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Nokia and Motorola vs. Telsim

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Nokia and Motorola vs. Telsim

Question 1

The entry of Motorola into the Turkish telecommunication industry was intended to fasten growth and increase profitability. However, its decision to loan Telsim $2 billion was a strategic mistake that eventually made it incur huge losses. Foremost, the value of the venture was exaggerated because a company like Eriksson was efficiently undertaking a similar form of investment in multiple countries, all at a total cost of $2 billion. Secondly, Motorola succumbed to the pressure of joining the crowd thinking bandwagon of the late 1990s. During this period, many companies in the information and communication sector attained fast growth through vendor financing. Similarly, Motorola thought it could increase its global market share in Europe and the Middle East by sponsoring Telsim. However, it ignored to examine the background of its new partner, as well as the political instability of Turkey. Finally, subsequent mismanagement of the company and the failed involvement of its owners in the shaky politics of the country forced Motorola to write off the contract.

Also, by deciding to follow the reigning business practices, the company perhaps overlooked other more risky, but high return alternatives. For instance, the company should have considered implementing a foreign direct investment. Even though this model is precarious, it would have assured the company full control of its resources. Moreover, it would have become the sole beneficiary of all the profits generated from the initiative.

Question 2  

The Turkey Savings Insurance Fund (TMSF) decided to share the funds it obtained from the sale of Telsim with Nokia and Motorola because of two reasons. First, the orders issued by various international courts authorizing the two companies to seek their money compulsorily were still in force by 2005. Secondly, Turkey’s pursuit of official membership in the European Union (EU) compelled it to cooperate with the corporations. In doing so, it wanted to appear liberal to the other members of the organization.

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