Each company, organization or institution faces various challenges when it comes to running its daily operations. Some of the challenges encountered include diseconomies of the scale, transport costs, and market share among others. To cope with these challenges, alliances are made with other companies or organizations offering better deals in areas where the initial organization is failing. The alliance is like symbiosis since both organizations benefit from each other. In the recent years, Nokia, a cell phone company, has been deteriorating regarding the market share. Microsoft, another tech organization, has also not had much success concerning the market share in the mobile phone sector. To combat these challenges faced by both organizations, an alliance was made by both companies in a bid to acquire market share in the global smartphone industry. This move, though, a brilliant one, came late as far as the smartphone market share is concerned. Thus, this paper aims at providing a profound analysis on the Nokia- Microsoft alliance as well as distinguishing the mistakes made by two companies and the possible ways of dealing with them.
Nokia was formed in 1865 operating as a paper mill. Over the years, Nokia has shown success in other fields including rubber products such as tires and boots, telecommunication infrastructure equipment, cable, and mobile devices. Each sector gave rise to Nokia, changing it from a Finnish-focused company to being a company with a tangible European presence in the 80s, to acquiring the European market in the 90s, and finally being a global competitor in the mid-90s. From 1998, Nokia became the world leader in the sale of GSM phones and had held the position over a decade. Throughout its mobile phone production, Nokia was using the Symbian operating system. In 2011, however, Nokia abandoned the Symbian operating system for Microsoft’s Windows platform. Further, Nokia launched one of its best phones, the Nokia Lumia 1020 with a 41-megapixel camera.
The founder of Microsoft was Bill Gates who established it in 1975. In 1981, IBM used Microsoft’s new 16-bit operating system in its new personal computer, the MS-DOS 1.0. Since then, Microsoft has had an incremental model of improving its Windows platform. Microsoft has over the years concentrated all its effort on the production of software for computers. However, in 2005, that trend changed with the introduction of Xbox 360, Microsoft’s entertainment and gaming console. A more concrete shift to the smartphone industry was made in 2010 with the launch of Windows Phone 7. The year 2013 was the one that saw the announcement that Microsoft had acquired Nokia’s services business, mapping services, license Nokia’s patents, and Nokia’s devices.
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As the result, various challenges led to the formation of the alliance. Firstly, Nokia had lost the market share that it previously possessed in the mobile phone industry, which was attributed to its aging technology. Secondly, Microsoft wanted to experience a new smartphone market with the introduction of the Windows phone technology. The alliance would be beneficial for both companies. Moreover, it would mean a global expansion for two companies as well as offer the right tools and infrastructure for them to be competitive in the growing smartphone industry. After the Alliance, the Nokia Lumia was released to the market with the new Windows Phone platform.
The alliance between Nokia and Microsoft was driven by several motivations. First of all, both companies wanted to share any of the costs of production and risks in the market. The development of new products and processes would also be shared between them. Another motivation was to gain entry to the new industry (Microsoft) while Nokia wanted to consolidate the market share that it had previously lost. According to Lee (2013), Microsoft would be able to compete with its counterparts Google and Apple’s mobile ecosystems through this alliance with Nokia.
In the result, various lessons can be learned for the future application to ensure a possible success during the alliance. To make it successful, an organization should choose a partner whose goals and objectives are compatible with their own, and who through synergies can combine their infrastructure, technologies, and even market share for a better placement in the specific industry. Furthermore, the chosen organization should possess complementary skills, market, and products, which means that each organization forming an alliance should bring something to the table. During the alliance, various aspects should be dealt with, for example, handling the shared technology. Finally, during an alliance organizations need to know that most alliances are usually short term. Once the partner(s) of the Alliance feel that they are comfortable to make it in the industry on their own, then the alliance breaks (Deresky, 2014).
Consequently, this alliance can stop functioning according to the SWOT analysis. Various strengths were seen from the alliance such as the synergy between two companies; hence, this was a win-win strategy for both of them. Nokia still possessed a large market share in Indian Mobile Industries holding a 27.7% of the market share. Therefore, Nokia was a strong platform for Microsoft to utilize if it wanted to gain the Indian market. In addition, Nokia’s Lumia brand had already picked in the market as a new commodity and was bringing good returns to the table. The alliance made a strong supply chain for shipment possible. More than 80% of Windows phones were sold on the small market share possessed by Nokia. However, weaknesses included a shrink in the market share for both companies since the deal was introduced late when the market was already captured and due to the market share, developers were not attracted to develop the platform. Opportunities that were revealed during the alliance involved acquiring the Indian market for windows, optimizing resources in such a way bringing large economies of scale, and changing of Microsoft core system to new hardware. Finally, the threats to the alliance embraced a cut throat competition and a loss of market share.
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In order to achieve better results, the alliance should have performed various improvements. Firstly, mutual trust between two companies should have been enhanced to foster better-working conditions. According to Lam (2014), Microsoft blamed Nokia for not sharing and hiding the key information of the products they wanted to release to the market, which hindered collaboration between these companies. If both organizations trusted each other and shared this type of information, then greater heights of success could have been reached. Another area of improvement would have been focusing more on Nokia in terms of Windows platform. Microsoft had a diverse software business with most of the income coming from its desktop version of Windows. Therefore, Microsoft did not make an exclusive deal with Nokia meaning that other smartphone manufacturers were free to use the Windows Phone platform with their mobile devices. Another area of concern was the Windows ecosystem. During the launch of the first Windows Phone, Microsoft promised regular updates and fixing bugs. However, they did not accomplish this objective. Additionally, there were major issues regarding the ecosystem such as the lack of crucial apps in the app store and other platform problems. To improve this, a better environment should have been enhanced to lure mobile developers to develop the ecosystem.
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In conclusion, any alliance between two organizations, regardless of the type, is complicated. The alliance between Microsoft and Nokia was successful in achieving a part of the goals set by two companies such as the global reach of the Windows Phone platform and an increase in the market share. However, an unrecoverable price was paid by these two companies leading to the acquisition of Devices and Service business by Microsoft and the cash flow crisis by Nokia. Lastly, the Alliance should have been planned well to attain high success levels by fixing various issues with the Windows platform, mutual trust between these two companies, and more focus on the alliance.