MKTG 755 Winter 2023

Negotiation Case Analysis, 20% of Total Course Evaluation

Instructions:
• This assignment covers content related to the negotiation component only of
your MKTG 755 course. 20% of total semester grade.
• You are encouraged to research the merger beyond the information
below. Any outside research must be properly cited and acknowledged.
If not, expect a 0 on the question or paper.
• Provide each answer, in bold, directly below the question.
• The assignment is out of 20 marks, each question is worth 5 marks.
• Please write the answers in Word, save the file as a PDF and upload it to the
“Negotiation Case Analysis #1” dropbox folder by the end of Week 11-
Saturday April 1st, 1159pm (late means -10% per day)
The Microsoft-Nokia Deal
International negotiation topics in business: merging two distinct corporate cultures
with as little conflict as possible.

International negotiation brings on more challenges than most.

During the 1990’s and early 2000’s, one company dominated the mobile industry:
Nokia. Established in 1871, the Finnish-born company gained a worldwide
reputation for producing reliable, standard mobile phones that were internet-
enabled and programmed with an array of multimedia features. Eventually,
competition in the mobile phone sector rose in 2007 when Apple introduced the
iPhone, and Nokia soon found its market share rapidly decreasing.1 Initially,
Nokia predicted the smart phone craze would die out and consumers would return
to standard mobile phones, but smart phones proved to be more than a passing
trend. Nokia’s management failed to understand the wave of radical innovation
that revolutionized the mobile industry—as Samsung and Apple produced and sold
touch-screen phones. Nokia’s failure to react to the changing competitive climate
is reflected in the precipitous fall in its share price from the iPhone’s introduction
to Nokia’s own smartphone introduction: its market share faltered, losing almost
10 percent

On 3 September 2013, Microsoft CEO Steve Ballmer announced that Microsoft

would acquire Nokia’s mobile phone division for $7.2 billion.7 Microsoft had been
looking for a way to enter the mobile phone industry to better compete with Apple
and Google. In acquiring Nokia’s services and devices unit, Microsoft took control
of Nokia’s mobile phones and smart devices, design team, licensing agreements,
and approximately 32,000 new employees. Given Microsoft’s prowess in software
and Nokia’s in devices, the acquisition was anticipated to be a smooth, successful
transaction. Furthermore, both CEOs (Ballmer and Elop) acknowledged the
acquisition as something that would build upon the existing Nokia-Microsoft
partnership.

The agreement marked a belated but bold move by Microsoft to upgrade its
presence in handheld devices and signals an end to Nokia’s long struggle to enter
the hyper-competitive (and extremely lucrative) smartphone market.
What negotiating skills brought negotiators to an agreement in one of the tech
industry’s largest acquisitions and what bargaining strategies can business
negotiators use to bring competitors to a negotiated agreement in similar
negotiation scenarios?

This article briefly explores the dynamics behind the negotiations that saw
Finland’s phone giant join forces with icon of US technology and software,
Microsoft.

International Negotiation Behind the Microsoft and Nokia Deal

Both sides had strong incentives to join forces. Nokia had lost significant ground in
recent years to smartphone manufacturers, most notably Samsung and Apple, by
failing to keep up with innovations such as touch screens.

Having shed its underperforming handset business, Nokia planned to focus on

telecommunications equipment, mapping business, and patent portfolio.
Microsoft’s Steve Ballmer first approached Nokia CEO Stephen Elop about a
possible acquisition during the Mobile World Congress industry conference in
Barcelona. Ballmer and Nokia chairman Riisto Siilasmaa conducted methodical,
discreet negotiations across the globe in 2013.

How to Overcome Cultural Barriers in International Negotiation: Merging

Distinct Business Cultures

As with any large merger or acquisition, this one faced even more complexity after
the ink dried on the contract—namely, the challenges of integrating employees
from different cultures.

Merging distinct cultures can be a confusing, lengthy process – even without the
added complexity of joining together two of the world’s largest companies, each of
which is emblematic of its mother country in its own way.

It often makes sense to maintain each organization’s unique identity and borrow
from the best of both. Moreover, because national culture is just one facet of our
identities, it pays to view negotiating counterparts as unique individuals rather than
as cultural ambassadors. Keeping this in mind, it never hurts to infer strategies
based on expected cultural norms so long as this acknowledgement is part of a
holistic bargaining process aimed at creating value and forging workable,
sustainable agreements.
Ultimately, Microsoft did acquire Nokia, but according to Computerworld,
Ballmer called it a ‘monumental mistake’ and ended up writing off billions of
dollars, calling it an “impairment charge” of $7.6 billion, which was close to how
much it paid for Nokia and its patents. As a result, 8,000 people worldwide lost
their jobs.

Questions:

1) In your view what type of negotiation occurred between Nokia and

Microsoft? Would it have been Distributive or Integrative? Why?

Nokia and Microsoft's negotiations were integrative in nature. Both

parties had compelling reasons to work together and conducted the
negotiations discreetly and methodically overtime. The main purpose
was to sign a mutually beneficial deal that would allow both businesses
to fulfil their goals over time.

2) How would Nokia’s position in the mobile phone industry have affected its
negotiation strategy?

The effect of Nokia's standing within the mobile phone industry would
have played a part in how they negotiated, possibly making them more
open to bargaining and conceding on certain terms within the contract.
The smartphone industry had advanced with Apple and Samsung
surpassing Nokia's previous success rate with their smartphones which
led to the dissolution of Nokia’s failed handset establishment was a
critical aspect regarding its plan for reorientation toward other
industries, considering how companies such as Apple and Samsung had
surpassed them in smartphone production. Microsoft may use this
information to acquire greater leverage.

3) As both companies originated from “different cultures”, how would that

have impacted their tactics and goals?

The distinct cultural origins of these two enterprises must have

profoundly affected their tactics and goals in multiple forms. Their
manners of exchanging information, determining courses of action, and
 attitudes toward venturing into unknown territory may be dissimilar
because Nokia draws mainly from its roots in Finland which cherishes
collaborative decision-making and developing lasting relationships
while Microsoft hails from an American culture focused on being
decisive with instantaneous results
Both sides would have needed to be aware of these cultural differences
and adapt their negotiation strategies accordingly.

4) What lessons would each company have drawn from the negotiation?

Several insights can be obtained from the recent discussions between

both sides. Nokia's inability to keep pace with revolutionary
technological advancements such as touch screens highlights the
significance of promptly responding to market fluctuations. Redirecting
its focus on telecommunications tools, mapping businesses and
intellectual property rights after abandoning an underperforming
handsets business is a display in adapting to novel commercial
prospects. Meanwhile, Microsoft’s acquisition of Nokia's mobile phone
arm proved costly which is indicative that meticulous examination must
precede every merger or takeover decision made by any company
before assessing all possible gains and risks involved carefully first.