Case Study on Swot Analysis
Nokia-Microsoft’s Strategic Alliance
Introduction:
Nokia was founded in 1865 in Finland as a communication and IT corporation. The company started as a ground wood pulp mill and expanded their business with the generation of electricity by the end of the century. The company started to produce telegraph and electrical cables in the beginning of 1900s. But after the World War I the company was on the verge of becoming insolvent. That was when the Nokia shifted to the business of Rubber Manufacturing.
By 1978 Nokia was set up to develop a digital phone network. In 1981, Scandinavia had already developed a Car phone network. In 1994, Nokia introduced the 2100 series phones. This innovation brought a boom in the market as Nokia succeeded in selling 20 Million phones worldwide. Since then there was no looking back and Nokia became the World Leader by 1998 in the Cell Phone industry. There was a huge escalation in the turnover of Nokia from €6.5bn to €31bn between the periods of 1996-2001. Nokia launched its first phone with a built-in-camera Win 2001 known as Nokia 7650. Nokia introduced the first 3G phone known as Nokia 6650. Browsing the web, downloading and surfing became trouble-free. When the “Smartphone” era struck the market, Nokia came up with its own version Nokia 9210. The phone consisted of various engaging features like using MS office.
Generally, the Nokia phones operated on the Symbian Version. Most of its phones like Nokia 7650, 3600, 3620 etc. operate on the Symbian S60 version.
The biggest threat to the Nokia arose when Apple ingressed the market with its iPhone in 2007. With this Apple brought a new era of Smartphones in the market. The market was hugely affected by the entry of the iOS version in the market. Nokia could not cope up with the innovation in the market and could not come up with a better strategy or version to compete the other companies. In September, 2008; Google launched its Andriod OS which was yet another innovation in the market. This led to a huge shift in the market share of Nokia to other companies like Apple and Samsung.
Nokia failed to cope up with the market changes and hence there was a huge downfall in its revenue. Hence Nokia came into a Strategic Alliance with Microsoft to gain back share in the market.
The need for the strategic alliance was from both the sides. Microsoft and Nokia were losing shares in their respective markets. Thus, they needed to come together to launch a product which was viable, feasible and innovative.
The increasing sale of the Smart phones and tablets led to a decrease in the sale of the PCs and Laptops and thus rendered a huge decline in the selling of the Microsoft products. That is when Microsoft needed to come up with a more efficient technique to make a comeback in the market.
At the same time, Nokia was facing a decline in the market. Thus, these two companies came together to build Windows Phones. This alliance was beneficial for both of them. This strategic alliance took place in 2011. Microsoft provided its Windows OS to Nokia for its Windows Phones. This was a huge blow to the market.
Microsoft constantly provided the “Platform Support Payments” to Nokia to carry out its activities. This payment amounted to USD250 Million every quarter. In return, Nokia had to pay the Royalty payments to Microsoft for using the software. This Royalty was based on the number of Cell phones sold every year. Microsoft did not give Nokia the license to use its technology though it allowed customization. Throughout the alliance, none of the companies purchased equity shares in each other’s company. By 2013, the royalty payments made by Nokia to Microsoft exceeded the support payments made by Microsoft to Nokia. The alliance was a result of the need of each other. The Strategic Alliance was based on achieving the strategized common goals of both the companies that would benefit both.
The objective of Collaboration:
The Nokia-Microsoft Strategic Alliance had some objectives which were:
- To increase the sale of Window Phones and increasing manufacturing capacity,
- Fostering demand for Window Phones,
- Integration of Products of Nokia and Microsoft; and
- Increasing the Revenue of Sustainable profit for the prevalence of the companies in the market.
Both the companies had large expectations from this alliance and they hoped to capture market yet again.
Analysis:
The analysis of the conditions and the business management of Nokia in 2011 accounted for as follows:
SWOT ANALYSIS:
Strengths
- Dominant market shares of entry-level feature phones and Symbian smartphones in most developed and emerging markets.
- Strong brand awareness across the globe.
- The high reputation of industrial hardware design, build quality and voice quality.
- Customers have high brand loyalty.
- Established great relationship and bill payment arrangement with mobile network carriers around the globe.
- Established extensive regional sales and marketing networks around the globe.
- Strong research and development teams; lots of market disruptive innovations happening.
- Software development teams embrace openness.
Weaknesses
- Inward-looking and short-sighted vision.
- Organizational bureaucracy; too many approval processes.
- Failure to establish effective communications between teams.
- Nokia had long product development procedures. These procedures made it latent in the industry and it lacked behind.
- The Symbian phones were not able to fulfill the customer needs anymore. The consumers needed innovation but Nokia highly relied on the working of Symbian and hoped that it will strike the market.
- Finnish-only board of directors and CEO.
- Failed to commercialize R&D outcomes.
- Recent low stability of Symbian software impairs brand reputation.
Opportunities
- Nokia can take the advantage y meeting the specific requirement of the consumers. It can create a revolution by addressing the needs of the customers.
- If Nokia comes into other handshakes with the mobile ecosystem, it could revolutionize the market and bend it in its favor. It could have helped the business to earn more revenue.
- Disruptive smartphone features, such as the superb camera and imaging technologies, could be Nokia’s key competitive advantage.
- Nokia could have explored and used those markets where the Apple and Android were not dominating the market. It could have used the opportunity to establish itself in the new markets.
Threats
- Nokia faced a huge competition from the other established brands like Google, Apple, and Android etc.
- Nokia due to being the largest market shareholder in the world, the customers had huge expectations from it that it will bring innovation and quality to the consumers.
- Nokia had the largest market share of the feature phones in the industry. But due to the coming up of other companies, the share of Nokia fell and it was no longer in the competition.
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