Thursday, November 13, 2014

Nokia: From a paper mill, to the world’s biggest mobile company to being acquired by Microsoft
Recently, Microsoft completed the acquisition of Nokia’s smartphone business bringing an end to an era, which has seen plenty of ups and an equal number of downs. Let’s take a look at the brief history of the company that started out as a paper mill in small village in Finland.
THE EARLY YEARS
In the year 1865 Fredrik Idestam built a paper manufacturing mill in Southern Finland and followed it up by launching a second mill in the nearby town of Nokia in 1868. Three years later Idestam transformed his company to a share company and the Nokia company was formed.
Nokia kept growing through the 19th century and in the 1960s the company branched out into electronics. In the next two years it developed a host of electronic devices including radio telephones for the army. In 1979 Nokia took its first steps into telephony by creating Mobira Oy in a JV with Finnish TV maker Salora, and they created the Nordic Mobile Telephone (NMT) service. This was the world’s first international cellular network and in the 80s, Nokia launched its first car phone called the Mobira Senator.
Five years later Nokia launched the Mobira Cityman, the first mobile phone that would run on the company’s NMT network. At 800 grams and priced at $6,308, it may be heavy and pricey by today’s standards, but the device soon hit cult status when Mikhail Gorbachev was photographed using the device.
THE GLORY YEARS
The 90s were the glory years for the Finnish company. In 1994, Nokia launched the 2100 with the now iconic Nokia ringtone. Three years later it launched Snake, one of the most widely recognized mobile games of all time. The Nokia 2100 was such a big hit that it went on to sell more than 20 million handsets worldwide, much higher than what the company had predicted.
In 1997, Nokia also launched the Communicator, which 11 years before the first iPhone was considered to be much ahead of its time. The device not only looked cool, but also offered features like email, fax, calendar and a massive display.
The same year, Nokia also launched the 6110 and the 5110 two more devices, which were way ahead of their time and competition. These devices offered a much sleeker way of text messaging, a beautiful menu system customization options like multiple color snap-on covers. These devices were followed by the 7110, which offered basic web functions, the 7650, with a built-in camera and the 6650, the company’s first 3G enabled smartphone.
By 1998, Nokia had firmly established itself as the global leader. Where its rivals like Apple, Sony and Siemens had failed to predict the global demand, Nokia sailed through these years with a turnover that increased 500 percent from $ 8.9 billion to $42.8 billion.
THE DOWNFALL
There is an old Finnish tale, which talks about Sampo, an engine of eternal wealth created by the poor people of Kalevala. Sampo essentially grinds out gold, salt and wheat from three horns, day and night, but as nothing good lasts forever, one day Sampo drowns to the bottom of the lake and the people of Kalevala are returned to their gloom and poverty.
As is with old tales, one can easily relate Nokia to the Sampo. After the glorious 90s, in 2007 things began to go downhill — and rapidly. In the year 2009, Nokia posted its first quarterly loss in more than a decade. This was largely due to HTC developing a smartphone running on the yet new Google Android operating system. With the iPhones and various Android smartphones taking the market by storm, Nokia failed to keep up with them. Instead of joining the horde of Android adopters, Nokia’s new CEO Stephen Elop joined hands with Microsoft to develop smartphones running on the Windows Phone platform.
Though the partnership saw the development of Nokia’s popular Lumia series of smartphones, Nokia wasn’t able to rekindle its glory days.
END OF AN ERA
On September 3, 2013, Nokia announced that its hardware department would be acquired by Microsoft in a deal worth $7.2 billion. After eight months, the deal was completed today and with it came the end of an era.

t is official: Nokia’s shareholders have signed off on the $7.2 billion acquisition of the company’s handset division by Microsoft. The Financial Times reports that 99.7 percent of the investors at a general meeting in Helsinki voted in favor of the deal.
The investors who approved the deal hold nearly four-fifths of Nokia’s total shares. The meeting is expected to continue for quite some time, however, “as various small Finnish shareholders vent their anger over the deal” and Stephen Elop’s hefty payday. Ever since the deal was announced, Nokia has been on something of a rebound, surpassing Motorola to become the fourth-largest smartphone vendor in the U.S. and moving a record number of Lumia smartphones. Once the venting has ended and the meeting adjourns, Nokia will be one step closer to becoming a subsidiary of Microsoft.
Nokia and Microsoft today announced that the acquisition of Nokia’s devices and services unit is finally expected to close on April 25. While the deal is almost done, the fate Nokia’s Chennai manufacturing facility, which is also one of its largest, hangs in a state of limbo. The plant is in the centre of a tax row and has been frozen by Indian authorities.
“The situation is a complicated one, and Nokia is continuing to weigh its options. As there is still time before the closing of the deal, we cannot speculate on possible outcomes at this point. With Chennai, it is worth remembering that we have said we will consider a services agreement with Microsoft should our Indian assets not be able to transfer at the close of the global deal,” a Nokia spokesperson told BGR India.
Microsoft too announced that there were a few adjustments made from the original deal that was announced on September 3, 2013.
As with any multinational agreement of this size, scale and complexity, our two companies have made adjustments to the original deal throughout the close preparation process. We’ve entered into numerous agreements to address items ranging from manufacturing to IT. These include the following:
· While the original deal did not address the management of online assets, our two companies have agreed that Microsoft will manage the nokia.com domain and social media sites for the benefit of both companies and our customers for up to a year.
· The original deal had all employees in Nokia’s Chief Technology Office continuing with Nokia. We’ve adjusted the agreement so the 21 employees in China working on mobile phones will join Microsoft and continue their work.
· The original deal had Microsoft acquiring Nokia’s Korean manufacturing facility. The agreement was adjusted and Microsoft will not acquire the facility.
End of an era: Nokia to be renamed Microsoft Mobile after acquisition
Nokia’s handset and services business will be known as Microsoft Mobile Oy, Nokia said in a mail sent out to existing users with a Nokia account. Microsoft and Nokia are expected to close the $7.2 billion acquisition before the end of this month, which would mark the end of Nokia as we know it. However, Nokia will continue to exist with its telecom networks and infrastructure business NSN, its mapping and location based services HERE and its Advanced Technologies business that handles its IP and patents. Microsoft Mobile Oy will become a subsidiary of Microsoft Corp.
“With the completion of this sale, the Nokia Devices & Services business will be part of this Finnish entity, Microsoft Mobile Oy, a subsidiary of Microsoft Corp,” the letter said.
Nokia’s handset and services business is expected to run as usual after Microsoft acquires it. Stephen Elop, who was the CEO and President of Nokia before the acquisition deal was announced will head the division under Microsoft.
:



PYRAMID SAIMIRA ENTERTAINS A DICEY STRATEGIC OPTION

Leisure and entertainment usually gain prominence  in an economy that is growing fast and provides leeway to the consumer to spend on things other than necessities. India's entertainment and media industry is one of the sunrise industries, growing at a compound annual growth rate of 18 per cent, much faster than the 7 per cent national economic growth rate. According to a study conducted by the Federation of Indian Chambers of Commerce and Industry and Price waterhouse Coopers, the industry size is Rs. 437 billion presently and is projected to grow to Rs. 1 trillion by 2010. Positive measures taken by the government, technological advancement and entry of large corporate houses in all the segments of the industry are fuelling the impressive growth.
Among the various segments of the industry, there are radio, television, films, out-of-home
advertising and live entertainment. While radio and television make up the fastest growing segments, film entertainment growing at 16 per cent annually, is another potential segment.
The film entertainment segment of the entertainment and media industry has several strategic groups that could be roughly categorized along the value chain of film making and distribution. These strategic groups could be: production, distribution, retail, music and home video. While many of the companies operate in more than one activity area on the value chain, such as Yash Raj Films operating in all activity areas except retail, there are a few that concentrate on just one or two activity areas, such as RGV Film Factory that operates only in production of films.
Size based on revenue could be another basis for categorization of the film entertainment companies in India. Among the large size companies are Adlabs, Sahara, Percept, Yash Raj Films and UTV, that could touch or exceed Rs. 1000 revenues by 2010. The middle-rung is of companies of revenue size of Rs. 300 - 500 crore, such as pure retail and distribution companies such as Inox Leisure, PVR Cinemas, Pyramid Saimira and Valuable Group, C pure content companies such as Pritish Nand Communications, Vishesh Films or RGV Film Factory. The third category is of emerging companies in the revenue size range of Rs. 100-300 crore, such as Real Image, Red Ice and Seven Entertainment.
Major investments in the media and entertainment industry in recent years have been ploughed into infrastructure, largely into multiplex chains and digital theatre chains. These investments are made by companies that are pure retail and distribution companies. Among the major ones in this strategic group is the Chennai-based Pyramid Saimira Theatre Limited (PSTL)-India's largest theatre chain company with over 29 multiplexes in operation, with over 371 screens in 2007, projected to increase to 2000 screens by 2010. It was incorporated in 1997 as Pyramid Films International Private Limited and has gone through severe changes of name to emerge as Pyramid Saimira Theatre Limited, reflecting its concentration on the theatre business, though it operated in film production and TV content production in the past.
Film making and distribution in India has been traditionally an unorganized and fragmented industry, managed through experience rather than systems. In recent years, one trend in the film industry is corporatization. Under corporatization the traditional organizations dealing with the various aspects of film making and distribution become formal organizations registered under the legal process, such as the Companies Act, 1956. Along with corporatization comes increasing professionalization in the management of organizations Technology, especially information and communication technology, has played its part in heightening the chances of making corporatization and professionalization successful. A new breed of organizations has emerged on the horizon that deals with the various activities in an organized and systematic manner. Pyramid Saimira intends to be one of such organizations.
The people behind Pyramid Saimira include Mr. V.         Natarajan, a Gemini-studio's veteran of the Tamil film industry, Mr. P. S. Saminathan, the finance and technology brain behind the flagship project and Mr. N. Narayanan, the management man. The financials for the year 2006-2007, show net sales of Rs. 1661.52 crore and net profit of Rs. 158.82 crore on equity capital of Rs. 282.76 crore.
The flagship project of the Pyramid Saimira is the mega digital theatre chain project being  implemented in two phases, with a total cost of Rs. 414.5 crore. This is an information technology- driven venture that is a first-mover in the film industry in India. The basic idea is to have a chain of theatres for exhibition of films that have been encrypted in the digital medium. The theatres are linked through a satellite-based communication network. The films are released in the digital format and simultaneously exhibited in the digitally- enabled theatres through the satellite network. The one-stroke release and exhibition of films is claimed to reduce the chances of films being pirated, which is the Achilles' heel of the film industry in the world. It also avoids the use of costly film rolls and reels now used to photograph and distribute films. The digitized theatres also offer the potential of developing them as value-added service providers, enlarging their role from that of entertainment providers to commercial infrastructure providers such as shopping malls, exhibition spaces and education and training venues.
The business model of the digital theatre concept is based on a vertically-integrated theatre chain on long-term lease, where the revenue streams emanate mainly from the ticket sales at the individual theatres at the demand end, much like it does now. The critical difference is on the supply side where the distribution, retailing and exhibition of films are done in an integrated manner through digital means connected through a communication network. This effectively eliminates the film distributor and tries to achieve economies of scale through volume sales. The centralized network operating centre is the nodal supply point.
A standardized delivery process makes the process operationally low-cost, albeit at a high initial investment. Additional revenue streams, generated through exploitation of the theatre infrastructure to provide other services than entertainment, help to recoup the high initial investment. Creating a franchise system for a long-term lease enables sharing of the initial high costs of realty by engaging partners who own the theatre space but use Pyramid Saimira's digital distribution and exhibition facilities at a price. There are additional possibilities of creating content library of films, extending networks abroad and building integrated family entertainment centers.
The digital theatre is a compact model, having various elements such as digital projectors, servers, connectivity equipments, high-definition recorder and telecine, system integration and software solution providers. For each of these, there are in-house and external agencies in partnership. For instance, connectivity equipments are being provided by TataNet while servers are arranged by a partnership of Saimira Access Technologies with Real Image Media.
Pyramid Saimira's SWOT analysis indicates the following factors:
·      Strengths: Established organization, experienced promoters and networking with financially strong and capable partners.
·      Weaknesses: Lack of in-depth technological experience, risks of being the first-mover and limited financial capability.
·      Opportunities: Favorable demographics, increasing spending on entertainment, potential expatriate demand, availability of technological infrastructure such as broadband and digitized films a regenerative asset that has multiple uses.
·      Threats: Unorganized film industry, fickle nature of demand for films, powerful industry bodies with political lobbying capabilities, high entertainment taxes, piracy, high cost of infrastructure and faulty governmental policy implementation.         .
Pyramid Saimira's global ambitions are reflected in its vision statement, which is 'to be the largest vertically integrated theatre chain in the world carving a unique space in mass access using theatre infrastructure to deliver education, entertainment and information at affordable cost to all sections of society'. The digital theatre project is being implemented in Tamil Nadu and is planned to be expanded throughout India and abroad in areas where there are a large number of Indian expatriates such as South East Asia, Europe and the U.S. The acquisition of the Texas-based Fun Asia made through the subsidiary Pyramid Saimira Entertainment America, targeting the Asian film market, marked the entry of Pyramid Saimira in the U.S. and Canada. There are subsidiaries operating in Singapore and Malaysia, where there is a substantial number of people of Indian origin.
Questions
1 (a.) Attempt   Porter’s five-forces analysis for the Indian film industry, highlighting the factors relevant for   Pyramid Saimira’s strategic planning.
  (b) Attempt a strategic groups analysis highlighting the factors relevant for Pyramid Saimira’s strategic planning.
2.    In the light of the concept of business definition, discuss the possible expansion strategies for the company. Which of them will be a better option for Pyramid Saimira?