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Microsoft and Nokia Alliance

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Microsoft and Nokia Alliance

Diversification Mode

Microsoft and Nokia first announced their strategic alliance to make mobile devices on February 11th, 2011 (Lam 3). In the deal, the latter was required to use the former’s Windows operating system (OS) to produce its smartphone products. Eventually, their collaboration led to Microsoft’s formal acquisition of Nokia’s Device and Service segment on September 3rd, 2013 (Ali-Yrkkö et al. 2). The main reason the initial partnership transcended into a purchase was because Microsoft realized that it needed to adopt an in-house manufacturing policy, similar to the one used by successful smartphone producers such as Apple. To sum up, the deal cost the acquirer €5.44 billion.

Reasons for the Acquisition

The leading factor behind the agreement was the need to outmuscle the rivalry waged by Google and Apple (Singh 608). Before 2007, Microsoft and Nokia were convincingly the embodiment of ingenuity and engineering success in the handset market. However, the 2007 advent of the iPhone by Apple, and the subsequent introduction of Android by Google in 2008 tilted the scales in favor of the new entrants (Lam 3). Soon, the market share for both Microsoft and Nokia dwindled significantly. To reenergize themselves, they decided to form a union that could capitalize on their synergy. In particular, Microsoft wanted to utilize Nokia’s expansive market reach and customer loyalty to sell its unpopular Windows OS. After showing good signals of improvement, the former decided to undertake a full takeover to cement a possible comeback.

Sustainability

Personally, I think the takeover is one of the best tactical decisions Microsoft has implemented in recent history. After the pact, the company’s sales of handsets showed a sign of recovery, more especially in the Lumia category. Moreover, the company still boasts of intellectual assets such as MS Word and MS Excel customized to its acquired mobile devices. For this reason, the diversification has the potential of sustaining short-term rivalry to allow the company search for better long-term solutions.

Works Cited

Ali-Yrkkö, Jyrki, Matias Kalm, Mika Pajarinen, Petri Rouvinen, Timo Seppälä, and Antti-Jussi Tahvanainen. “Microsoft Acquires Nokia: Implications for the Two Companies and Finland.” ETLA Brief 16.3 (2013): 1-6.

Lam, Amanda H. C. “The Microsoft-Nokia Strategic Alliance.” University of Warwick, 2014. Web.

Singh, Netra Pal. “Microsoft Acquired Nokia in Unipolar Operating System Market.” Independent Journal of Management & Production 5.3 (2014): 598-622.

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