Report Merging Distinct Western Business Cultures Of Giant Corporations In The Technology Field The Case Applied To Microsoft And Nokia Corporation In The Mobile Device Segment.pdf

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VIETNAM GENERAL CONFEDERATION OF LABOUR

TON DUC THANG UNIVERSITY

BAI HOC TON BUC THANG

TON DUC THANG UNIVERSITY

REPORT MERGING DISTINCT WESTERN BUSINESS CULTURES OF GIANT CORPORATIONS IN THE

TECHNOLOGY FIELD

The case applied to Microsoft and Nokia corporation

in the mobile device segment

Instructor: MBA TRAN KHANH Group :06

Students : LUONG THI HUYEN TRAN - 718H2038

NGUYEN THI THUY DUNG - 718H1863

DO THI HONG THI - 718H2014 TRUONG THI THUY NGAN - 718H0316 TRAN THỊ MỸ HÀNG - 718H1881

LE VAN HIEP- 718H1886 Subject : NEGOTIATION

Major > INTERNATIONAL BUSINESS

HO CHI MINH CITY, DECEMBER 2021

CONTENTS

LIST OF ABBREVIATIONS Q.0 Q12 HH TH KT n KH vu 3 CHAPTER 1: INTRODUCTION L0 Q0 2 HH nn HH1 ng TH nhu 4 1.1 General OVErVIW nh ốeốS al 4 1.2 Background of two partieS - L n2 HH HH TT TT 5 'F-ÄF - = 4ă ă.ă.ă 7 F5: ằ ai a 7 I-199) °)- .aa a1 8 CHAPTER 2: LITERATURE REVIEW QQQQQQQQ nn nh nhờ 9

4.1 Microsoft should use its Bafnas -.-.L TQ TT TT TS nnHHnH TH nghe 25 4.2 Respond to the changing environment - Q2 S222 nh xà 25 4.3 Microsoft Mobile should pay attention to customers demands 26

2

LIST OF FIGURES Figure 1.1: IDC’s top 5 smartphone vendors, shipments and market share- 20 12 4 Figure 1.2: Microsoft’s revenue from application performance management from 200908.:c22015n a 5 Figure 1.3: Nokia annual revenue from 2008-2013 L Quà 6 Figure 1.4: Timelines of the events at Nokia Corporation and the mobile

COMMUNICATIONS INCUSEIY 00.0 cceeeeeeceeeeteeeeeeeceeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eget eeea esa 7 Figure 2.1: Each partyˆs best alternative to a negotiated agreement 9 Figure 2.2: Hofstede's cultural dimensionsS -cccccn QọnnSnnnns nhe 11 Figure 3.1: Global market share held by Nokia smartphones from 1st quarter 2007

!9241198s|1 -1à:- #40 cggHgPầaầaầaaiiaiđidadiddđi 14 Figure 3.2: Hofstede dimension of USA and Finland ccSSccees re 17 Figure 3.3: Global operating system market Share .eccccccceceeeteeeeeeeeeteeeneenees 22 Figure 4.1: Creating and claiming Value .0:cccccceceeeeceeeeeeeeeeeeeeeeeetentceeeeeeeeees 26

LIST OF TABLES Table 3.1: Timelines of the events at Nokia Corporation and the mobile

Communications IndUSẨFy_ 0000002000111 nn HS TH HH TH ng ng gu 12 Table 3.2: Hofstede’s cultural dimensions of America and Finland 16 Table 3.3: The best alternative to a negotiated agreement in each scenario 19

LIST OF ABBREVIATIONS OEM Original equipment manufacturer

NSN National Stock Number

LTE Long Term Evolution

OS Operating system BATNA | Best alternative to a negotiated agreement CEO Chief Executive Officer

HTC High Tech Computer Corporation

CHAPTER 1: INTRODUCTION 1.1 General overview

In the industrial age 4.0, the global economy became more and more open and interdependent with liberalization of international trade and other economic exchanges, international competitiveness and hence technology are currently receiving increasing attention in the trade literature as well as in policy-making The existing technology market has created many breakthroughs in new technologies such as artificial intelligence production, robot manufacturing, internet development, 3D printing technology, nanotechnology, biotechnology, materials science, energy storage and informatics, etc

Along with the development of the technology age at the time, mobile phone devices had become a potential market for multinational technology corporations It cannot be denied that the global adoption of smartphones has had

a major influence on how people interact, communicate, and to some extent perform their daily tasks (Hur et.al., 2017) This distribution of smartphones basically forms a huge economic power especially with its rapid growth, smartphone share grew in 2011 to 2013 from 35% to 56% from the total cell phones share, it is really the digital oil As such, the smartphone market was expanding and new smartphones with innovative and better features were introduced every year, making the smartphone market a very lucrative and at the same time a very competitive market

Figure 1.1: JDC’s top 5 smartphone vendors, shipments and market share- 2012

IDC’s Top 5 Smartphone Vendors, Shipments and Market Share — Calendar Year 2012

(Units in Millions) Vendor 2012 Unit 2012 Market 2011 Unit 2011 Market Year Over

Shipments Share Shipments Share Year Change Samsung 215.8 39.6% 94.2 19.0% 129.1%

1.2 Background of two parties

Microsoft Corporation is an American public multinational technology company which develops and supports a range of software products, services, devices, and solutions It also designs, manufactures, and sells devices, including personal computers (PCs), tablets, gaming and entertainment consoles, other intelligent devices, and related accessories It offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and it provides solution support and consulting services

It markets and distributes its products and services through original equipment manufacturers, direct, and distributors and resellers

Microsoft before 1990 was predominantly a supplier to the hardware manufacturers That was their target market As technology advanced and personal computers became so popular, the bulk of Microsoft’s revenue was generated from sales to consumers It was the first software company to reach $1 Billion in revenues As more and more versions of Microsoft Windows were launched, Microsoft captured a higher market share of the world’s Personal Computer (around 90%) Moreover, as a way to diversify the company’s portfolio and to penetrate into the tablet and smartphone segments

Figure 1.2: Microsoft’s revenue from application performance management from

Nokia is a Finnish multinational communications corporation engaged in the production of mobile devices and in converging Internet and communications industries Nokia's strategy has mostly focused on growing growth markets and investing in innovative and disruptive technology In 2000s, Nokia has been very successful on the low and medium end mobile phone market, where Nokia has eliminated many of its competitors In reality, Nokia's major goal has always been

to stay ahead of the competition in terms of industry innovation evolution, resulting in a positive influence and a brand image of success and pioneering From 2000- 2007, Nokia maintained its market share and leadership by providing appealing and localised mobile goods and services, refreshing its product line, and investing in the future, particularly in growing regions such as China and India The Nokia brand, valued at $25 billion, is listed as the 14th most valuable global brand in the BusinessWeek Best Global Brands list of 2011

Figure 1.3: Nokia annual revenue from 2008-2013

Nokia annual revenue

Source: Macrotrends.net However, the rise of smartphones and tablets posed a threat to Nokia's leadership and organisational structure In 2010, volume and value growth in the global mobile device market was driven by rapid growth in converged mobile devices.Nokia’s device volumes were also adversely affected in the second half

of 2010 by shortages of certain components At the same time, the competitive environment in mobile devices intensified, adversely impacting Nokia’s competitive position in the market Since then sales dropped, numerous factories and R&D facilities were closed, employees made redundant, as well as the market capitalization dropped considerably, form € 110 Billion to € 15 billion in 2012

1.3 Timelines

Figure 1.4: Timelines of the events at Nokia Corporation and the mobile

communications industry

Nokia N92 — a Nokia's financial performance Lumia 900 for the US market Meltemi

Symbian OS (S60) starts to deteriorate Development stopped by top management

2007 2009- 2010 2012

es 77-7

2002-2003 2008 2011 2013

Nokia 7650 — first Launched The shift from Symbian to the Microsoft acquires Nokia's

constantly different Windows Phones The first Nokia mobile phone division

smartphone with Symbian

smartphones Windows Phone 7 based devices

Nokia had lost significant ground to smartphone manufacturers, most notably Samsung and Apple, in recent years due to a failure to keep up with innovations such as touch screens “The company lost 40% of its mobile phone revenue in the second quarter of 2013”, Hakan Wranne, an analyst at Swedbank, commented For Nokia, the deal is seen as a way to exit from the handset market Although they once dominated this sector, they are now well behind market leaders Apple and Samsung

For Microsoft, the purchase is a way for them to add a mobile hardware component that will allow them to compete head to head with Apple and Google

By bringing Nokia on board, Microsoft will be able to work on both firmware and hardware from the start, theoretically making the process of developing, manufacturing, and distributing a new phone or tablet much more efficient Furthermore, Microsoft claims that with a better understanding of how hardware

and software interact, it will be able to apply that knowledge to its existing relationships with partners, developers, and operators

1.5 Objectives

In this report, the authors would like to manifest the essence and conflict

of the negotiation between two giant companies in technology fields, including:

se Analysing the technology fields with two different cultures, reason for the negotiation of Microsoft and Nokia company

e Criticizing being overconfident in current technology without experimenting with higher technology

e Offering evaluations and solutions in the third perspective to two giant companies

e Examines the impact of cultures on the effectiveness of negotiation process in the context of cross border acquisitions

CHAPTER 2: LITERATURE REVIEW 2.1 BATNAs

The term BATNA was originally used by Roger Fisher and William Ury

in their 1981 book entitled “Getting to Yes: Negotiating Without Giving In.” BATNA is an acronym that stands for Best Alternative To a Negotiated Agreement It is defined as the most advantageous alternative that a negotiating party can take if negotiations fail and an agreement cannot be made In other words, a party's BATNA is what a party’s alternative is if negotiations are unsuccessful The BATNA concept is a useful metaphor in all dispute resolution procedures where parties have the option to exit the process, such as negotiation and mediation In this context, a BATNA is a strategy for putting pressure on the opposite party Mnookin (2003) argued in a recent essay that having an accurate BATNA is part of the armoury one should employ to determine whether or not

Seller's Alternatives

SELLER'S BATNA

Buyer’s Alternatives BUYER'S BATNA

2.2 Different Cultures

Culture is considered to be one of the most influential factors in international business negotiations When culture is discussed in international business, the emphasis tends to be on the national culture level National cultures influence the way business is done in a society and how individuals are expected

to behave Successful negotiations require an understanding of each party’s culture and may also require adaptation of the negotiating strategy so it is consistent with the other party’s culture National culture distance affects the extent to which acquisition partners communicate during the negotiation process and integration process Several studies report that national culture has an important influence on behavior and the negotiation process For example, Hofstede (2001) explained that in cultures that are characterized by large power distance, centralization of communication is popular, whereas in small power distance cultures decentralization is popular or Gelfand & Realo( 1999) proved that studies stated that cultural differences, such as individualism versus collectivism, affect the negotiation process

Nowadays more companies are expanding internationally and they cannot avoid cultural differences Many companies regardless large or small are making the same mistake when approaching a foreign market The mistake is that companies approach the new unfamiliar market the same way that they would their domestic markets There have been many failure rates involving acquisitions where corporate or national cultural differences are detrimental to acquisitions performance The important contribution of cultural fit models such

as the one proposed by Cartwright and Cooper (1996) is that they illustrate that cultural differences can pose significant barriers to achieving integration benefits and that they have to be considered at an early stage of the M&A process — as early as the evaluation and selection of a suitable target and the planning of the integration process

2.3 Integrative negotiation

Integrative negotiations are often referred to as "interest-based negotiations, win-win negotiations or non-zero-sum game and is a negotiation strategy in which parties collaborate to find a "win-win" solution to their dispute This strategy focuses on developing mutually beneficial agreements based on the interests of the disputants Interests include the needs, desires, concerns, and fears

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important to each side In the integrative (or principled) negotiation strategy, parties explore options to increase the size of the joint gain, before focusing on the division of payoffs (Patton, 2015; Pruitt & Rubin, 1986) This tends to solve problems jointly and to benefit all parties, as negotiators distribute the increased value by applying objective criteria (rather than haggling, as in distributive negotiation) (Fisher et al., 1981) There are four steps for handling an integrative negotiation First, Negotiator should not make a proposal too quickly, especially starting with numbers because a premature offer won't benefit from information gleaned during the negotiation process itself Second, They should try to uncover the other side's real reservation price by initiating a conversation about interests and concerns instead of hastily throwing out offers Furthermore, they should generate options that offer mutual gain Last but not least, they should not overlook differences in preferences, resources, and capabilities in order to create value that neither party could have created on its own To make a successful negotiation, integrative negotiation tells people to focus on preparing to create value, exploring interests and issues and knowing the other party‘s needs

Figure 2.2: Hofstede's cultural dimensions

Power Distance Index (PDI) Indulgence vs Individualism Restraint vs Collectivism (IND) (IDV)

Hofstede’s Cultural Dimensions

Long-term Theory Orientation vs

Short-term

Uncertainty Avoidance Index Orientation (UAT) (LTO)

Masculinity vs

Femininity (MAS)

Source: iEdunote.com

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7650 - first smartphone with Symbian operatinc system

Matrix Reorganisation nokia 7710 — first touchscreen smartphone Internet tablet 770 (Maemo)

Nokia N95 — Symbian OS (S60) Launched constantly different smartphones

Nokia’s financial performance starts

to deteriorate

NOKIA CORPORATION

HIGHLIGHTS Entering the smartphone market

Nokia reaches 40% market share

in mobile phones

On the smartphon market Nokia was having a market share around 47%

Leaving the competitors far behind

The market share decreased from 39.3% in the beginning of 2009

to 27.6% in the final quarter of

2010

First network INDUSTRY

operators in south Korea and the US adopt 3G standarc

Google acquired Android inc and starts its mobile strategy Apple iPhone is launched to the market First Android phone to the market

Apple iPad USA shift to LTE networks (4G) Samsung Galaxy : Nexus

smartphones and tablets (Google)

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US market Meltemi Development stopped by top management Microsoft acquires Nokia’s mobile phone division

Microsoft Lumia was released

iPhone 4 were released 39% of all devices sold were powerec

by Android

Witsneed the considerable plunge on sales Capitalization dropped considerably, from

€ 110 Billion to €

15 billion Nokia dismissed Apple launched 4,000 employees iPhone 5 from smartphone

manufacturing plants in Europe

Microsoft paid EUR 3.79 billion

to purchase substantially all of Nokia’s Devices

& Services business, and EUI 1.65 billion to license Nokia’s patents, for a total transaction 15 price of EUR 5.44 billion in cash

Microsoft announced that it would discontinue the majority of its Nokia-branded devices, in favour

of Lumia's development

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Back on September 3, 2013, Microsoft announced a deal to acquire Finnish mobile phone company Nokia’s handset and devices, patterns, licenses and service business for $7.2 billion, the New York Times reported The agreement marked a belated but bold move by Microsoft to upgrade its presence

in handheld devices and signaled an end to Nokia’s long struggle to enter the hyper-competitive (and extremely lucrative) smartphone market

Microsoft and Nokia had been partners since 2011, when the Finnish firm began installing Microsoft's Windows Phone operating system on its smartphones The arrangement had been disappointing, however Nokia was lagging far behind smartphone manufacturers Apple and Samsung in terms of innovation and market share, and the Windows Phone OS, used primarily on Nokia handsets, also was failing to meet expectations Without big sales, Nokia’s future as an independent company was in question, as both its stock and financial performance waned In addition, Microsoft wanted to join the smartphone market Although, engineering teams from the two companies were also duplicating efforts in some areas and unable to fully collaborate in others The result was that Windows Phone still had single-digit market share, a situation that kept Microsoft on the sidelines of the mobile conversation and a clear also-ran to Google’s Android and Apple’s iOS These problems were a signal to start a negotiation between Microsoft and Nokia

Figure 3.1: Global market share held by Nokia smartphones from 1st quarter 2007

to 2nd quarter 2013

Source: Gartner

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