Tuesday, September 3, 2013

Microsoft's Acquisition of Nokia: A Supply Chain Perspective

Elop and BallmerMicrosoft (MS) is acquiring Nokia and the deal is struck at a staggering $7.2 billion! The acquisition is also of top executives and 32,000 work force of Nokia, with MS entering hardware mobile market by 2014. With such a huge barrier to entry in mobile hardware market, with Microsoft's strong patent and software base what is going to be the future of mobile business is already under plenty of speculation. For me this is rather interesting as this is seems to be a strategic supply chain (SC) move where MS now fully controls the operations of its licensee for patents and software. Google is already geared up with Android based Google Nexus starting to increase its market share by being a very low cost smartphone in a smartphone market where customers have plenty of options and complicated decisions to make and keep up with loyalties.

Apple, Google and MS will soon have their own OS, own hardware and  own set of loyal customers and bargain hunters. The market is becoming increasingly complex and Google already is also trying to take some leap ahead by trying to purchase spectrum [story here at CNET].

As an SC enthusiast the smartphone is moving towards a vertical integration system, it is now interesting to see is this vertical integration beneficial for the industry as a whole? For consumers and industry this will be boon as this reduces the double marginalization effect and now all the players will be able to get more money for each penny. However, in a fierce competition with continuously decreasing smartphone production costs, will it lead to price wars? A simple way to avoid price wars is to invest in future technology that will differentiate the company from its competitor over long run and keep the market stable.

We will see how the market turns out to be, but people have already start posing questions, for example this post on TIME [here].

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