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Managerial Economics Report on Nokia and Microsoft

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Added on  2020-04-15

Managerial Economics Report on Nokia and Microsoft

   Added on 2020-04-15

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Running head: MANAGERIAL ECONOMICS Managerial economicsName of the StudentName of the UniversityAuthor note
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1MANAGERIAL ECONOMICS Table of ContentsIntroduction................................................................................................................................1Discussion..................................................................................................................................1Conclusion..................................................................................................................................6References..................................................................................................................................7
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2MANAGERIAL ECONOMICS IntroductionNokia and Microsoft are well-known names when it comes to mobile phone businessand information technology industry. This is due to their performance in the past years andthe famous merger and acquisition that both the company took in 2014. Nokia is a well-known information technology company that started operating its business in 1985, waseventually merge by Microsoft in 2011, and bought by Microsoft in 2014 (Ali-Yrkkö, et al.,2013). Microsoft is known as a named American multinational company selling upgradedtechnology in today’s world. The company started introducing its new Windows OS in 2010and new strategy with new type of Smartphone. This made the company to join Nokia, theSmartphone manufacturing company. However, later in 2013 Microsoft announced to acquireNokia’s devices. Acquisition and merger has both long-term effect and short-term affect onthe economy and on the industry (Ali-Yrkkö, et al., 2013). The essay will analyze theperformance of the consolidated companies after the deal took place. The analysis has beendone based on managerial economy using various economic affect of the merger andacquisition that took place. Discussion Nokia has always been known as the pioneer of telecommunication and informationtechnology sector. The dominance of Nokia in the mobile industry continued for a long timewhen the company was known for its Smartphone manufacturing. However, excessivecompetition from the fast growing Smartphone business and increasing competitors, forcedthe company to take up new strategies. Microsoft on the other hand, was of the view ofentering the Smartphone business with their new Windows OS. This made both the companyto decide on an acquisition strategy in which Microsoft would acquire Nokia and offer its
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3MANAGERIAL ECONOMICS technology to develop new phone (Ali-Yrkkö, et al., 2013). However, this had detrimentaleffect on the both the company as well as on the economy. Impacts of merger and Acquisition Managerial economics is termed as a branch of economics in which it deals with theconcepts and methods of business. The managerial economics analyses the effect of variousbusiness strategies based on microeconomics concepts (Hirschey, 2016). The merger andacquisition that took place between Microsoft and Nokia can also see such affect. Merger is atransaction that takes place between two companies. During merger two companies joinstheir operation and try to make use of their best resources and techniques in order to get thebest out of the merger (The Verge, 2017). On the other hand, acquisition takes place whenone company acquires the business and operation of another company. However, suchmergers and acquisition has both positive and negative effect. Positive affects leads toincrease in an increase in profit and revenue of the company and negative impact leads toincrease in cost and reduction in profit (Buckley, & Clegg, 2016). However, most of the casesin the past has shown a failure from the acquisition and offered disappointing results. Most ofthe positive impact that results from acquisition is to grow, become competitive, economiesof scale and achieve domination (Keizer, 2017). However, the opposite impact happens whenthe acquisition between two companies fails. Both positive and negative impact of acquisitionfalls on the economy as a whole as the consumers are the one that are affected directly due tosuch business strategies. Thus, the all round effect of acquisition that affects the economy is apart of managerial economic analysis (Von Kalinowski, et al., 2016).Microsoft and Nokia Acquisition With the rising environment of innovation in the technology sector both the companydecided to merge in the year 2010, to make use of the each other competitive advantage and
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