International negotiation brings on more challenges than most. Back on September 3, 2013, Microsoft announced a deal to acquire Finnish mobile phone company Nokia’s handset and services business for $7.2 billion, the New York Times reported. The agreement marked a belated but bold move by Microsoft to upgrade its presence in handheld devices and signals an end to Nokia’s long struggle to enter the hyper-competitive (and extremely lucrative) smartphone market. What negotiating skills brought negotiators to an agreement in one of the tech industry’s largest acquisitions and what bargaining strategies can business negotiators use to bring competitors to a negotiated agreement in similar negotiation scenarios? This article briefly explores the dynamics behind the negotiations that saw Finland’s phone giant join forces with icon of US technology and software, Microsoft.
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International Negotiation Behind the Microsoft and Nokia Deal
Both sides had strong incentives to join forces. Nokia had lost significant ground in recent years to smartphone manufacturers, most notably Samsung and Apple, by failing to keep up with innovations such as touch screens.
Having shed its underperforming handset business, Nokia planned to focus on telecommunications equipment, mapping business, and patent portfolio. Ballmer first approached Nokia CEO Stephen Elop about a possible acquisition during the Mobile World Congress industry conference in Barcelona. Ballmer and Nokia chairman Riisto Siilasmaa conducted methodical, discreet negotiations across the globe in 2013.
How to Overcome Cultural Barriers in International Negotiation: Merging Distinct Business Cultures
As with any large merger or acquisition, this one faced even more complexity after the ink dried on the contract—namely, the challenges of integrating employees from different cultures (for more information on overcoming cultural barriers in negotiation, please see our free report, Overcoming Cultural Barriers in Negotiations).
Merging distinct cultures can be a confusing, lengthy process – even without the added complexity of joining together two of the world’s largest companies, each of which is emblematic of its mother country in its own way.
It often makes sense to maintain each organization’s unique identity and borrow from the best of both. Moreover, because national culture is just one facet of our identities, it pays to view negotiating counterparts as unique individuals rather than as cultural ambassadors. Keeping this in mind, it never hurts to infer strategies based on expected cultural norms so long as this acknowledgement is part of a holistic bargaining process aimed at creating value and forging workable, sustainable agreements.
Ultimately, Microsoft did acquire Nokia, but according to Computerworld, Ballmer called it a ‘monumental mistake’ and ended up writing off billions of dollars, calling it an “impairment charge” of $7.6 billion, which was close to how much it paid for Nokia and its patents.
Have you ever been part of an international negotiation? Share your story in the comments.
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Claim your copy of International Negotiations: Cross-Cultural Communication Skills for International Business Executives from the Program on Negotiation at Harvard Law School.
Originally published in 2013.
There has been a completely mixed response to whether the deal was good or was a decision taken in a hurry. Nokia surely can use this incoming cash flow on some great products, but the issue now is that Nokia was recognized by its Mobile Devices and there will be almost zero difference between a new product category (coz no more mobile phones)coming under the NOKIA brand name or a completely new Brand name because they will both have zero popularity in that field.
It would probably be good for Nokia to come up with a new brand name and leave the Nokia legacy behind in its Nokia Research Department and nowhere else. As you could feel, this deal saddens me 🙁
It’s 2015 now buddy and Nokia’s all of microsoft now. You should be a lot sad now 😛
There are no more phones with ‘Nokia Lumia’. They are all ‘Microsoft Lumia’. Microsoft completely scraped the company and rebranded the devices. Nokia got a bad future