Abstract

This case is about the strategic alliance between Finnish mobile handset major Nokia Corporation and information technology behemoth Microsoft Corporation to compete in the hypercompetitive smartphone market. Nokia faced severe competition from companies like Apple, Inc. and Google, Inc. who entered the market for high-end smartphones after 2007. Analysts said Nokia’s poor focus on software and the lack of the latest operating system on its smartphones were the main reasons for its declining market share. Nokia’s board appointed a new CEO, Stephen Elop (Elop), who was a former executive at Microsoft, to bring more of a focus on software. Soon after taking over as CEO of Nokia, Elop sent out a memo to the employees emphasizing the need to bring about drastic changes at the company. In February 2011, Nokia announced the alliance with Microsoft in which Nokia would use Microsoft’s mobile OS Windows Phone on its smart phones. As per the deal, Windows Phone would replace Symbian as the primary OS on Nokia’s phones and Nokia would pay royalties to Microsoft for using its OS. Microsoft would in turn provide support to Nokia in selling its new Windows Phone powered smartphones. There were mixed reactions from analysts to the alliance between Nokia and Microsoft. The challenge before the senior management at Nokia and Microsoft was how to make the alliance work. This case is meant for MBA/MS students as a part of the Strategic Management curriculum.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand issues and challenges in strategic alliances.
• Understand the threats that established players in the market face from new entrants, new technology, etc.
• Analyze the strategies that market leaders should follow to counter competition from new entrants.
• Discuss and debate whether Nokia’s alliance with Microsoft will enable it to recapture market share that it had lost.
• Analyze the new strategies planned and implemented by Stephen Elop in reviving the fortunes of Nokia.

Keywords

Strategy, Strategic alliance, Methods of development, Joint development, Competition, Hypercompetitive, Innovation, Disruptive innovation, Smartphone market, Smartphone ecosystem, Apple, Google, Android , iOS, Nokia, Microsoft