THE CATHOLIC UNIVERSITY OF EASTERN AFRICA

P.O. Box 62157 A. M. E. C. E. A 00200 Nairobi - KENYA Telephone: 891601-6 Fax: 254-20-891084 MAIN EXAMINATION E-mail:[email protected]

AUGUST - DECEMBER 2016 TRIMESTER

FACULTY OF COMMERCE

MBA EVENING PROGRAMME

CMM 613: STRATEGIC ALLIANCES

Date: DECEMBER 2016 Duration: 3 Hours INSTRUCTIONS: Answer Question ONE and ANY OTHER TWO Questions

CASE: 'S STRATEGIC ALLIANCE WITH NOKIA

Joining Forces in the Smartphone Wars In September 2011, Microsoft Corp. (Microsoft), the US-based computing industry major, and Nokia Corp. (Nokia), the Finland-based communication company, launched a toolkit that would allow developers to port Symbian operating system (OS) applications to the OS.

The package was expected to help Symbian developers learn to develop Windows Phone. "This helpful package contains the tools and documentation to help you along the path to learning Windows Phone development," said Jean- Christophe Cimetiere, senior technical evangelist, Microsoft. Earlier in February 2011, Microsoft had entered into a strategic alliance with Nokia. The alliance envisaged combining the traditional strengths of the two companies to create synergies. In the face of stiff competition from Google's Android and Apple's iOS, Microsoft's share in the mobile OS market had been shrinking. And Nokia was struggling to compete with Samsung Electronics

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(Samsung) , Apple , and HTC Corp. in the smartphone market as most buyers perceived its Symbian OS as being outdated and lacking in many of the features that were available in competing operating systems. The strategic alliance was expected to help the two companies build a new mobile eco-system. Nokia was to gradually migrate away from the Symbian OS to Windows Phone. It was hoped that Nokia Windows Phones would offer a compelling alternative to prospective smartphone customers.

With Google, Inc. purchasing Motorola Mobility in August 2011, the smartphone market seemed to be in the middle of a profound change. Barring Microsoft, all major OS vendors now had a presence in the smartphone hardware market. According to some analysts, this could be disadvantageous for Microsoft. As Nokia had a negligible presence in the US, the world's largest smartphone market, industry observers felt that it would be an uphill task for Microsoft and the alliance to make headway there. Also, with Google and Apple succeeding in creating a thriving ecosystem of apps, it was felt that it would be extremely difficult for a third entity to challenge their hegemony. About Microsoft Bill Gates (Gates) dropped out of Harvard University to establish Micro-soft in 1975 in a hotel room in Albuquerque, New Mexico. Initially, Gates, together with high school friend Paul Allen (Allen), developed a version of BASIC, a programming language. The duo sold the modified version of the software to other companies.

In 1979, Gates shifted Micro-soft to his hometown Seattle. In 1980, IBM Corp. selected the firm, which by then had been renamed Microsoft, to develop the operating system for its new computing machines. Later, Gates purchased QDOS (Quick & Dirty Operating System) for $50,000 from a programmer. He called it MS-DOS (Microsoft Disk Operating System). In 1983, Allen resigned from Microsoft on health grounds.

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In the mid-1980s, Microsoft launched Windows, a graphics-based version of MS- DOS. In 1986, the company went public. Windows NT was launched in 1993; the newer version competed with the UNIX operating system. In the early 1990s, the company was embroiled in legal battles as monopoly charges had been pressed against it. In 1995, the US Department of Justice (DoJ) objected to Microsoft's proposed acquisition of Intuit, a company that developed software for the personal finance industry, on antitrust concerns.

Microsoft was a little late in jumping on to the Internet bandwagon. In 1995, the company launched Microsoft Network (MSN). It also introduced the Internet Explorer, a web browser, in that year. In 1998, the DoJ filed antitrust charges against Microsoft, contending that the Seattle-based company limited consumer choice in the Internet browser market by choking competition. In the same year, Gates appointed Steve Ballmer (Ballmer) as the president.

In 1999, Microsoft announced that it would purchase a minority stake in AT&T for $5 billion. Microsoft also bought Visio, a company that specialized in Windows- based technical drawing software, for $1.3 billion. In the year, it sold stake in Expedia to the public. Microsoft and the Mobile OS Space Microsoft entered the mobile operating software (OS) market on April 19, 2000, with the launch of Pocket PC 2000 (codenamed Rapier). This software, based on Windows CE 3.0, was meant for Pocket PC devices. The OS came with Pocket Office, Pocket Internet Explorer, (software that allowed users to read e-books), , Notes (note-taking application), (personal finance software), etc.

In October 2001, Microsoft launched Pocket PC 2002, an improved version of Pocket PC 2000. This software was also based on Windows CE 3.0.

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The Changing Mobile OS Market In 2003, when Microsoft launched WM 2003, Palm Inc. was the leader in the smartphone market. Palm devices used , called Palm OS. However, companies like HP, Hitachi, and Dell incorporated Pocket PC 2002 or Mobile 2003 in their smartphone models. In the first quarter of 2004, Microsoft was able to capture 40% of the smartphone OS market. By the third quarter, sales of Microsoft CE-based phones exceeded that of Palm OS phones. Microsoft and Nokia Force Strategic Alliance On February 11, 2011, Nokia and Microsoft announced a roadmap for a broad strategic partnership. The partnership was to exploit the strengths of both companies and "build a new mobile eco-system." The proposed partnership included the following: i. Nokia would largely use Windows Phone OS for its smartphone models. The Finnish company would develop enhancements on top of the platform in areas such as imaging, where it was a market leader. ii. Nokia would use its hardware design, language support capabilities, and its global reach to develop Windows Phone-based smartphones at various price points, and in diverse market segments and regions. Google Buys Motorola Mobility In August 2011, Google purchased Motorola Mobility for $12.5 billion. According to analysts, the search engine giant took this step in response to the legal threats by Microsoft and Apple. "Google gets Motorola Mobility's portfolio (17,000 patents)...it may position Google to defend itself against more fundamental IP attacks, and increase counter-threat and leverage in global patent negotiations and litigation," said Mike Abramsky, an analyst at RBC Capital Markets. The Road Ahead In 2010, Microsoft had reported net income of nearly $19 billion, up from around $15 billion in 2009. Microsoft was betting big on online services, search, entertainment, mobile computing, cloud computing, etc. However, in the mobile OS market, the company continued to cede market share to Apple and Google in 2010 and in 2011. In May 2011, Microsoft entered into handset agreements with Cuea/ACD/EXM/AUGUST - DECEMBER 2016/MBA Page 4

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Acer Inc., Fujitsu Ltd. and ZTE Corp. It also announced that it would add around 500 features in the fall release of , christened Mango.

a) Critically analyze the factors that led Microsoft to enter into a strategic partnership with Nokia. (10 Marks) b) Describe the alliance in detail (10 Marks) c) Discuss the future prospects of the alliance in light of the rapidly changing external environment. (10 Marks) d) Evaluate the key factors that would influence the success of the alliance. (10 arks)

Q2. a) Explain strategic alliances typologies (10 Marks) b) Discuss the benefits that accrue from forming strategic alliances (10 Marks)

Q3. a) Choosing partners is one of the most difficult steps in strategic alliances formation. Discuss (10 Marks) b) Giving examples explain the various risks that can derail strategic alliances goals (10 Marks) Q4. a) There are several ways how a strategic alliance can come to an end. Using examples discuss. (10 Marks) b) Explain the various management structures in strategic alliances. (10 Marks) Q5. Discuss the various stages involved when building a strategic alliance (20 Marks)

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