Microsoft Acquisition Over Nokia Case Study

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Microsoft acquisition over Nokia
Sensing the need to create a strong footprint in the mobile communication and data space, Microsoft zeroed in on Nokia as a potential target. Microsoft acquired the Finnish mobile phone manufacturer Nokia in September 2013 for approximately $7 billion.
Before Microsoft acquired Nokia, its presence in the mobile phone industry was limited to software products namely Windows 8. Microsoft’s operating system had already been featured on various mobile phones including Nokia’s Lumia device and had received mixed reviews. This significant strategic acquisition was on the face of it non-core extension for Microsoft, but deeper analysis clearly indicates that Nokia signalled a major strategic shift in the direction
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VALUE CHAIN INTEGRATION: With the integration of Nokia into Microsoft, Microsoft acquired the entire supply chain and manufacturing production capabilities of Nokia along with its array of mobile devices. Even before the acquisition, Nokia and Microsoft had worked closely on the production of Nokia’s Lumia phone which used a stripped down version of Microsoft’s operating system in the smartphones. However with the acquisition of Nokia, both the teams will be able to implement an operating system to its maximum capacity and enhance user experience.
Microsoft has vertically integrated Nokia’s production line thereby allowing larger profits margins and larger capabilities with each unit. By controlling the production ecosystems Microsoft would be able to reduce costs and increase profits while satisfying current and future Lumia owners.
2. SYNERGISTIC BENEFITS: Before the acquisition significant transaction costs existed between collaborative products of the two companies. This created barriers of inefficiency and obstructed the business relationship between the two companies. Exchange of goods & services and flow of information in the market all added to transaction costs which indirectly led to production of smartphones and associated mobile software that were less than optimal in cost
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Moreover priortization between devices and services, especially with the inclusion of Nokia’s portfolio, will affect the company future. It will have to ensure that it does not repeat the same mistakes that Nokia and Microsoft itself did over the past decade. Harmonizing the organizational structure, demonstrating a sustainable strategic intent and reinvigorating employee morale to reach its once famed peak are only some of the initiatives it has to roll out more efficiently. The company now has to ask itself whether it wants to create a vertical ecosystem that fully integrates devices or a horizontal ecosystem that extends across and encourages scale. The existing restructuring does not indicate a strong direction on this strategic choice. It remains to be seen if Microsoft can adopt a middle path and yet challenge the supremacy of Apple and

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