University Report: Nokia-Microsoft Partnership & Cultural Challenges

This report provides a comprehensive analysis of the Nokia-Microsoft partnership, examining the cultural challenges that led to its failure. It begins with an introduction to the partnership and Nokia's decline in the mobile market due to the advent of smartphones and competition from companies like Apple and Samsung. The report then delves into the key management challenges, specifically focusing on the cultural differences between Nokia (Finland) and Microsoft (USA). It utilizes Hofstede's cultural dimensions to highlight the contrasting values and communication styles. The report further explores communication issues arising from cultural barriers, discussing negotiation strategies employed, and the implementation process. The analysis covers structural, strategic, and process analyses. Finally, the report discusses the implementation of negotiation strategies, including win-win scenarios and the importance of open communication, concluding with the expectations and achievements of the partnership and the impact of cultural clashes on the business.

Running head: NOKIA MICROSOFT
NOKIA MICROSOFT
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Author Note:

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Introduction:
The aim of this report is to discuss the actual situation of partnership between Nokia and
Microsoft and how this partnership is bringing positive change in the business of both of these
two companies. This paper will be analyzing the cultural challenges the partnership business is
facing and how these companies will be reviving their places in the market by solving the
cultural issues in the management segment.
Nokia has been in the dominating position during the 1990s to early 2000s due to
extremely overwhelming design of mobile phone and exclusive services. This company had the
reputation of producing high standard and reliable mobile phones for the customers in all over
the world. Despite the fact that the phones of this company were internet enabled and
programmed, it could not survive in the market of the developed countries firstly and then in the
developing markets. Nokia used to provide the best quality production and service but after
Apple introduced iPhone, the trend of using mobile by the customers had changed completely.
The advent of smartphones snatched the mobile market from Nokia and gave all the facilities to
the companies like Apple and Samsung. Nokia with its simple mobile phones could not face this
changing competitive climate hence faced a tremendous failure in the stock market.
The company needed time and effort to understand the current trend of the demands of
the customers so first changed the CEO of the company so that the change in the process can get
fresh air to survive. The company identified the need for increase expertise in the software
system. As Nokia is famous for its exclusive design and hardware, hence it started to depend
upon the partnership with the software expert Microsoft. Nokia with collaboration of Microsoft
and launched Nokia Lumia. This new product however brought fresh impetus in the share but the

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expectation did not meet properly. This was the question of popularity of both the companies
hence Microsoft directly acquired the mobile phone division of Nokia to compete with Apple
and Samsung. This led Microsoft to acquire the divisions like mobile phones and smart devices,
design team, licensing agreements, and approximately 32,000 new employees of Nokia. This
Nokia-Microsoft partnership had more negative effect rather than positive as more than 20,000
skilled employees of Nokia faced job cuts (Tjemkes, Vos & Burgers, 2017). Within one year,
this partnership was destroyed and Microsoft did not intend to produce any new mobile phone.
The main issue of this partnership failure is however the inability to understand the market trends
but along with this, the company’s inability to manage the cultural differences among the
employees (Dolata, 2017). The cultural barriers of these two companies had led the destruction
of this partnership and eventually the company like Nokia.
Key Management Challenge:
As the national culture directly connects the organizational culture of the companies, the
companies face tremendous pressure in managing the employees with different mindset and
values. According to the Hofstede cultural dimensions different countries have different cultures
and social values that create impact upon the people living there. Hence the companies when
partnering with any other brand form different culture need to have proper understanding of the
values, beliefs and communication system so that the culture does not create impact upon the
successful operation of the companies.
Cultural differences and barriers:
The companies partnering in the mobile phone market here are Nokia and Microsoft.
Nokia hails from Finland and Microsoft from the USA. The first one is a country from Europe
that culturally different from theta of US. This is the reason why the companies fail to create a

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bond among the employees that reflected in their operation. According to the Hofstede cultural
dimensions, there are six dimensions on which the organizational culture of Finnish company
Nokia and the US based corporation Microsoft contradicted vehemently.
Figure 1. Hofstede cultural dimensions
(Source: Hofstede-insights.com 2019)

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Figure 2. Hofstede cultural dimensions
(Source: Hofstede-insights.com 2019)
In the power distance dimension, Finland scores 33 and USA scores 40 (see figure 1
and 2). This particular dimension relates to the tendency to support hierarchy within the
organization the higher the score is, the more preference for hierarchy is seen. In the case of
Nokia, the Finnish employees do not intend to have centralized power to dominate. They are
more independent, support equal rights and accessible superiors. This informal attitude towards
managers might have created negative impact upon the US employees and led to clash.
In the individualism dimension, Finland scores 63 and USA scores 91 (see figure 1 and
2). The culture of USA is highly individualistic that enables the employees to work by their own
and for their immediately families rather than the teams or their colleagues. Here the relationship
between the employers and the employees is completely professional and contact for mutual

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advantage. On the contrary, the Finnish culture tend to teach the people to think for the others
and achieve the goals collaboratively (Alwan & Wolf, 2019). This collaborative and
individualistic outlook and operating methods have created gap among the employees of
Microsoft and Nokia.
In the masculinity dimension, Finland scores 26 and USA scores 62 (see figure 1 and 2).
In this index, the Finnish company like Nokia has shown more feminine cultural that that of the
US. The organizational culture of Nokia is based on the dominant value of caring for the others.
Here equality is the sign of success in the society and competition level is low in the
organizations. On the other hand the US organizational culture is highly competitive where the
people tend to strive in the society on the basis of higher status (Huo et al., 2017). The goal is to
become winner at any cost which contradicts the organizational culture of the Finnish employees
of Nokia.
In the uncertainty avoidance dimension, Finland scores 59 and USA scores 46 (see
figure 1 and 2). In this dimension only the organizational cultures of Nokia and US have shown
similarities as both of these cultures show fair degree of acceptance for the new ideas, intensions
to try something new and innovative (Wolf & Alwan, 2019). This tendency had brought these
two innovative companies to work for one another as well as for themselves.
In the long term orientation dimension, Finland scores 38 and USA scores 26 (see figure 1 and
2). This dimensions describes the process through which the societies maintain some connection
with their own past and deal with the present challenges. The US has a normative society hence
it tends to honor traditions and maintain time which view the social changes. In the case of
Microsoft, this normative outlook become important that has pointed out the fact the Americans

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tend to analyze new information for checking whether they are true. This makes them very
practical in their personal and professional lives. This make them very confident and have a can
do mentality. This score is 38 in the Finnish society that concerns with establishing the absolute
truth relatively small propensity for saving for the future but achieve quick results.
In the indulgence dimension, Finland scores 57 and USA scores 68 (see figure 1 and 2).
Both of the cultures of US and Finland believe in the work life balance. Both of the
organizational cultures believe in the idea of working hard and playing hard. The people in both
the countries tend to explore every happiness in the without controlling their impulses and
desires. They have relatively weak control over the extravagancies and all the other factors that
lead to enjoyment of life. In this regard, the US employees tend to spend their time and money
more in the enjoyment as compared to the Finnish employees.
Communication Issues:
Cultural barriers lead the employees of both the corporation to face the communication
issues. The cultural diversity makes the communication process more difficult as the mindset of
the employees of the corporation are different. Different cultures lead to have difference in the
language, symbols and signs which may be acceptable to one culture but not supportive to the
other. The confusion level gets higher because the meaning of one gesture can be different in the
other culture. This leads to the development of the ethnocentrisms, opinions and manners and
prejudices (Yang, 2018). The Finnish employees working in Nokia do not expect that the US
employees will be interested in conversing in Finnish or Swedish. Therefore the companies while
partnering with each other, found English to be the most useful language to share their thoughts
and deals. Now the US English is quite different from the actual English of Britain or that is
commonly used in other European countries. This is the reason why there is always a

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communication gap among the employees from both sides which create barrier for a perfect
understanding of the messages.
Analysis
Negotiation strategies:
The foundation of the negotiation theories include decision analysis, game theory,
behavioral decision making and negotiation analysis. Negotiation analysis is also classified with
the structural analysis, process analysis, and strategic analysis, integrate analysis and behavioral
analysis of negotiations. The structural analysis mainly focuses upon the perfect distribution of
the empowering elements among the two negotiating parties. This moves away from the
traditional realist notions of power to be a possession. This is manifested for the example in the
economic or the military resources and thinks power to be a relation (Sandin & Francis, 2018).
The distribution of the elements mainly depends upon the symmetry of power between the
equally strong parties or the asymmetry between the weaker and stringer party. All the elements
constitute structure but have hard and soft nature that mainly relates to the contracts, norms and
precedents.
The strategic analysis initiates with the idea that both of the parties sitting for the
negotiation possess Veto therefore both of these parties can cooperate or defect. This leads to the
development of trust on the repetitive games through the emergence of reliable patterns of
behavior (Quinones et al., 2016). The process analysis of the negotiation theory focuses upon the
study of the dynamics of processes. This process is used to predict the attitude of the other party
to find the rate of concession to predict the like result. The process of negotiation hence
considered to unfold between the fixed two points, starting point of discord and end point of
convergence. Here the key challenge is to discover the conditions for fostering progress towards

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the solution to dilemma of balancing desire for agreeing to come out favorably (Peleckis, 2016).
The integrative analysis on the other hand divides the processes into the successive stages
without talking about the fixed points. This extends to the pre negotiation stages finding formula
of distribution, settlement and crest behavior.
Implementation:
There are different strategies to cope up with the negotiation process where the
companies aiming to negotiate know the exact time to collaborate. The aim behind every
negotiation process relates to achieve the win-win situation and find common ground. In
implementing successful negotiation, the companies need to be willing to trade off for particular
factors through open communication (Sandin & Francis, 2018). The third stage of negotiation is
to respond in what ifs. Through this stage the companies get a clear idea about the future impact
upon the business. In the case of Microsoft and Nokia, it was seen that Nokia will be getting
exposure in the smartphone market of it partners with the company like Microsoft. Here the
interest of Microsoft was also present because this also wanted to enter the phone market other
than only serving the computer markets (Peleckis, Peleckienė & Leonavičienė, 2019).
The implementation process of negotiation also include the effective founding of the
pressure points. This is due to the fact that both of the companies know their own weaknesses
and points where they will be curbed effectively. Next stage is the expectations and
achievements so that the company goes for the next negotiation (Li et al., 2018). In this respect,
the initial success of Nokia after introducing the Nokia Lumia series can be referred. This can be
seen as the experiment by both the companies aiming to achieve more or less same objectives.
However towards the end, the partnership of Nokia and Microsoft has been broken where they
faced the more dangerous deadlock (Zhao et al., 2019). This is usually emerged from the aspect

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that both the parties did not get a mutually beneficial zone of agreement over which both Nokia
as well as Microsoft could survive, they needed to change the negotiators mainly from the aspect
of Nokia it was mandatory. Otherwise they needed a presence of a mediator so that the
communication and others issues affecting the organizational culture and all the other resulting
factors to the breaking of the negotiation prices or for that matter the actual business of the
company for surviving the tremendous pressure of performing in the competitive business world.
Performance of Microsoft in the last 5 years:
Microsoft has been a constant figure among the most valuable brads of the world that was
not at all affected by the partnering with Nokia. This is due to the fact that the company actually
performs in the PC industry rather than the mobile phone industry. Therefore, the growth of the
company has been sharp for last five years. This is reflected in the revenue also where the annual
revenue in FY 2015 was 93.58 billion USD. In 2016 and 2017 the revenue got reduced FY there
were 85.32 and 89.95 billion USD consecutively because on 18 May 2016, the informed the
public of its intention to write off most of the $7.2 billion Nokia deal and an agreement to sell the
mobile devices unit to HMD Global and Foxconn Technology for just $350 million. Within these
two years, the company had effcetively solved many issues relating to the production of
Microsoft mobile hence in 2018, the FY of 2018 led to have 110.36 billion USD and in FY 2019,
the revenue was 125.84 billion USD (Microsoft.com 2020).

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The company has showed growth in the share market performance also. In 2015 financial
year Microsoft Corporation had maintained the span of 47.19 billion USD to 55.48 billion USD.
In 2016, it ended with 62.14 USD. The growth in spite of being slow was marked positive. From
the march 2017, the share price was growing faster than expected where it grew from 65.86 USD
to 85.54 USD. The FY 2018 started with 89.60 USD and crossed 100. The next FY started with
101.93 and ended with 158.96 USD (Microsoft.com 2020).

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Learning Positives or Negative:
From this case of Nokia and Microsoft, the other companies can learn both the positive as
well as negative factors. The partnership can lead the other companies to understand the cultural
factors which need to be realized form making any type partnership process. This partnership of
Microsoft and Nokia was mainly taking place as Nokia wanted to avoid the harsh competition in
the mobile or smartphone market and face the blow by Apple and Samsung, on the other hand
Microsoft wanted to capture the mobile software market just like it had done in the case of PC
software market (Alibage & Weber, 2018). Both of these two companies wanted to get into the
partnership for overcoming the competition. In this regard none of them thought of the
employees and the difference of culture and its impact upon the successful operation of the
companies.
The negative aspects that the other companies can learn from the failed negotiation
between Nokia and Microsoft are related to the behavior of the business partners. Here Microsoft
towards the end completely stopped helping Nokia by supporting with innovative software. The
process of showing respect to the partner can therefore end in between when one partner will be
dying.
Recommendations:
Bridging the gap:
In order to bridge the gap between the employees having different cultural background,
the management of both the companies need to have proper understanding among themselves.
The credibility and communication are two major factors that reduce the gap among the
employees in the organizations. The credibility is an important area that lessens the