International Journal of Business Management and Leadership. ISSN 2231-122X Volume 5, Number 1 (2014), pp. 13-18 © Research India Publications http://www.ripublication.com
Microsoft Nokia Deal: A SWOT Analysis Adit Jha Faculty at Biff & Bright College of Technical Education, Padasoli, Dudu, jaipur
[email protected] +91- 9660078944
ABSTRACT: This research paper deals with Contemporary Issue of Marketing that is Microsoft-Nokia Deal on September 3, 2013. Paper is a exploratory research which deals with current acquisition of Nokia by Microsoft. The purpose of this paper is to do SWOT analyse for both companies and to analyse what benefits they will get after this deal and what challenges they will face in future. This is a Process of acquisition starts in February 2011 and completed in 2013. This acquisition is a strategic move from both Microsoft and Nokia. Paper will provide a study of Indian smart phone business which is one of the best emerging markets in the world. I will try to do SWOT analysis of the deal. Study will be based on analysis of Primary data and secondary data which is taken from Indian communication market, different reports from experts on the topic covers the secondary data and in primary data Survey research both field and online research and interviews is used. Interviews are related to academician, Industry people and consumers of Cell Phone. This is a contemporary topic which covers the study of Indian Cell Phone Market, Competitor analysis, Strategic move for saving, expanding and creating new emerging markets, Market Share of Nokia and Samsung, Market Share of Android, Apple’s iOS and Microsoft’s OS in smart phone market. KEYWORDS: Microsoft-Nokia deal, SWOT analysis of Nokia – Microsoft deal, market share of Android OS, Apple iOS, and window’s OS Acquisition, Indian Mobile Market, INTRODUCTION: Microsoft-Nokia Deal is a new dawn for communication industry. On the day September 3-2013 Microsoft Acquired nokia’s handset division and services, License of nokia’s patents & License to use nokia’s Mapping services. Microsoft acquire Nokia by Forking out $ 7.2 billion means 490 thousand Cr rupees deal all payment will be done in cash transaction and hope to close in first quarter on 2014.This move is an attempt by Microsoft to make leadership in software market. Deal will give
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benefits to both parties as they will share strengths of both companies and will work together for meeting market needs and to grasp the Gap in the market. Microsoft announced his partnership with nokia in February 2011 Company aims to accelerate his growth and market share and profit through mobile devices through greater creativeness and innovativeness in their Operating System to deal with the Market Competitors. For Nokia this deal is significantly attractive to earning and strengthen it’s financial position, and provide solid base for future investment in continuing business. “ It’s a bold step into the future – a win - win for employees, shareholders, customer of both companies bringing these great teams together will accelerate microsoft’s share and profits in phones and strengthen overall opportunities for both Microsoft and their partners across our entire family of devices and services. We are excited and honoured to bringing nokia’s incredible, technologies and assets into our Microsoft family giving our long partnership with nokia and many key nokia leader’s that are joining Microsoft, we anticipate a smooth transaction and great execution. ”1 For nokia this is the moment of reinvention and form a position of financial strength we can build our next chepter”.2 Building on our successful partnership we can bring together Microsoft’s best software with the nokia’s best product engineering, award wining design, and global sales and marketing and manufacturing.”3 Under the term and conditions Microsoft will acquire sustainably all nokia’s devices and services business including mobile phone and smart phone devices business units as well as an industry leading design team, Operation including all nokia devices and services related production facilities, devices and service related sales and marketing activities and related support functions. Approximately 32000 employees will be transferred to Microsoft including 4700 people in finland and 18300 employees directly involved in manufacturing, assembly and packaging of products worldwide. The operations that are planned to be transferred to Microsoft generated an estimate EUR 14.9 billion, or almost 50% of Nokia’s net sales of year 2012. Review of data This is a new topic for research which came out because of the deal between two giant companies Microsoft and Nokia. Indian Smart phone is third largest smart phone market in the world Recent data is related to NEWS in different newspapers, interviews. Data related to the market share of Nokia, Samsung, Micromax, Carbon, Apple is available from companies website and from some reports like Survey done by International Data Corporation (IDC). Smartphone business in India is going to change with the new approaches by companies. According to latest report by International Data Corporation (IDC) Korian Gaint Company Samsung win the race and got 1st slot in the Indian Mobile market but their market share fell to 26%. Indian Mobile vendor Micromax came to second slot with the market share of 22%. Overall in India vendors shipped 9.3 million smart phones for Q2 in 2013 compared to 3.5 million units in the same period of 2012.Karbon Mobile is second Indian Mobile manufacturer which is on third place in the list with market share of 13%. In Q1 2013 Karbon have 10.9% market share. Previously Nokia was market leader in Indian market but they are not doing well in Smartphone business and with it’s Symbian OS. Nokia gain some market share when they joined hands together with Microsoft and
Miccrosoft Nokiia Deal: A SWOT S Analy lysis
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launnched Lumiia range whhich helped nokia to gaain some maarket share. Nokia’s Lu umia brannd features itself from low end to high end market. m Nokkia’s Markeet share in Q2 Q is 5% and with thhis market share s nokia capture fou urth positionn in the Indiian Smartph hone Marrket. Sony stands on fifth slot with w 4.6 % market shaare4. This ddata revels that Indiian smart phone p markket is changging very quickly q andd companies like Nokia is tryinng to save it’s i market share s in Inddia. Accordiing to Voicee and Data’s report in 2012 2 the situation was w differennt for Nokiia. Nokia was w in Betteer position with 27.2% % of Marrket Share and they occupy o secoond slot in n Indian Market, in fiiscal year 2012 2 5 Miccromax stoood in the maarket with 8.7% 8 of maarket share (Voice & D Data report)). So this was necesssary for nokia n to doo something g for gaining some m market sharre to com mpete with competitors c s who are coming c with h everythinng in their pportfolio. Home H grow wn compannies are undderstanding Indian you uth and cappturing them m by providing attraactive offers. Nokia annd Microsofft just want to gain marrket share inn Indian Maarket so thhey make sttrategic alliiance. Microsoft windows w is a market leeader in com mputer operrating system m market bu ut in mobbile segmennt windows is facing reegular challlenges from m it’s biggest competitor’s. Miccrosoft OS in i india is on o second place p after Apple A iOS and a Blackbeerry. 90% share s is captured by Google’s brand b Androoid 5.4% iss related to Windows O OS and oth her is for apple a and blackberry. b Regarding SWOT anaalysis there s no data iss available because b thiss is respectiively w area for reesearch. Daata that is reelated is abo out market shares of ccompanies, their t new currrent positionns and leadeership. I am m using seco ondary resouurces of datta for my paaper. My study will be b based onn these data..
Market Share S of Vaarious Brandds in Indian n Smart Phoone Market ((graph.1)
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Market Share S of Anndroid, Wind dows OS annd others. SW WOT Analyssis of Nokiaa-Microsofft deal SW WOT analysiis is refers to four terrms which is used in competitorrs analysis each com mpany must care about these four terms. t Thesse terms refe fers to S stannds for Strength of thhe companyy in this paaper this is consider ass the strength of the deeal, W referrs to Weaakness of thhe companyy in this case this stand d for weakneess of the D Deal, O refers to Oppportunity foor companyy in paper thhis is relateed to opporrtunity for bboth compaanies whoo came together for deal, T referrs to Threaat from it’s competitorrs and potential threeats which can c affect thhe companyy in this casse threat knnown as thee competitorrs of the company. Streengths Nokkia – Microosoft deal iss win-win situation s forr both comppanies. Miccrosoft will buy nokkia’s handseet business and there patents p for 10 1 years in cash $7.2bbillion. Thiss is a strattegic alliannce to createe synergy between b bo oth companiies. Microsoft is acquiiring Thiss deal will provide p stroong platform m to Microssoft for it’s OS as all kknow that nokia n is one o of the biggest b brannds in indiaan mobile in ndustries with w 27.2% oof market share s therre will be trransfer of great hardwaare team to Microsoft after the deeal. Microso oft is enjooying seconnd position in i smart phoone OS ind dustry after the t market leader Andrroid. Afteer this deall Microsoft and Nokiaa will be ab ble to make stronger suupply chain n for shippment. Nokkia sells moore than 80% % of windo ows phone but b operatinng system itself i has only 4% market m shaare. By buyying nokia Microsoft not only w will make more m monney from each e windoows phone sold but itt also be able a to bettter integratee its 4 Soft ftware and Hardware H . Microsoft and a Nokia is i working on o it’s full range or Lu umia Brannd which is i targeted toward low wer level in ncome grouup to higheer level inccome grouup. For Nokkia it is lifee saving deaal because this t will givve them cassh $7.2. Qu uality wisee Nokia is always onn front poinnt to it’s competitors. Nokia’s L Lumia Bran nd is makking handsoome moneyy for that company c which is higgh end smarrt phone in n the porttfolio.After deal both companies c w able to provide higgh value serrvices inclu will uding Geoospatial servvices. Nokiaa’a HARE map m app is now n relate to t Microsofft but nokia will conttinue work on HARE for f it’s betteerment 5.
Microsoft Nokia Deal: A SWOT Analysis
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Weakness Deal has it’s own weaknesses. Both companies Microsoft and Nokia is facing shrink in their market. Microsoft is market leader in computer OS but in Smartphone section it has only 4% of market share and Nokia that was Market Leader in indian Market has lost it’s Share. Deal is too late when market is almost captured by Google’s Android OS. Today Android has 90% of Market Share in Smart Phone Section. Many companies adopt Android OS as the requirement of time or for the better services. Companies like Samsung came with wide range with smart phones and they targeted Indian youth market. Nokia-Microsoft is lags behind to market leaders and they are not attracting developers to make apps that are one of the most important factor in purchasing Smartphone. In Computer world Microsoft has it’s Monopoly but in Smartphone section Apps developers are more interested to develop Apps for Android and iOS. This situation is like a Chicken/egg problem “ Microsoft needs market share to attract apps developers but they need developers to build market share.” 6 Beside the lack of developer support, Microsoft suffers from what Neil maswton of strategy analyst call the company’s own “Glacier-Like” pace of development. “In high end smart phones Microsoft has not been able to deliver software that works with fastest mobile chips unlike Andriod. If we talk about low end service it has not been able to reduce in order to compete, some android devices wholesale for just $35, While the cheapest Smartphone device is $ 110 in U.S. market in indian market it cost $147”.7 In countries like U.S. people don’t like to share things through Bluetooth but in countries like India people commonly use Bluetooth as their way of sharing files. In many of Windows phone that feature was not available even Lumia 520 was also suffering from this. This was the problem for Nokia Lumia brand. After this deal Microsoft will also get a troubled area of Nokia Ovi store in their brand. These are the weakness of the deal which both companies will try to remove. Opportunities This deal has great opportunity if both companies utilise their resources in optimum way. For Microsoft opportunity is to gain profit as it expects to get 14% of market share and want to be second largest Operating system company for Smart phones. According to Blelfiore “Microfsoft will change in it’s core system software to allow for new hardware which will all smart phone devices of Nokia”.Microsoft is working upon it’s software to manage incoming photos to work with Nokia lumia 1020 with it’s 41 Mega Pixel camera. Software will allow to images at the one point of the time. This opportunity grasp by both companies to make future smart phones. India is still profitable market for nokia and Nokia has big market in India. Nokia need a Operating system for it’s devices and Microsoft need Device for it’s OS. “The future phone segments contributes 60-70% of the overall device market in India and no one can ignore it but going forward everything will be Smart phones and that is growth is happening” (Anshul Gupta principal research analyst with gartner.)8. Nokia has opportunity in Low Segment smart phone market in India. Nokia identify the opportunity in low segment and they launched a range of Smartphone Low to High in segment Nokia 520 to Nokia 1020.In larger context both companies aims to move 55 Million Smartphone to 250 million by 2016. (Neeraj Roy, The Founder CEO and managing Director of digital and mobile entertainment company Hungama Digital Private Limited)9.
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Threat India is an emerging market in smart phone segment. Both Nokia and Microsoft is losing their market share to Market Leader Samsung. Indian Mobile companies like Micromax, Karbon are also doing very good in smart phone sector. They all are coming with Android and they have new features to attract Indian youth consumer and price sensitive market. Not only for Nokia indian players are threat to market leader Samsung For example Canvas 4 is priced to 17, 999 by Micromax while Samsung Galaxy S4 is currently pricing 33999 and features are same in both 10. is growing regularly and coming with new range of products which is providing better services and they are giving same range of products in low prices. Conclusion This deal was necessity for both companies Nokia and Microsoft because they are loosing their profitable markets. This is true that Deal came very late when all market is captured by Google’s Android and Samsung. Microsoft want to capture market in smart phone segment so they want a well accepted brand to feature their Windows OS. Hardware which is well known and have good team to work.In same manner Nokia is getting a OS which is well known this is all about fighting with own weakness and with Competitors. Both Microsoft and Nokia wants to need work on some part of their areas which is their loose points. Both Companies must work together as a team because 32000 new employees will be transferred to Microsoft and they will get new specialise team in hardware. The thing is how Microsoft and Nokia together can make innovations to their existing products line. References [1] Wingfield nick, New York Times sep 4, 2013 Microsoft eyes Apple like revival with Nokia deal. Retrieved from www.articals.timesofindia.indiantimes.com. [2] Ando Ritsuko & Rigdy Bill (2013 September 4) Microsoft swallows Nokia’s Phone business for $ 7.2 billion. [3] Elop Stephen, Balmer steve [4] International Data Corporation (IDC) report top five slots. Micromax giving a run for it’s money. [5] Voice & Data Survey report Samsung beats nokia to emerge no.1 in India. www.siliconindia.com [6] Accelerating Growth, (2013 September 2013) Microsoft’s strategic rationale for deal announced with nokia. www.microsoft.com [7] Micromax looks to challenge Samsung and apple in India smart phone market. (2013 September 28) Retrieved form www.articals.timeofindia.indiatimes.com [8] Gupta anshul & gartner, principal research analyst IDC India. [9] Roy Neeraj, The Founder CEO and managing Director of digital and mobile entertainment company Hungama Digital Private Limited. [10] Ghosh shuvik, Choudhary vidhi (2013 October 22) Microsoft nokia deal may impact smart phone prices.
