Partner Selection Criteria in Strategic Alliances When to Ally with Weak Partners

Three handsets were offered at launch: Sharp GX10; Panasonic GD87; and Nokia 7650.
However, Vodafone surprised the industry by choosing Sharp, then a virtually unknown
mobile brand in Europe, as the flagship handset provider. However, Sharp was more will-
ing to cede to Vodafone’s demands to produce a phone meeting its specific requirements.
The strategy worked, with the Sharp phone becoming a top-selling handset in Europe in
2003.¹³ The Nokia handset was not emphasized in advertising and nor by analysts exem-
plified by CSFB that noted “The new Sharp and Panasonic terminals are a good start and
Vodafone has said that a number of other new Vodafone Live! terminals are in the Pipe-
line” (Credit Suisse First Boston, 2002), leaving Nokia unmentioned. As a result the
Nokia handset represented less than 20 percent of the sold Vodafone Live! handsets by
November 2003 (Credit Suisse First Boston, 2003). In the summer 2003, Vodafone
placed orders with several unnamed Japanese manufacturers for several millions 3G mo-
bile phones, passing over the industry-leading Nokia, as Nokia models were not offering
the features Vodafone wanted. The firm instead enlisted Samsung and Sony Ericsson to
provide handsets for the service, but hoped to expand its range in the coming months.¹⁴

Vodafone spent $23 billion acquiring 10 3G licenses in Europe. However, its
CEO Mr. Sarin complained about the unavailability of 3G handsets at the 3GSM mobile
summit in Cannes. He argued that Vodafone's 3G networks and services were ready, but
it was continuing to wait for handsets that were not bulky, overheating or that had poor
battery life. Thus, even though “3” in 2004 started having some success selling bulky 3G
phones on cheap voice tariffs, Mr Sarin said Vodafone would wait until 3G handsets
were “superior” to 2G as Vodafone could afford to disappoint its customers. Other lead-
ing operators voiced similar complaints that the devices did not match current 2G and
2.5G phones and all have indicated their full 3G launches will be delayed until.¹⁵ Nokia’s
CEO Mr. Ollila responded by saying that Nokia had suffered from a chicken-and-egg
situation in its development of 3G handsets. It had to have three or four stable networks
available to test the devices and the complexity of 3G meant the process had taken a long
time. Not before May 2004 did Vodafone launch its first full 3G mobile services in Por-
tugal and Germany. The firm developed strong relationships with handset manufactures

¹³ Financial Times, “The Finnish Company has Dominated Mobile Telecoms...”, May 7 2004, p. 17.

¹⁴ BBC News, May 4 2004.

¹⁵ Financial Times, “Mobile Makers Return Fire in 3G Row”, February 26 2004, p. 18.

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