Study of the Nokia - Microsoft Deal (Research Project)


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an analysis & a look at the Nokia - Microsoft deal, as a part of a research project

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  • I give you a simple answer, why Nokia crashed despite of doing everything right... (a) I stopped using Nokia, when I found that they are cheating the customer on service by creating the ground that if mobile is damaged due to moisture, it will not be covered under warranty... think, their mobile was designed to allow the entry of moisture, a manufacturing defect for which they denied services. That was the last day I banked upon the other brand... I am sure like me, millions would have similar stories.... Bottom line is: "You create a product which is genuine and customer oriented, it is bound to grow until you find a method to cheat upon your ultimate source of income - THE CUSTOMERS"
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  • Study of nokia’s sudden partnership with microsoftAnalysis of the loss of market share by Nokia on the basis of market share, market segment, and average pricesAlso given advice to major players, on where to focus to capture a slice of this pie
  • Announcement to discontinue Symbian (OS) and Meego , a new modernized OS being developed by nokia in association of IntelAnd go ahead with Windows Phone 7 series, i.e. WP7 as the new OS for nokia phonesSelf-defeating prophecy
  • Dumphones - A cellphone which has little or no advanced features such as a large, bright screen orapplications such as e-mail and web browsing.Smartphones - A high - end mobile phone which combines the functions of a personal digital assistant (PDA)and a mobile phone. The term is used to generally describe phones with more advancedcomputing ability and connectivity.Eco – System - In general, an eco-system is a set of components where they interact with each other tomutually benefit each other. In terms, of the cell phone industry, the eco-system refers to thesystem in which the company, its application developers, its application store and itsrelationship with varios carriers work together with each other, with a view to aid each other.Market Share - Market share is the portion or percentage of sales/revenue of a particular product or service ina given region controlled by a company.Windfall - A windfall gain (or windfall profit) is any type of income that is unexpected. It refers to incomereceived which was not expected and not a direct result of something the recipient did.
  • Rationale behaviour of the consumers during the purchase No dramatic fluctuations in the ASP of the phonesCompanies follow the same policies that have been established in the past Distribution of Windfall assumed on the basis of current Market share and ASPThe effect of this deal on the industry is considered on the basis of the assumed hybrid model of forecasts which reflects a combination of the market share and the ASP; with a particular weight being given to each competitor depending on its presence and its perception in the regional market.
  • The foremost limitation of the forecast is that it is based on historic data and cannot be used for future predictions.Future behaviour of the company with respect to its ecosystem cannot be predictedThe revenues of Nokia are forecasted solely on the basis of their handset division
  • Some other variables suchas mobile operating system and design, ease of use, perception of loss in social status, relationship withthe carriers, perception of the brand, alternative brand’s reputation, image and service quality accordingto the customer’s perception have not been considered here since their significance as variables in thestudy of customer loyalty has been proved to be of low significance
  • Nokia was a market leader prior to the deal, however, it is predicted to fallmuch below amonst the ranks of its competitors. This in turn, has created tremendous marketopportunities for other players in the industry in order to capitalize on this collapse and gain themaximum possible windfall.
  • Study of the Nokia - Microsoft Deal (Research Project)

    1. 1. Research Paper – I Study & Analysis of the Nokia – Microsoft deal Presented by: Ishan Parekh MBA (Tech.) – Div . C Roll No. #315 1
    2. 2. Study Objective • The main objective is to study the implications of the Nokia – Microsoft deal on Nokia, as well the cell phone industry as a whole 2
    3. 3. 3
    4. 4. Nokia • Generic with product • Leader in innovations • Pioneer in cell phones • Empire at one point (in the 3rd quarter of 2010, the sales of Nokia were greater than that of the combined total of Apple & Samsung!) 4
    5. 5. Nokia - Microsoft Alliance • Announcement in February 2011. 5
    6. 6. Significance and Need For Study “Complete game – changing deal” • Enormous loss of sales & will change market share holding pattern • The need for the study is to analyze the amount of losses Nokia will face and how its competitors stand to gain from it. 6
    7. 7. Concepts & Constructs and Issues Raised 7
    8. 8. Basic Concepts Dumbphones Smartphones Eco-system Market Share Windfall ASP 8
    9. 9. Issues Raised Issues Raised Will Nokia Survive Windfall 9
    10. 10. Assumptions, Scope & Limitations, Proposed Framework, Variables and Hypothesis 10
    11. 11. Assumptions 11 Rational Behaviour No Fluctuation in the ASP Same policies followed as in the past Distribution of windfall based on current market scenario Effect of the deal on the basis of assumed hybrid forecast
    12. 12. Scope & Limitations • Forecast based on historic data • Ecosystem behavior cannot be predicted • Nokia’s revenues calculated on basis solely of their handsets 12
    13. 13. Proposed Framework Current market share Average sales price Hybrid model 13
    14. 14. Variables 14
    15. 15. Hypothesis “The hypothesis for our study is that the loss in market share for Nokia is directly associated with the deal it signed with Microsoft.” 15 Loss in market share Deal signed with Microsoft
    16. 16. 16
    17. 17. Quarter (2011) Mkt Share (%) Sales (mill) ASP ($) Revenue (bill €) 1 28 29 146 4.3 2 21 25 136 3.3 3 16 21 126 2.6 4 12 17 116 2 Source: Tomi Ahonen Consulting Nokia’s Development in 2011 17
    18. 18. 18 0 5 10 15 20 25 30 1 2 3 4 Mkt Share (%) mkt share 0 5 10 15 20 25 30 35 1 2 3 4 Sales (mill) sales (mill) 0 20 40 60 80 100 120 140 160 1 2 3 4 ASP ($) asp 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 1 2 3 4 Revenue(bill €) revenue(bill €)
    19. 19. 19
    20. 20. Conclusion Future Scope • Worst possible nightmare for Nokia • Short term – Nokia losing & Microsoft gaining some advantage • Long term – future of Nokia looks very bleak • Recent acquisition of Motorola by Google • Recent let go of Palm by HP • Possible return to Symbian / Meego • How to rescue Nokia 20
    21. 21. 21