In 2013, Microsoft announced the acquisition of Nokia’s smartphone business division in a deal worth USD 7.2 billion. This deal stood out for both companies given the fact that they had been once global giants in the tech world. However, experts had mixed feelings about this deal with many projecting that it was bound to become a failure. For instance, Tellis suggested that the acquisition happened out of convenience for two dying moguls. Indeed, in the wake of this deal, Nokia’s smartphones, as well as the Windows mobile platforms, were experiencing a series of roadblocks including competition from Google and Apple. These two companies were emerging as the new device manufacturers with their revolutionary Android and iOS software (Tellis).
In the partnership, the CEO Steve Ballmer and Nokia agreed on the following. First, Windows would become Nokia’s Lumia primary platform. Second, Nokia would lend its expertise to the Windows Phone hardware development for the establishment of a new smartphone. Third, Nokia would help bring its low-cost price points, geographies and market segments in the developing world home to Microsoft. Fourth, the Microsoft Marketplace would absorb Nokia’s premier Ovi store. Fourth, Nokia phones would utilize the Bing search engine to help expand its capabilities on mobile devices. Lastly, the deal would not be exclusive hence both companies would allow each to keep external hardware partners (Hiner). However, 2015 saw Microsoft write off the deal citing numerous losses and the need for further restructures. This move had long been in the offing based on the idea that Nadella had opposed the deal then brokered by Ballmer (Warren).
This behavior reveals a horde of challenges affecting Microsoft's business operations as follows. First, there is poor coordination and communication among leadership within the organization. Mclean reveals that the company’s former CEO Steve Ballmer received the blame for its failure to capitalize on the smartphone manufacturing and success. Unlike his predecessor Bill Gates, Ballmer had failed to oversee the increasingly large and unwieldy development projects surrounding Windows on a daily basis. The reason for his absence was that Ballmer was too ill-equipped regarding internal coordination to handle the management of company of such a huge magnitude. As Mclean suggests, a recent rating by Microsoft employees in 2012 assigned him an approval rating of 46 percent. Such results did not instill investor confidence prompting Microsoft’s founder Bill Gates to appoint Satya Nadella as the new CEO (Mclean).
Second, according to critics, Microsoft, as a tech mogul, lacks relevance in business operations. Mclean quotes Benedict Evans’ assertion that the company’s market share in the tech world of computing devices continues to plunge from over 2009’s 90 percent to around 20 percent in 2014. This drop happened because the company has, over the recent years failed to integrate its strengths towards smartphones and tablets. Indeed, John Thompson, the company’s new board chairman stated that “some attributes to Microsoft today [do] look vaguely like IBM circa 1990 (Mclean).” This interesting comparison comes from an ex-IBM executive whose company Microsoft overpowered as a tech giant close to a couple of decades ago.
Third, the company faces the challenge of market disconnection because it has not found a way of competing with its competitors in the same market environment. The shortcoming exists the fact that the company has not yet been able to figure out how to gain a foothold in the smartphone market. The company also is unable to compete effectively with competitors that specialize in the production of personal computers and computer-related software. Notably, Microsoft licensed the Windows operating system to numerous third party organizations who have increasingly been flooding the market with cheap alternatives. Such countermoves forced the company to restructure and refocus its operations by trimming the number of employees. Indeed, for it to maintain acceptable profit margins, Microsoft, in 2014, cut down 8,000 jobs following the Nokia acquisition and a further 18,000 jobs across its global workforce (Mclean).
Finally, Microsoft is unable to respond effectively to changes in the external environment. As Sultan suggests, the introduction of smart devices and cloud computing technologies increased the pressure on Microsoft. Also, the decline in personal computer shipments happened because of customer changes in tastes and preference. In essence, consumers displayed an inclination to purchase smart and portable devices rather than personal computers. Finally, the desire for upgrades influenced the decline of traditional computers. Indeed, consumers demanded devices that had comparatively faster computational capabilities to maximize their efficiency levels. This discovery prompted Microsoft to venture into the production of smart devices by partnering up with Nokia, a relationship that did not last long (Sultan 39-56).
Works Cited
Hiner, Jason. "Microsoft-Nokia deal: The challenges and opportunities." 13 February 2011. The Tech Republic. Web. 18 March 2016. <http://www.techrepublic.com/blog/tech-sanity-check/microsoft-nokia-deal-the-challenges-and-opportunities/>.
Mclean, Bethany. "The Empire Reboots." November 2014. Vanity Fair. Web. 8 March 2016. <http://www.vanityfair.com/news/business/2014/11/satya-nadella-bill-gates-steve-ballmer-microsoft>.
Sultan, Nabil. "The Implications of Cloud Computing for Global Enterprise Management." Camillo, Angelo. Global Enterprise Management. New York, NY: Palgrave Macmillan US, 2015. 39-56. Online.
Tellis, Gerard. "Microsoft And Nokia: A Marriage Made In Hell?" 4 September 2013. Forbes Magazine. Web. 18 March 2016. <http://www.forbes.com/sites/forbesleadershipforum/2013/09/04/microsoft-and-nokia-a-marriage-made-in-hell/#6b0c40a14d10>.
Warren, Tom. "Did Microsoft just give up on Windows Phone?" 8 July 2015. The Verge. Web. 18 March 2016. <http://www.theverge.com/2015/7/8/8913365/microsoft-lumia-windows-phones-strategy-2015>.
