With the introduction of the iPhone in 2007, a revolution took place in the mobile phone industry. With a new user interface and the revolutionary approach of creating an ecosystem to support the phone’s functionality through apps, Apple not only took the rest of the industry by surprise but also set a new standard for competition in the mobile industry.

In particular, Nokia’s leading position in the mobile market, both from a mobile software perspective (Symbian) and a hardware perspective, was endangered. The company rapidly lost ground to Apple, and later to Google from a software perspective thanks to Android, and to Samsung from a hardware perspective.

When Steven Elop, CEO of Nokia, announced the partnership with Microsoft in 2011, it was believed that this would provide Nokia with the opportunity to become competitive again and grow as a smartphone manufacturer. However, by 2013—a little over two years after signing the alliance agreement—the alliance was terminated through the acquisition of Nokia’s Devices and Services business by Microsoft. According to Steve Ballmer, CEO of Microsoft, this was ‘a bold step into the future—a win–win for employees, shareholders, and consumers of both companies’. However, since that moment, it has been a tragic ride for Nokia; many thousands of employees have been laid off, smartphone production decreased over the years and fnally Microsoft wrote off the entire investment in Nokia in an impairment charge. Microsoft abandoned the name Nokia, and everything that was left is being converged in the Microsoft Surface team. The collaboration with Microsoft has been destructive for a company that reigned over the mobile markets for years.

The Finnish company Nokia was founded in 1865 as a ground wood pulp mill and grew to become a global corporation with a prominent position in the global telecommunications industry. The company was able to establish its leading position through easy-to-use phones aimed at individual consumers and businesses. However, the telecommunications industry changed dramatically in 2007 with the introduction of Apple’s iPhone. The iPhone revolutionized customer experience and created a market shift. In 2008, Google introduced its open-source Android operating system, which further disrupted the mobile landscape.

During the late 2000s, Nokia was using its own operating system called ‘Symbian’; however, it lacked the sleek user experience provided by iPhone and was generally regarded as outdated and old-fashioned. Also Microsoft—which was using Microsoft Mobile platform—

was outperformed by the new competitors. Next, Microsoft was taken by surprise when Apple launched the iPad. Both Nokia and Microsoft saw their market shares decreasing steadily, losing it to their new competitors, which outclassed both companies. Both companies realized that this situation could not be sustained for a prolonged period of time.

After the introduction of the iPhone and Android, Nokia began focusing on revitalizing its mobile business. In August 2009, Nokia and Microsoft announced their frst step of a strategic partnership by ensuring the porting of Microsoft Offce Mobile and Offce Communicator to Nokia’s Symbian devices (Smart Phones) initially, and then to Nokia’s Series 40 devices

(Feature Phones). This was followed by a vast array of other Microsoft Offce products. The key Microsoft executive sponsor for this initiative was Stephen Elop, then president of Microsoft’s business division. In February 2010, Nokia partnered with Intel to develop an entirely new Linux-based platform called MeeGo. This partnership produced the Nokia N9, which used MeeGo as its operating system. However, it took more than two years to develop the Nokia N9, by which time iOS and Android had already secured dominant market positions.

Questions 1 Explain the extent to which formal and relational alliance governance may have facilitated or hampered the partners’ ability to manage alliance termination.
2 Explain whether alliance termination was avoidable in the Microsoft–Nokia alliance, and if so, what the partners could have done to prevent alliance termination.
3 How and to what extent may national cultural diferences between Microsoft and Nokia have afected this alliance termination trajectory?