International Negotiation Case Study: Microsoft and Nokia Deal Manuel Nicolas Rodriguez León Cod: 20110!" #$e Microsoft Is %aying &S'()1*+n ,or #$e -c.uisition /f Nokias o+ile one di3isión and atents) Introduction
The acquisition of Nokia by Microsoft has been one of the biggest negotiatio negotiations ns in the last years between between big companies companies in the world. But, who are those companies?
4$at or 5$o is Microsoft6
Microsoft was founded by Bill Gates and aul !llen in "anuary #$%&. They see the future. ! future in which e'eryone will ha'e a personal computer in their "obs, home or e'en eating at a restaurant. These restaurant. These guys wanted to change the world througth their 'isionary ideas and negotiating core abilities. aul and Bill designed and distributed its B!()* programming langua language ge to !ltai !ltairr. )n that that way, way, Micro Microsof softt has been been sellin selling g operat operati' i'e e systems to almost all manufactories of personal computers and desktop computers computers around around the world. world. But also, Microsof Microsoftt has been growing growing to new techno technolog logy y marke markets ts in order order to be respo respondi nding ng to fast+c fast+chan hangin ging g en'ironment in the industry. industry. Through the years. Microsoft has de'eloped more software for impro'ing the eperience and utility of its operati'e systems as Microsoft o-ce and Microsoft )nternet plorer for creating and editing documents documents in the computers computers and the another another one for ha'ing a good eper eperien ience ce on the inter internet net.. !lso, !lso, Micro Microsof softt anali/ anali/es es the new emerging markets and try to capture market share of those markets. !n eam eampl ple, e, we get get back back to 0111 01112s 2s wh when en Micr Micros osof oftt gets gets into into conso console le 'ideogames market with 3B43 and competed with (ony and Nintendo. )n a re'iew, Microsoft started a pro5table industry and has been growing
to desirable and pro5table markets through its history. 6Bellis, 01#78 )n the following 5gure, we see the incomes growth of Microsoft through the years.
9igure #.# : Net income for !pple and Microsoft
6*ontet, 01#78 The net step about Microsoft will be, why did Microsoft buy Nokia2s Mobile phone de'ice di'ison and its patents?
4$at or 5$o is Nokia6
Nokia has a particular story in how a business growth and epand. Today, Nokia is a multinational company in the technological and telecomunications industry with location in spoo, 9inland. )n contrast with Microsoft, Nokia was founded in #;7& as a company of production of paper mil by 9redrik )destam in (outhern 9inland in #;7&.(o, Nokia grew to looking for new strategic business units that were not related to paper
mill industry because )t saw opportunities in that changing en'ironment. )n the #$71s, Nokia became a conglomerate, comprised of rubber, cable, forestry, electronics and power generation businesses resulting from a merger of )destam2s Nokia !B, and 9innish *able
Nokia
de'eloped
the
5rst
cellphone
in
the
world
and
telecommunications network and took the strategic decision of closing those business described earlier and got into the new cellphone market. Therefore, for many years Nokia was the leader in the manufacturing and selling cellphones around the world. But, with the growth of )phone, (amsung and other competitors in the industry. Nokia could not catch them and tried to get into other markets rather than mobile phone market. 6>4ur story>, 01#8.
Introduction to t$e negotiation
The negotiation between Microsoft and Nokia must be anali/e in order to respond this questions@
7o5 5as t$e deal closed +et5een t$e Microsoft and Nokia6
Microsoft acquires the Nokia2s core cellphone di'ision for the amount of C%.0 billion in the mid of 01#. Microsoft paid D.%$ billion for the all Nokia2s smartphone operations. )n other hand, company paid D#.7& billion to license NokiaEs patents, the companies said, bringing the deal to C%.#; billion. !lso, se'eral eecuti'es were Foined to Microsoft as part of the deal. 64'ide, 01#78
Microsofts interest and ositions
9igure #. : Mobile phone2s market share and growth
6casais, 01#78
The number of cellphones is being reduced o'er the time and the product is getting to the maturity stage of the product life cycle. (o, the dylemma is the following what do Microsoft or Nokia with this business? *learly, Microsoft decided to in'est in a dog what it means that it has low market share and low market growth rather than har'est oo selling the business like Nokia did. !ctually, Microsoft hope for getting a higher piece of pie through its resources and capabilities.
There is an important frame in the decision of Microsoft for getting into mobile phone market and this has a name@ !pple. Through the history, Microsoft and !pple ha'e been competing against each other. (ince 01#1, !pple is one of the biggest manufacturers and sellers od smartphones around the world. (o, Microsoft Fust can not allow !pple to do this. Because, they will be always competitors and each other do not want to see the another on the top. )n that way, Nokia acquisition by Microsoft is an answer for !pple. (o, Microsoft paid Fust C%.0bn for Nokia2s Brand, speciali/ed engineers with eperience, knowlegde and abilities in mobile phones, Nokia2s international 'alue chain, 'ertical integration of its acti'ities 6Making its own hardware and software8, reduce the transaction cost of the Nokia+ Microsoft Foint 6Before the purchase8. Nokias interest and ositions
9igure #.0 : Nokia2s mobile market share 0111+01#
NokiaAs Mobile hone Market (hare 0111+01# &.11H 1.11H &.11H 1.11H 0&.11H 01.11H #&.11H #1.11H &.11H 1.11H
6>Mobile phone market share worldwide #$$%+01# I (tatistic>, 01#78
Bibliography #. Bellis, M. 601#78. Microsoft - History of a Computing Giant . About.com Money . Jetrie'ed ; !pril 01#7, from
http@KKin'entors.about.comKodK*orporatero5lesKpKMicrosoft+Listory.htm
0. *ontet, *. 601#78. CHART OF THE DAY App!e"s #ncre$ib!e %ro&t Gro't( #n Conte)t . *usiness #nsi$er . Jetrie'ed ; !pril 01#7, from
[email protected]+of+the+day+net+income+apple+ 's+microsoft+01##+ . Our story . (2013). Nokia. Retrieved 9 April 2016, from http://company.noia.com/en/a!o"t#"$/o"r#company/o"r#$tory
. Mobile phone market share worldwide #$$%+01# I (tatistic. 601#78. (tatista. Jetrie'ed #1 !pril 01#7, from
[email protected]%#&%Kglobal+market+share+held+by+ mobile+phone+manufacturers+since+011$K &. 4'ide, (. 601#78. Microsoft in C% Billion eal for Nokia *ellphone Business. <(". Jetrie'ed ## !pril 01#7, from
[email protected](B#111#0#0%;;%001&%$1$#0 %1#$00
7. casais, e. 601#78. Mobi!e p(one mar+et forecast , /0 . 1tats.areppim.com. Jetrie'ed ## !pril 01#7, from
[email protected]mobile01#.htm