a three-horse race.” Of course, for any strategic alliance to work, both companies need to offer something that the other does not have (Sharing complementary resources). And according to Elop, this is exactly why the Nokia/Microsoft partnership makes sense. “Together, we have highly complementary assets and competences, allowing this ecosystem to achieve more than any other industry partnership could achieve”. Both the companies brought vital components to the alliance (Paul Thurrott, 2011). They had agreed to collaborate on joint marketing initiatives, share development plans and build products together.
Why the alliance was much needed?
As the numbers in the tables suggest, market share for Symbian was decreasing. In addition to it, sales of Nokia phones also started decreasing. Even though Nokia was the market leader, Apple and Android mobiles started grabbing market share of Nokia. Nokia was in need of a strategy that could make it regain its leadership position in the market. Nokia’s mass market for mass feature phones was under severe threat from cheap Chinese competitors. They thought it would be no easier down the line. From the other end, Microsoft wanted a stronghold in the mobile market, where it was not more than non-existing. If the deal was not fructified, Nokia would have been partnering with Google and it would have shut the doors for Microsoft into the mobile devices market. The deal would give a route to their aspirations.
What‘s most important in US to be successful in mobile space?
The importance can be explained with the Google-Carrier deal. Google's Nexus One, on the amazing Android OS which at the start of last year was the hottest thing going - and defeated both Apple and RIM - and at the time the Nexus One was a highly rated 'iPhone killer' but suddenly, US carriers decided not to subsidise the Nexus One, and Google killed the phone in 2 months. It was not the desirable OS, it was carrier relationship.
Market share and revenues of different Mobile manufacturers
Revenue ($ m)
2010 Market Share (%)
Q4 2010 Revenue ($ Market Share m) (%) 28 14 16 10 11 5 5 5 2 2 2
2009 Market Share (%) 39 20 15 5 4 4 3 2 2 2 4
100.3 34 28.3 Nokia 48 16 14.2 RIM 47.5 16 16.2 Apple 25 8 10.2 HTC 24 8 10.5 Samsung 13.7 5 4.9 Motorola Sony 9.5 3 5.2 Ericsson 7 2 4.7 LG 6.2 2 2 Fujitsu 5.2 2 1.7 Sharp 11.6 4 1.5 Others Source: Datamonitor, Mobile space market (Global)
Market share of different Mobile OS –Globally
Market Share (%) 2010 Nokia 38 Symbian Google 23 Android RIM 16 Blackberry Apple 16 iOS Microsoft 4 Windows Mobile Samsung 2 Bada LiMo Foundation 2 LiMo Microsoft 1 Phone 7 HP 0 Palm WebOS Source: Datamonitor, Mobile space market (Global)
Mobile OS
Company
2009 46 4 20 14 9 0 4 0 1
Nokia – Microsoft Strategic Alliance Structure
A combination of complementary assets, which make the partnership truly unique, including Nokia to deliver mapping, navigation, and certain location-based services to the Windows Phone ecosystem. Nokia will build innovation on top of the Windows Phone platform in areas such as imaging, while contributing expertise on hardware design and language support, and helping to drive the development of the Windows Phone platform. Microsoft will provide Bing search services across the Nokia device portfolio as well as contributing strength in productivity, advertising, gaming, social media and a variety of other services. The combination of navigation with advertising and search will enable better monetization of Nokia’s navigation assets and completely new forms of advertising revenue. Joint developer outreach and application sourcing, to support the creation of new local and global applications, including making Windows Phone developer registration free for all Nokia developers. Opening a new Nokia-branded global application store that leverages the Windows Marketplace infrastructure. Developers will be able to publish and distribute applications through a single developer portal to hundreds of millions of consumers that use Windows Phone, Symbian and Series 40 devices. Contribution of Nokia’s expertise in operator billing to ensure participants in the Windows Phone ecosystem can take advantage of Nokia’s billing agreements with 112 operators in 36 markets. Microsoft will receive a running royalty from Nokia for the Windows Phone platform, starting when the first Nokia products incorporating Windows Phone ship. The royalty payments are competitive and reflect the large volumes that Nokia expects to ship, as well as a variety of other considerations related to engineering work to which both companies are committed. Microsoft delivering the Windows Phone platform to Nokia will enable Nokia to significantly reduce operating expenses. In recognition of the unique nature of Nokia’s agreement with Microsoft and the contributions that Nokia is providing, Nokia will receive payments measured in the billions of dollars. With the definitive agreement now signed, both companies will begin engaging with operators, developers and other partners to help the industry understand the benefits of joining the new ecosystem. At the same time, work will continue on developing Nokia products on the Windows Phone platform, with the aim of securing volume device shipments in 2012. The scale of the mutual commitment from both companies is significant and is in keeping with the intention to build a new ecosystem based on a longterm, strategic partnership
How Nokia changes from the deal
Even in 2011, Nokia did not have a phone that could challenge apple’s iPhone. The increasing market share of Android OS was also posing a threat to Nokia. If there’s one positive aspect to this whole partnership for Nokia, it is that it is not just another OEM. Remember the words they used? “Strategic Alliance”. While companies like HTC, SE, etc will still make WP7 phones, Nokia is the only one so far that has been given permission to make changes to the UI. Nokia is more than an OEM. It is going to play an active role in the future direction of WP7. Of course, with Microsoft’s history of bad partnerships (HTC, Motorola, LG have all been disillusioned by Microsoft), the amount of say Nokia will have is suspect. But it is still a sweeter deal than what other companies have) (Nokia-Microsoft Strategic Alliance: Win-Win or LoseLose?, 2011) Nokia had to reorganize its structure. It divided its business into two business units: Smart devices and Mobile phones. Smart devices unit took care of producing windows mobiles while the latter took care of producing Nokia mobiles for mass market.
Advantages for Nokia
Nokia gets to pare down a bloated corporate structure. With a pared down structure, Nokia can focus, become more streamlined and potentially get a cut of future ad revenue via Bing and location based services Microsoft would continue to invest in the development of Windows phones Microsoft development tools would be used to develop applications for Windows phones Much easier and attractive customer experience using Microsoft marketplace Microsoft’s marketing budget can help Nokia break into the U.S. and open a new market Nokia would be paid for its intellectual property rights, which otherwise would not yield any income Microsoft have a powerful brand position in every country in the world, but especially in America where consumers have a patriotic feeling about the company and its founder Bill Gates. Because of this powerful position in the US, Nokia may have seen a way to increase their focus for the American market and regain their position as market leaders. The cooperation between Nokia and Microsoft will allow Nokia a new try at entering the American market, which they seem to have lost It can now differentiate itself from its competitors like Samsung, HTC, Sony Ericsson By terminating the Symbian platform and moving research in software and development from Nokia to Microsoft, the company will save $4 billion in yearly cost
Disadvantages to Nokia
Future of the windows phones is uncertain Many companies were already making applications for Symbian devices. Nokia have to develop this extensive network once again to sustain.
With this move, Nokia could be placing all its resources behind a losing mobile platform (Fern, 2011) 2 year transition to windows phone 7 may be a deterrent for NOKIA in the rapidly evolving smart phone segment Huge Trainings expenses need to be incurred to switch symbian DEV to work on Windows 7 platform Even though Windows Phone will be the primary operating system for Nokia in the future, they are forced to keep supplying Symbian based phones to demanding markets in Russia and China (Bloomberg, 2011). This shows how difficult world-based strategic decisions are and one decision may be correct for one market and may be wrong for another market. Nokia have to act now if they want to survive on the American market, but because of existing profits in other markets they have to keep developing and investing in an operating system which has an expiration date. Keep in mind that Nokia will only invest the absolute minimum in Symbian to keep it running Confidence and loyalty from its own internal employers has been lost , as many are laid off and many have to start again from scratch after gaining sufficient exp in symbian and QT Microsoft partnered with many mobile manufacturers (With Motorola, LG) in the past, but they proved failures. Timelines of the deal
What is in for Microsoft in this deal
Till then, Microsoft’s mobile strategy had been lackluster and tardy. For the first time, the sales of Smart phones were greater than those of PCs. Microsoft, which sells software to the PCs, felt a threat to its business. Microsoft was in search of an easy access route into mobile space which it was not able to do amid huge investments since last decade. Excellent mobile distribution network of Nokia in the developing nations provides the need to Microsoft. Every day around 1.3 b people communicate with one another using Nokia devices in the world (Microsoft News center, 2011). Nokia will contribute its expertise on hardware design, language support, and help bring Windows Phone to a larger range of price points, market segments and geographies
Motivations to Microsoft
An alliance with Nokia gives Microsoft access to the world’s largest phone maker and its huge mindshare—in many developing nations a mobile phone is known as a Nokia (Ben Rooney, 2011) Better monetization of Nokia’s navigation assets
It is now into two most prolific business segments ( PC and Mobile), where internet plays a key role and acts as a complement Microsoft gets distribution for its Windows Phone 7 OS The software giant dents what could have been mobile domination by Google Intellectual property possessed by Nokia in the mobile space Nokia maps would be a core part of Microsoft mapping process Nokia is the market leader in Imaging Microsoft will get more developers on board due to Nokia’s global distribution The US is a very important market for Microsoft and this deal will benefit the company on business areas like the Bing search engine, which will be expose to a huge amount of consumers which will be provided by Nokia. This is a huge business opportunity for Microsoft and their Xbox Live universe. Xbox Live is a gaming console where gamers are able to play online, and with the partnership with Nokia, users have the ability to stay connected 24 hours a day, as well as downloading games directly onto their smart phones. Microsoft will benefit from Nokia’s global reach and from the possibility for computer users to be connected with their Windows computer everywhere they go.
Disadvantages to Microsoft
This announcement also poses risks for Microsoft. It seems to elevate Nokia above Microsoft’s other handset partners, such as HTC. This may cause handset manufacturers, other than Nokia, to reallocate resources away from WP7 to Android development. The net effect is that Microsoft may reach just as many consumers with Nokia as it would with a broader array of partners
Issues with the alliance
Organization structure of Nokia
It is clear that Nokia could not adapt their global strategy to the American market. Nokia’s organization structure may block its success with the alliance. The size of Nokia could have been the reason for this problem, making it impossible to change the strategy set by top management. In large corporations like Nokia strategic decisions are made at absolute top management level and have to be applied for many years to come. (No flexible strategy by top management to counter attack competition)
Cultural Issues
Culturally, Nokia and Microsoft are very different. The biggest reason for cultural issue in this deal is difficulty for software and hardware companies to work together because of cultural differences and work styles. A look at the issues in Nokia’s culture that adversely impacts the strategic alliance between Microsoft and Nokia: A local Finnish culture, insulated from outsiders Managers who have worked for the business for their whole careers A masculine culture, with deals brokered in the sauna (the firm’s offices from Afghanistan to Zambia have been fitted with steam rooms) A lack of innovation and lengthy product development times A lack of focus, with too many products on the market Exclusively run by Finnish executives, and some of the senior executives deliberately keep foreign counterparts at arm’s length Microsoft, an American firm, would be a hard pill to swallow for many in the company whose are staunch supporters of Nokia
Other issues
As per CCS, there are no silver bullets, to drive out the tough competition from Apple and Android, with any of the companies (Matt Warman, 2011) As few analysts pointed out, is this alliance a precursor to a mega merger that happened as with Sony and Ericsson with the Japanese giant acquiring Swedish top mobile manufacturer. But past experiences suggest us that mega mergers is never an easy task. Whether the alliance has the ability to create a nimble competitor to Android and iOS is still questionable Risk of laying off employees Competitors could gain much as the deal restricts Nokia to concentrate on a differentiated product strategy (Windows phones) when the world is thriving with Android and iOS phones
Impact on the industry due to this Alliance
The success of the deal has the ability to change the dynamics of mobile strategy The International Data Corporation (IDC), an analytics company which monitors the market for smart phones, expects Windows Phone to be the second largest software provider for smart phones in the world, behind Android, based on the news of Nokia and Microsoft’s partnership (IDC, 2011). With the synergies between Nokia and Microsoft, they plan on creating the so called third mobile ecosystem (First two being Apple and Android) The Integration of Windows PC and Phone can bring a revolution in this industry. It will make much easier for people to be connected with their PC’s while travelling. Nokia’s overall idea of joining all Microsoft’s products and services is well aligned with the massive use of personal computers today. PCs are a part of our everyday life and Windows PC users have to realize the huge potential this cooperation may be in terms of synergies between their Smartphone and PC. If this is realized there is no doubt that Nokia will come back very strong on the American market. And there is no doubt that both Nokia and Microsoft will see massive growth in market shares in the coming years.
Future challenges ahead for this alliance
Windows Phone platform has been there for several years and had not been so successful. So now with the same architecture how it will succeed that remains to be seen How Nokia would integrate windows phone platform in its lower end products in the future that needs to be also seen Evolution of windows market –to match competitors like App Store and Android market How can Nokia sustain its 3 platforms ( Symbian, Meego and now windows phone platform) With Tablet market fiercely picking up, can MS sustain its PC business (so challenge here in would be to balance its resources towards mobile and PC) Investors reacted negatively to the announcement of the deal. Nokia’s stock fell in Finland stock exchange How swiftly can PC be integrated with Windows phones has to be observed Developers community shaping of interest in making apps for so many platforms (iOS, Android, RIM, and now Windows) Shelf space for all those different OS phones in a retail outlet(how it will be managed will be a big concern for retailers to avoid confusion among customers)
Bibliography
Ben Rooney. (2011, February 11). Analysis:Microsoft and Nokia embrace in Smartphone Alliance. Retrieved August 18, 2012, from TechEurope: http://blogs.wsj.com/tech-europe/2011/02/11/nokiaand-microsoft/ Fern, M. (2011, February 14). A Brief Assessment of the Microsoft-Nokia Alliance. Retrieved August 17, 2012, from Fern Strategy: http://fernstrategy.com/2011/02/14/a-brief-assessment-of-the-microsoftnokia-alliance/ Matt Warman. (2011, February 11). Nokia announces Microsoft deal. Retrieved August 19, 2012, from The Telegraph: http://www.telegraph.co.uk/technology/nokia/8317896/Nokia-announces-Microsoftdeal.html Microsoft News center. (2011, February 10). Nokia and Microsoft Announce Plans for a Broad Strategic Partnership to Build a New Global Mobile Ecosystem. Retrieved August 19, 2012, from Microsoft News center: http://www.microsoft.com/en-us/news/press/2011/feb11/02-11partnership.aspx Nokia-Microsoft Strategic Alliance: Win-Win or Lose-Lose? (2011, February 13). Retrieved August 17, 2012, from TechWench: http://www.techwench.com/nokia-microsoft-strategic-alliance-win-win-orlose-lose/ Paul Thurrott. (2011, February 12). Nokia + Microsoft: An Analysis Of The Strategic Alliance. Retrieved August 17, 2012, from Supersite for Widows: http://www.winsupersite.com/article/windows-phone7/nokia-microsoft-an-analysis-of-the-strategic-alliance Tomi T Ahonen. (2011, February 11). First Analysis of Nokia-Microsoft Alliance - Wow this is good for Microsoft. Retrieved August 17, 2012, from Communities dominate brands: http://communitiesdominate.blogs.com/brands/2011/02/first-analysis-of-nokia-microsoft-alliance-wow-this-is-good-formicrosoft.html
Strategic Management II Course
8/20/2012 MDI, Gurgaon
Submitted to: P Ramakrishnan
Section A - Group 4 Abhinav Sharma Amitesh Kamani Aseem Jagadev Balaji Kunjeti Nirmal P Prateek Singh Malhan Saurabh Bhandari 11P001 11P008 11P012 11P024 11P029 11P033 11P041
Table of Contents
Nokia - Microsoft Strategic Alliance.............................................................................................................. 3 Why the alliance was much needed? ....................................................................................................... 3 What‘s most important in US to be successful in mobile space? ............................................................. 3 Market share and revenues of different Mobile manufacturers.......................................................... 4 Market share of different Mobile OS –Globally .................................................................................... 4 Nokia – Microsoft Strategic Alliance Structure ......................................................................................... 5 How Nokia changes from the deal ................................................................................................................ 6 Advantages for Nokia ................................................................................................................................ 6 Disadvantages to Nokia ............................................................................................................................ 6 What is in for Microsoft in this deal.............................................................................................................. 7 Motivations to Microsoft .......................................................................................................................... 7 Disadvantages to Microsoft ...................................................................................................................... 8 Issues with the alliance ................................................................................................................................. 9 Organization structure of Nokia ............................................................................................................... 9 Cultural Issues ........................................................................................................................................... 9 Other issues .............................................................................................................................................. 9 Impact on the industry due to this Alliance ................................................................................................ 10 Future challenges ahead for this alliance ................................................................................................... 10 Bibliography ................................................................................................................................................ 11
Nokia - Microsoft Strategic Alliance
In 2011, Nokia and Microsoft were very happy to announce a strategic alliance between the two companies. Stephen Elop of Nokia described it as a step in building “new global mobile ecosystem”. Nokia will be producing smart phones running on Windows phone 7 OS. He further explained about the alliance in the press meet that “Nokia and Microsoft will combine our strengths to deliver an ecosystem with unrivalled global reach and scale. It’s now a three-horse race.” Of course, for any strategic alliance to work, both companies need to offer something that the other does not have (Sharing complementary resources). And according to Elop, this is exactly why the Nokia/Microsoft partnership makes sense. “Together, we have highly complementary assets and competences, allowing this ecosystem to achieve more than any other industry partnership could achieve”. Both the companies brought vital components to the alliance (Paul Thurrott, 2011). They had agreed to collaborate on joint marketing initiatives, share development plans and build products together.
Why the alliance was much needed?
As the numbers in the tables suggest, market share for Symbian was decreasing. In addition to it, sales of Nokia phones also started decreasing. Even though Nokia was the market leader, Apple and Android mobiles started grabbing market share of Nokia. Nokia was in need of a strategy that could make it regain its leadership position in the market. Nokia’s mass market for mass feature phones was under severe threat from cheap Chinese competitors. They thought it would be no easier down the line. From the other end, Microsoft wanted a stronghold in the mobile market, where it was not more than non-existing. If the deal was not fructified, Nokia would have been partnering with Google and it would have shut the doors for Microsoft into the mobile devices market. The deal would give a route to their aspirations.
What‘s most important in US to be successful in mobile space?
The importance can be explained with the Google-Carrier deal. Google's Nexus One, on the amazing Android OS which at the start of last year was the hottest thing going - and defeated both Apple and RIM - and at the time the Nexus One was a highly rated 'iPhone killer' but suddenly, US carriers decided not to subsidise the Nexus One, and Google killed the phone in 2 months. It was not the desirable OS, it was carrier relationship.
Market share and revenues of different Mobile manufacturers
Revenue ($ m)
2010 Market Share (%)
Q4 2010 Revenue ($ Market Share m) (%) 28 14 16 10 11 5 5 5 2 2 2
2009 Market Share (%) 39 20 15 5 4 4 3 2 2 2 4
100.3 34 28.3 Nokia 48 16 14.2 RIM 47.5 16 16.2 Apple 25 8 10.2 HTC 24 8 10.5 Samsung 13.7 5 4.9 Motorola Sony 9.5 3 5.2 Ericsson 7 2 4.7 LG 6.2 2 2 Fujitsu 5.2 2 1.7 Sharp 11.6 4 1.5 Others Source: Datamonitor, Mobile space market (Global)
Market share of different Mobile OS –Globally
Market Share (%) 2010 Nokia 38 Symbian Google 23 Android RIM 16 Blackberry Apple 16 iOS Microsoft 4 Windows Mobile Samsung 2 Bada LiMo Foundation 2 LiMo Microsoft 1 Phone 7 HP 0 Palm WebOS Source: Datamonitor, Mobile space market (Global)
Mobile OS
Company
2009 46 4 20 14 9 0 4 0 1
Nokia – Microsoft Strategic Alliance Structure
A combination of complementary assets, which make the partnership truly unique, including Nokia to deliver mapping, navigation, and certain location-based services to the Windows Phone ecosystem. Nokia will build innovation on top of the Windows Phone platform in areas such as imaging, while contributing expertise on hardware design and language support, and helping to drive the development of the Windows Phone platform. Microsoft will provide Bing search services across the Nokia device portfolio as well as contributing strength in productivity, advertising, gaming, social media and a variety of other services. The combination of navigation with advertising and search will enable better monetization of Nokia’s navigation assets and completely new forms of advertising revenue. Joint developer outreach and application sourcing, to support the creation of new local and global applications, including making Windows Phone developer registration free for all Nokia developers. Opening a new Nokia-branded global application store that leverages the Windows Marketplace infrastructure. Developers will be able to publish and distribute applications through a single developer portal to hundreds of millions of consumers that use Windows Phone, Symbian and Series 40 devices. Contribution of Nokia’s expertise in operator billing to ensure participants in the Windows Phone ecosystem can take advantage of Nokia’s billing agreements with 112 operators in 36 markets. Microsoft will receive a running royalty from Nokia for the Windows Phone platform, starting when the first Nokia products incorporating Windows Phone ship. The royalty payments are competitive and reflect the large volumes that Nokia expects to ship, as well as a variety of other considerations related to engineering work to which both companies are committed. Microsoft delivering the Windows Phone platform to Nokia will enable Nokia to significantly reduce operating expenses. In recognition of the unique nature of Nokia’s agreement with Microsoft and the contributions that Nokia is providing, Nokia will receive payments measured in the billions of dollars. With the definitive agreement now signed, both companies will begin engaging with operators, developers and other partners to help the industry understand the benefits of joining the new ecosystem. At the same time, work will continue on developing Nokia products on the Windows Phone platform, with the aim of securing volume device shipments in 2012. The scale of the mutual commitment from both companies is significant and is in keeping with the intention to build a new ecosystem based on a longterm, strategic partnership
How Nokia changes from the deal
Even in 2011, Nokia did not have a phone that could challenge apple’s iPhone. The increasing market share of Android OS was also posing a threat to Nokia. If there’s one positive aspect to this whole partnership for Nokia, it is that it is not just another OEM. Remember the words they used? “Strategic Alliance”. While companies like HTC, SE, etc will still make WP7 phones, Nokia is the only one so far that has been given permission to make changes to the UI. Nokia is more than an OEM. It is going to play an active role in the future direction of WP7. Of course, with Microsoft’s history of bad partnerships (HTC, Motorola, LG have all been disillusioned by Microsoft), the amount of say Nokia will have is suspect. But it is still a sweeter deal than what other companies have) (Nokia-Microsoft Strategic Alliance: Win-Win or LoseLose?, 2011) Nokia had to reorganize its structure. It divided its business into two business units: Smart devices and Mobile phones. Smart devices unit took care of producing windows mobiles while the latter took care of producing Nokia mobiles for mass market.
Advantages for Nokia
Nokia gets to pare down a bloated corporate structure. With a pared down structure, Nokia can focus, become more streamlined and potentially get a cut of future ad revenue via Bing and location based services Microsoft would continue to invest in the development of Windows phones Microsoft development tools would be used to develop applications for Windows phones Much easier and attractive customer experience using Microsoft marketplace Microsoft’s marketing budget can help Nokia break into the U.S. and open a new market Nokia would be paid for its intellectual property rights, which otherwise would not yield any income Microsoft have a powerful brand position in every country in the world, but especially in America where consumers have a patriotic feeling about the company and its founder Bill Gates. Because of this powerful position in the US, Nokia may have seen a way to increase their focus for the American market and regain their position as market leaders. The cooperation between Nokia and Microsoft will allow Nokia a new try at entering the American market, which they seem to have lost It can now differentiate itself from its competitors like Samsung, HTC, Sony Ericsson By terminating the Symbian platform and moving research in software and development from Nokia to Microsoft, the company will save $4 billion in yearly cost
Disadvantages to Nokia
Future of the windows phones is uncertain Many companies were already making applications for Symbian devices. Nokia have to develop this extensive network once again to sustain.
With this move, Nokia could be placing all its resources behind a losing mobile platform (Fern, 2011) 2 year transition to windows phone 7 may be a deterrent for NOKIA in the rapidly evolving smart phone segment Huge Trainings expenses need to be incurred to switch symbian DEV to work on Windows 7 platform Even though Windows Phone will be the primary operating system for Nokia in the future, they are forced to keep supplying Symbian based phones to demanding markets in Russia and China (Bloomberg, 2011). This shows how difficult world-based strategic decisions are and one decision may be correct for one market and may be wrong for another market. Nokia have to act now if they want to survive on the American market, but because of existing profits in other markets they have to keep developing and investing in an operating system which has an expiration date. Keep in mind that Nokia will only invest the absolute minimum in Symbian to keep it running Confidence and loyalty from its own internal employers has been lost , as many are laid off and many have to start again from scratch after gaining sufficient exp in symbian and QT Microsoft partnered with many mobile manufacturers (With Motorola, LG) in the past, but they proved failures. Timelines of the deal
What is in for Microsoft in this deal
Till then, Microsoft’s mobile strategy had been lackluster and tardy. For the first time, the sales of Smart phones were greater than those of PCs. Microsoft, which sells software to the PCs, felt a threat to its business. Microsoft was in search of an easy access route into mobile space which it was not able to do amid huge investments since last decade. Excellent mobile distribution network of Nokia in the developing nations provides the need to Microsoft. Every day around 1.3 b people communicate with one another using Nokia devices in the world (Microsoft News center, 2011). Nokia will contribute its expertise on hardware design, language support, and help bring Windows Phone to a larger range of price points, market segments and geographies
Motivations to Microsoft
An alliance with Nokia gives Microsoft access to the world’s largest phone maker and its huge mindshare—in many developing nations a mobile phone is known as a Nokia (Ben Rooney, 2011) Better monetization of Nokia’s navigation assets
It is now into two most prolific business segments ( PC and Mobile), where internet plays a key role and acts as a complement Microsoft gets distribution for its Windows Phone 7 OS The software giant dents what could have been mobile domination by Google Intellectual property possessed by Nokia in the mobile space Nokia maps would be a core part of Microsoft mapping process Nokia is the market leader in Imaging Microsoft will get more developers on board due to Nokia’s global distribution The US is a very important market for Microsoft and this deal will benefit the company on business areas like the Bing search engine, which will be expose to a huge amount of consumers which will be provided by Nokia. This is a huge business opportunity for Microsoft and their Xbox Live universe. Xbox Live is a gaming console where gamers are able to play online, and with the partnership with Nokia, users have the ability to stay connected 24 hours a day, as well as downloading games directly onto their smart phones. Microsoft will benefit from Nokia’s global reach and from the possibility for computer users to be connected with their Windows computer everywhere they go.
Disadvantages to Microsoft
This announcement also poses risks for Microsoft. It seems to elevate Nokia above Microsoft’s other handset partners, such as HTC. This may cause handset manufacturers, other than Nokia, to reallocate resources away from WP7 to Android development. The net effect is that Microsoft may reach just as many consumers with Nokia as it would with a broader array of partners
Issues with the alliance
Organization structure of Nokia
It is clear that Nokia could not adapt their global strategy to the American market. Nokia’s organization structure may block its success with the alliance. The size of Nokia could have been the reason for this problem, making it impossible to change the strategy set by top management. In large corporations like Nokia strategic decisions are made at absolute top management level and have to be applied for many years to come. (No flexible strategy by top management to counter attack competition)
Cultural Issues
Culturally, Nokia and Microsoft are very different. The biggest reason for cultural issue in this deal is difficulty for software and hardware companies to work together because of cultural differences and work styles. A look at the issues in Nokia’s culture that adversely impacts the strategic alliance between Microsoft and Nokia: A local Finnish culture, insulated from outsiders Managers who have worked for the business for their whole careers A masculine culture, with deals brokered in the sauna (the firm’s offices from Afghanistan to Zambia have been fitted with steam rooms) A lack of innovation and lengthy product development times A lack of focus, with too many products on the market Exclusively run by Finnish executives, and some of the senior executives deliberately keep foreign counterparts at arm’s length Microsoft, an American firm, would be a hard pill to swallow for many in the company whose are staunch supporters of Nokia
Other issues
As per CCS, there are no silver bullets, to drive out the tough competition from Apple and Android, with any of the companies (Matt Warman, 2011) As few analysts pointed out, is this alliance a precursor to a mega merger that happened as with Sony and Ericsson with the Japanese giant acquiring Swedish top mobile manufacturer. But past experiences suggest us that mega mergers is never an easy task. Whether the alliance has the ability to create a nimble competitor to Android and iOS is still questionable Risk of laying off employees Competitors could gain much as the deal restricts Nokia to concentrate on a differentiated product strategy (Windows phones) when the world is thriving with Android and iOS phones
Impact on the industry due to this Alliance
The success of the deal has the ability to change the dynamics of mobile strategy The International Data Corporation (IDC), an analytics company which monitors the market for smart phones, expects Windows Phone to be the second largest software provider for smart phones in the world, behind Android, based on the news of Nokia and Microsoft’s partnership (IDC, 2011). With the synergies between Nokia and Microsoft, they plan on creating the so called third mobile ecosystem (First two being Apple and Android) The Integration of Windows PC and Phone can bring a revolution in this industry. It will make much easier for people to be connected with their PC’s while travelling. Nokia’s overall idea of joining all Microsoft’s products and services is well aligned with the massive use of personal computers today. PCs are a part of our everyday life and Windows PC users have to realize the huge potential this cooperation may be in terms of synergies between their Smartphone and PC. If this is realized there is no doubt that Nokia will come back very strong on the American market. And there is no doubt that both Nokia and Microsoft will see massive growth in market shares in the coming years.
Future challenges ahead for this alliance
Windows Phone platform has been there for several years and had not been so successful. So now with the same architecture how it will succeed that remains to be seen How Nokia would integrate windows phone platform in its lower end products in the future that needs to be also seen Evolution of windows market –to match competitors like App Store and Android market How can Nokia sustain its 3 platforms ( Symbian, Meego and now windows phone platform) With Tablet market fiercely picking up, can MS sustain its PC business (so challenge here in would be to balance its resources towards mobile and PC) Investors reacted negatively to the announcement of the deal. Nokia’s stock fell in Finland stock exchange How swiftly can PC be integrated with Windows phones has to be observed Developers community shaping of interest in making apps for so many platforms (iOS, Android, RIM, and now Windows) Shelf space for all those different OS phones in a retail outlet(how it will be managed will be a big concern for retailers to avoid confusion among customers)
Bibliography
Ben Rooney. (2011, February 11). Analysis:Microsoft and Nokia embrace in Smartphone Alliance. Retrieved August 18, 2012, from TechEurope: http://blogs.wsj.com/tech-europe/2011/02/11/nokiaand-microsoft/ Fern, M. (2011, February 14). A Brief Assessment of the Microsoft-Nokia Alliance. Retrieved August 17, 2012, from Fern Strategy: http://fernstrategy.com/2011/02/14/a-brief-assessment-of-the-microsoftnokia-alliance/ Matt Warman. (2011, February 11). Nokia announces Microsoft deal. Retrieved August 19, 2012, from The Telegraph: http://www.telegraph.co.uk/technology/nokia/8317896/Nokia-announces-Microsoftdeal.html Microsoft News center. (2011, February 10). Nokia and Microsoft Announce Plans for a Broad Strategic Partnership to Build a New Global Mobile Ecosystem. Retrieved August 19, 2012, from Microsoft News center: http://www.microsoft.com/en-us/news/press/2011/feb11/02-11partnership.aspx Nokia-Microsoft Strategic Alliance: Win-Win or Lose-Lose? (2011, February 13). Retrieved August 17, 2012, from TechWench: http://www.techwench.com/nokia-microsoft-strategic-alliance-win-win-orlose-lose/ Paul Thurrott. (2011, February 12). Nokia + Microsoft: An Analysis Of The Strategic Alliance. Retrieved August 17, 2012, from Supersite for Widows: http://www.winsupersite.com/article/windows-phone7/nokia-microsoft-an-analysis-of-the-strategic-alliance Tomi T Ahonen. (2011, February 11). First Analysis of Nokia-Microsoft Alliance - Wow this is good for Microsoft. Retrieved August 17, 2012, from Communities dominate brands: http://communitiesdominate.blogs.com/brands/2011/02/first-analysis-of-nokia-microsoft-alliance-wow-this-is-good-formicrosoft.html
