Question Number Three

Recently a very popular strategic alliance took place. Take the case of
that alliance and analyze it looking at the benefits of strategic
alliances

Introduction

Case study introduction

Introduction of companies involved in the alliance

Pest analysis

Swot analysis

Financial analysis

Conclusion

References

Introduction

In this new era where today’s fad becomes obsolete tomorrow, one thing is assured-
nothing is certain. On account of this uncertainty, companies to ensure their survival
and maintain competitiveness often form alliances with each other either with a
direct competitor or a crucial partner in the business cycle. This kind of affiliation is
fast becoming the stamp of the 21st century. It is a kind of partnering with mutual
sharing of resources which focuses on one’s weakness compensated by the other’s
strength.

This partnering is known as strategic alliance and it takes many forms, from
outsourcing a function to another or to a joint agreement such as researching/
developing / marketing a product. It can also assume the form of a joint venture. The
gist it that each party does something better than the other, and the alliance allows
each party to focus on what it does best.

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In this case I will be analyzing the recently announced strategic partnership between
Intel & Nokia and will be detailing the benefits of the alliance

Intel & Nokia strategic alliance 2009

US semiconductor giant Intel and Finnish mobile phone maker Nokia announced
a "strategic relationship" to develop futuristic mobile computing devices.Intel, the
world's biggest computer-chip maker, and Nokia, the largest mobile phone
manufacturer, announced that their partnership would seek to "define a new
mobile platform beyond today's smartphones, notebooks and netbooks."

COMPANY PROFILES OF INTEL & NOKIA

INTEL

Integrated Electronics (Intel) is an American company which is in the semiconductor

business which supplies the crucial processors for computers.

Intel’s vision

“At Intel, we constantly push the boundaries of innovation in order to make people's
lives more exciting, more fulfilling, and easier to manage. Our unwavering
commitment to moving technology forward has transformed the world by leaps and
bounds.We're a company that's always in motion, fuelling an industry that never
rests. We inspire our partners to develop innovative products and services, rally the
industry to support new products, and drive industry standards. We do this so that we
can collectively deliver better solutions with greater benefits more
quickly”(Intel.com)

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Mission Statement
“Delight our customers, employees, and shareholders by relentlessly delivering the
platform and technology advancements that become essential to the way we work and
live.”(Intel.com)

NOKIA

Nokia is Finnish pioneer in mobile telecommunications and the world's leading maker
of mobile devices. People want to be truly connected, independent of time and place,
in a way that is very personal to them. And, Nokia’s promise is to connect people in
new and better ways.

http://www.nokia.com/about-nokia/company/vision-and-strategy/nokias-strategy

Vision

“Our customers continue to our First Priority”

Nokia’s future success depends on delivering great experiences to our customers by
creating products and solutions that work seamlessly and are appealing.

Mission

“In a world where everyone can be connected, we take very human approach to
technology”. “Our promise is to help people feel close to what is important to them”

PEST ANALYSIS

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PEST analysis stands for Political, economical, social and Technological factors
which are essentially external factors that can affect or contribute to a business.
The following is the PEST analysis for Intel-Nokia alliance.

POLITICAL

The political arena has a huge influence upon the regulation of businesses.In the
semiconductor industry as well as telecommunication industry competition regulation
is low. The alliance does not have any major political ramifications. This is an
alliance where technologies are licensed and the companies have agreed to work on a
new breed of gadget.So government policies are not going to influence the alliance
since it is a licensing of proprietary technology. Government policies may come into
play when the real product in question(which has not been announced yet) is to be
produced.

ECONOMIC FACTORS

The economic growth of the target market is fairly positive. Industry growth is
very promising and there is a wealth of opportunities for those who are already
established in this industry. With the increased pace in the change in technology
spurred by more need for higher and more advanced technology, the demand for the
electronics industry is stronger than ever. This present scenario offers a whole avenue
of possibility for Intel & nokia to develop their products to keep up with the demands
of the market.

SOCIO-CULTURAL FACTORS

This is an era of Generation ‘X’.Geeks who are born with gadgets,so to say.Both
companies have to be very attentive to cater to this market and produce innovative
products which keeps everyone connected.As the nature of the industry in which the
two companies are involved is of a very dynamic nature where change and
innovation are everyday words, there exists the need to constantly sensitive to the

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 change in market demands and preferences, as it is the key to maintaining market
leadership.

TECHNOLOGICAL FACTORS

A very fast technological transfer and a very fast rate of technological obsolescence is
a characteristic of the industry. A unique aspect of this industry is that prices for
products tend to decrease over time. more and more functions are integrated into a
single device. This phenomenal increase in industry productivity is the driving force
that has made semiconductor industry/ electronics so appealing.

Strengths Weaknesses

1. Worlds largest chip 1. No ground breaking product

manufacturer in recent years criteria examples

Political effects?of proposition?

Disadvantages
2. Brand strength 2. Stiffer competition in the
Legislative
Gaps in capabilities?
effects?
industry
3. Strong financial clout Environmental
Lack of competitive
effects?
strength?
SWOT 3.CORPORATION
One directional business
4. Supplier to most of the ANALYSIS-INTEL
major IT developments?
Reputation, presence and
reach?
firms 4. Failure to break through in
Competitor intentions -
the mobile computingFinancials?
various?
5. Chips are found in 8/10 pc’s
playground while competitors
Market
Own known
demand?
vulnerabilities?

6.Industry’s leading innovators are successful

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New technologies,
deadlines
services,
and
ideas?
pressures?
7.Specialists in 5.
Vital contracts
Cashflow, start-up
andcash-drain?
partners?
“Microprocessors”
Opportunities Threats

1. Demand for “Chips” stronger 1. Threat of new entrants like

than ever Nvidia

2. Opportunity for creative 2. Competitors like AMD slicing

team in Intel to Innovate Intel’s market share

3. Create a new platform for 3. Majority of Intels competitors

Mobile Internet devices
4. Enter the mobile processors
field
5. Create a low power
consuming chip line for mobiles
have a foot hold in the mobile
market
4. Intel faces isolation in the
fastest growing market in the
world-mobiles
5. Personal computers can become
obsolete in the future

6. Nvidia introducing its cellular

phone chip package
Strengths Weakness
7. The focus is on mobility
1.Worlds largest mobile 1.Recent flagship models a
today.Intel does not supply chips
failure(N96,N97)
manufacturer for this class of devices
2. Stiffer competition in the industry
2.Brand strength
3.Steadily losing ground to innovators
3.Strong financial clout such as Samsung,LG

4.Has different products 4.Lack of intuitive interface as inexamples

criteria
catering to different segments Iphone,Samsung omnia,Lg”S” class
Political effects?of proposition?
Disadvantages
of the market 5.Near obsolete software Legislative
Gaps in capabilities?
effects?
SWOT platform(S60)
ANALYSIS-NOKIA
5.Over 40% marker share Environmental
Lack of competitive
effects?
strength?
6.Lack of a good app store like Itunes
6.Simple user Interface Reputation,
IT developments?
presence and
reach?
7.Signing restriction preventing
Competitor intentions -
7.Proprietary radio transfer develepoers from developing new
various?
Financials?
technology like HSPA software
Market
Own known
demand?
vulnerabilities?
8.Low presence in USA
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New technologies,
deadlines
services,
and
ideas?
pressures?
9.Dependent on Arm processors
Vital contracts
Cashflow, start-up
andcash-drain?
partners?
10.Caters to every segment but not
Opportunities
1.Strengthen market leadership
through product
differentiation,pricing
2.Introduce convergence devices
3.Create a new open source platform
for Mobile with less restrictions on
developers
4.Develop devices with real
computing power
5.Expansion to USA market with
suitable devices
6.Enterprise solutions challenging
STRENGTH(S)
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Threats
1.Threat of new entrants
2.Market share & profits have
dropped steadily
3.Has been losing out to its
competitive innovators like
Samsung,Lg
4.Stuck with the S60 platform
5.Stiff competition from
Iphone,RIM
6.New entrants entering the
market like PC makers Acer &
WEAKNESS(W)
OPPORTUNITY(O) SO STRATEGIES WO STRATEGIES

THREAT(T) ST STRATEGIES WT STRATEGIES

SO STRATEGIES

Intel corporation is to develop a technologically superior, low cost, low power

consuming class of chips for the mobile market which Nokia will use in its MID.The
marketing is to be done by Nokia.Intel & Nokia will leverage their collaboration in
the Linux platoform to introduce the new operating system ’Mobilin’.With Intels
acquisition of Nokias technological expertise & an open source platform,with a
planned app store in place,things should be rosy & they should dominate the market

WO STRATEGIES

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Intel to leverage Nokias market leadership to inculcate its chips in its
devices.Nokia to use Intel chips to produce superior convergence devices based on
Linux.With Intels expertise Nokia is to enter the netbook market while Intel will use
Nokias wireless technology in its chips

ST STRATEGIES

When leaders in their respective fields come out with a product there is an instant
approval in customers minds.Capitalize on the fast developing mobile market to
introduce new portable, convergence devices.Focus on technical excellence. Both
companies to offer a new innovative mobile interface where the end user can
customize it. It should be a slick,intuitive GUI which would squash the threat of
Iphone.

WT STRATEGIES

Nokia with a logo of ‘Intel Inside’ should convince any geek to buy the device while
the advanced proprietary technologies from Nokia will allow Intel to stay miles
ahead of its competition .

DETAILED BREAKDOWN OF THE ANALYSIS

Both Intel & Nokia can undoubtedly be called as the best in their class and the
collaboration between the two is expected to open a whole new world of technical
advances. This Strategic Relationship is to develop a new class of Intel Architecture-
based mobile computing device and chipset architectures which will combine the
performance of powerful computers with high-bandwidth mobile broadband
communications and omnipresent Internet connectivity. Taking advantage of each
company's expertise as leaders in their respective fields, these future standards-based
devices will collage the best features and capabilities of the computing and
communications worlds.

The most likely outcome of this alliance is

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1. New smartphones

The most important devices to spring out of the deal will essentially be smartphones
with good computing abilities.It’ll largely replace Nokia's existing ARM-based
smartphone handsets.

2. New form factors

The devices in question, have not been announced yet but in all likelihoods will be
pocketable gadgets. Intel will work on x86-based designs with Nokia,i.e its fully PC
compatible A new Atom-based 3G nokia net book has already been announced

3. It'll use next generation Medfield, not Atom chips

The processors used in netbooks is likely to be atom while the new convergence
device in concept will most likely use the Medfield chips which is a fully integrated
system-on-a-chip design.

4.New operating system based on linux-Moblin

The agreement includes technology development and cooperation in several open

source software initiatives & to develop common technologies for use in the Moblin
and Maemo platform projects.This will deliver Linux-based operating systems for
these future mobile computing devices.

Moblin is an optimized open source Linux operating system project that delivers
visually rich Internet media experiences on Intel® Atom™ processor-based devices
including MIDs, netbooks, nettops, in-vehicle infotainment (IVI), and embedded
systems. Enabling common technologies across the Moblin and Maemo software
environments will help foster the development of compatible applications for these
devices

5. Intel to License Nokia's HSPA/3G Modem Technologies

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Intel will license Nokia's HSPA/3G modem technologies,combining the best-in-class
modem technology with the high performance of future Intel Architecture-based
platforms.The Nokia modem license complements Intel's broadband wireless
technologies and will enable the company to extend chipset solutions incorporating
Nokia's modem technologies across its mobility offerings in the future.

6. Development of Wimax

The alliance will be working on the development of the superior wireless

broadband service known as WiMax. WiMax iss capable of providing more reliable
wireless networking technology over a wider area compared to WLAN.

7. The alliance also extends to the realms of chipset architectures.

With the mobility of the portable technologies increasing every day in terms of
netbooks, laptops and the smart phones, it has become necessary that the
telecommunication carriers and the chipset manufactures must act closely to make
things possible and make portable computers and devices a common place

What products this alliance will generate – and how soon

Both companies have refused to be drawn on a timeframe for the first fruits of this
alliance.

Analysis

It’s a Win-win situation

Intel has had limited presence in the mobile phone market, which is growing much
faster than the PC and laptop categories. Nokia, which holds a major global presence

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and has several Smartphone devices is the perfect choice for Intel to move forward in
this field. Intel chips and Nokia’s broadband connectivity are seen as a path toward
the next wireless world of vast entertainment and information options. For Nokia it’s
a way to get into notebooks and netbooks.The direction in this alliance is more
computing power, graphics interactivity, multi-touch, video, lots of multi-media as
well as new products being introduced.

Most of the netbooks today carry Intel's Atom chips. ARM falls short as Nokia eyes
the netbook and mobile Internet device markets. Adding Intel to the fold gives Nokia
a say in the design of Atom chips.It would also pressurize Qualcomm,ARM and other
suppliers of Nokia about the price it pays to use its chips and technology portfolio.
Intel has been trying to emulate its competitors by offering complete packages of
processors that handset makers can more easily integrate with their device. By
licensing Nokia's modem technology, Intel can integrate the market-leading HSPA
wireless broadband technology with its own technology. The big takeaway for Intel is
that they have another radio and communications standard to use with Atom. The
relationship with Nokia, the largest handset manufacturer, validates Intel's mobile
strategy. The combination of Intel and Nokia also will be a powerful force in open-
source contributions and potentially a game changing one which is likely to affect
vendors Qualcomm, Marvell, Texas Instruments and ST Microelectronics. If it pays
off, the alliance could broadly reshape the computing and communications industries.

Drawbacks

Though the alliance has been announced it is very weak on actions. It’s unclear at this
point what type of devices will result from the partnership or a specific timeline

My thoughts:

The alliance between Intel and Nokia is built on the respective strengths of each
company.If Intel eventually assimilates the smartphone market ,this deal will be the
key turning point.

Recommended Strategy:

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1. The foundation of policy has been laid. Let the process of R& D begin with the
new technology

2. Announce the type of products that is likely to be borne out of this alliance

3. Announce a specific timeline for the product launch

Financial Statement Analysis

Intel:

A quick look at the balance sheet tells that Intel’s revenue has gone down from 38334
Million dollars to 37586 Million dollars. The net income has fallen down by 24.1 %
in 2008 from 2007.
The Q1 and Q2 statements of 2009 show the effect of the global slowdown, though
Q2 shows some sparks of recovery whilst comparing with Q2 2008.It was also
significant since Intel lost out on a case filed by AMD and was handed a massive 1.2
billion Euro fine.

Please See Annexure 1

Ratio Analysis

Current Ratio
The current ratio is 2.61(2009) which is very healthy against 2.5 in 2008 which shows
that company is stable despite the Global downturn.

Quick Ratio

The current figure is 1.75 down from 2.1 in 2008 which means the liquid assets have
come down. Still the figure is healthy considering the Industry average of 1.03

Return on Equity

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The ROE has come down from 14 % in 2008 to 12.77% in 2009.It is healthy and final
analysis can be given only after the 2009 annual report.

Return on Assets

ROA in 2009 is 4.89 whilst comparing to 10 % in 2008.This shows significant drop in

Income.

Gross Profit Margin

It is 55.44 % while compared to 55% in 2008.This ration signifies that the margin of
profit available in sales has not changed by much.

Operations Margin

This is 25.71 % in 2009 against 24 % in 2008.

Earning per share

It is 0.92 against 0.93 in 2008.This shows that the market price of the equity share of
the company hasn’t changed much.Its stable

Nokia

A look at the balance sheet shows that Nokia’s profit has been declining steadily. This
is most probably because other manufacturers like Rim and Iphone have eaten into
Nokia’s market share. The Q1 2009 results have shown a decrease in sales by 26.7%
while the Q2 2009 results have shown a decrease by 24.6 %, something Nokia should
seriously consider.

Current Ratio

The current ratio is 1.35(2009) against an industry average of 2.29 means that it lacks
liquidity and working capital.

Quick Ratio

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The current figure is 1.24 far from the industry average of 2.29.Though it is not bad as
anything above 1.1 is healthy,it means Nokia’s strategy has to be reconsidered

Return on Equity

The ROE is 17.51 against an Industry average of 5.46

Return on Assets

ROA for a five year margin is 16.01 against an industry average of 8.30

Gross Profit Margin

The gross profit margin for 2009 is 32.45 %

Operations Margin

This is 11.68 % in 2009

Earnings per share

It is 0.10 against 0.29 in 2008.This shows that the market price of the equity share of
the company has changed.

My take on the Financial state of both Corporations

Both companies are going through a tough phase.They do show some sparks of
recovery in Q2 2009.However they have weathered the toughest part of the storm by
sheer strength of their magnitude and brand equity.With readdressed strategy,both
Nokia and Intel should come on top in the coming years.

The Benefits of Strategic Alliances

Alliances cover up ones weakness by others strengths. Many are the benefits of
strategic alliances. Some of them are

• Improved Cash Flow

• Improved Access to Capital

• Credibility

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 • Access to Facilities and Technology

• Access to Expertise

• Innovative Products

• Diversification into New Markets

• Manufacturing Capability

• Reduced Risk

• Knowledge and Know-how

• Avoid Need to Reinvent What Has Been Invented Elsewhere

• The Shoring up of Weak Areas in the Company

• Strengthened Relationships with Key Suppliers or Customers

• Ability to Stay Focused on Core Competence

The Disadvantages of Strategic Alliances

Alliances can be costly, not only due to cash leaving the company's hands, but rather
due to returns from which it could be denied. Moreover, alliances can create indirect
costs by blocking the possibility of cooperating with competing companies, thus
possibly even denying the company various financing options.

Potential Benefits of the Intel-Nokia Strategic Alliance

Some of the potential benefits that the Intel-Nokiaalliance could achieve are such as:

i. Gaining capabilities

Nokia

It gains access into the netbook /notebook market where Intel has heaps of experience

Intel

Gains hold of proprietary Hspa technology which it can integrate into its chips.Also
has the worlds largest mobile manufacturer by your side when you are planning to
enter the mobile field is no mean feat.

ii. Easier access to target markets

Introducing the product into a new market can be complicated and costly. Using
Nokias excellent distribution network,Intel can easily roll out its new class of devices

iii. Taking out the competition

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Nokia

Nokia will try to outclass its competition by using Intels chips which proposes to give
more computing abilities.Also its opensource alliance will give it a better mobile
platform & software development than the near dead s60 platform

Intel

Will get a foothold in the mobile market and a know how knowledge.If its chips are
successful and if Nokia incorporates into its mobile phones,it is a feat

iv. Competitive advantage

Two leaders in their respective fields who have a strong brand image has a
competitive advantage over all its competitiors.The expertise shared by Intel & Nokia
will go ahead a long way in bringing new products and enhance technology.

v.Opportunities for growth in a totally different unexplored market

Nokia

This alliance offers Nokia to enter the net/notebook field with Intels experience as a
background.

Intel

Nokia’s leadership in the mobile market and its propreitary radio transfer techmolgy
will enhance & offer expertise to Intel to enter the mobile market

vi.Less reliance on present partners

Nokia

Nokia is completely reliant on ARM PROCESSOR suppliers like TI.Alliace with

Intel reduces the dependency

vii.Taking their challengers head on

Intel

Rivals like AMD have been eating into Intels market share.While TI,Quacomm are
steadily shutting out Intel from the mobile market.Nokias alliance helps them acquire
new technologies

Nokia

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Iphone,Rim,samsung has been steadily eroding Nokia’s market share & profits.This
alliance with the vision of new devices will definitely help stem the rot

In short this alliance is mutually beneficial to both corporates.

Conclusion

The alliance is a big win for Intel, which is trying to establish itself in a mobile device
market dominated by processors designed by rival Arm and a big boost to Nokia’s
credibility trying to enter the net book market. Potentially a Industry changing
alliance, it has to be seen whether it is empty rhetoric or concrete actions are taken

References

1. My-symbian.com discussion forums

2. Strategic management from theory to Implementation-David Hussey 4th ed
3. www.Intel.com

4. Strategic Alliances and Joint Ventures a how to guide www.nzte.govt.nz

5. www.nokia.com
6. Concepts in Strategic management and business policy(Thomas
L.Wheelan,J.David ( 9ed)
7. Strategic management an Integrated approach(CharlesW.L.Hill,Gareth
R.Jones 6 ed)

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