Nokia is by far the largest handset producer reaching a global market share of 39
percent and over 50 percent share in Europe. Nokia has several resources that make it an
attractive partner including the largest installed base of customers, high brand awareness
and value, highly developed and well-functioning distribution system, proven R&D and
marketing skills, strong influence in terms of standard setting, and the financial resources
to back almost any initiative. Credit Suisse First Boston noted that “With around 50% of
the European handset market, Nokia’s support for new initiatives is crucial” (2002: 9).
However, neither “3” nor Vodafone allied with the market leader, Nokia, when they en-
tered the market for data-intensive mobile services. While Nokia had very strong re-
source endowments in the European market, it had no strategic aspiration to enter the
market for 3G phones in the early exploratory stage or to customize 2.5G phones for cer-
tain operators. It was shipping large quantities of its 2G/2.5G “candy-bar” phones and
would neither cannibalize its sales by offering alternative products nor jeopardize its
market leader position by entering a new and immature technological regime. Moreover,
the initial scale of the emerging 3G market was simply too small for Nokia to enter the
market.
Siemens, with the second largest market share in Europe, formed a R&D alliance
with Japanese Toshiba to develop 3G handset in 2000. However, in December 2001 To-
shiba backed out of the deal.16 Instead Siemens agreed with Motorola that Motorola will
make UMTS phones for Siemens in 2002 and 2003 based on Motorola’s A820 model un-
til Siemens in 2004 should be able to produce its own handsets.17 In this regard Financial
Times noted: “This is a further sign that only a handful of companies are on target to
supply 3G compatible handsets in any significant numbers this year”.18 Siemens obvi-
ously lacked research and development capabilities to produce 3G handsets; however, it
possessed other key resources such as local market knowledge and established distribu-
tion and marketing systems. Still, there has been no discussion about Siemens allying
with an early moving network operator in the European market.
16 Europemedia: “Japanese Toshiba backs out on 3G Handset Deal with German Siemens”, December 6
2001.
17 Wireless, ”Motorola Phones Dressed in Siemens’ Clothing”, April 22 2002, p. 14.
18 Financial Times, ”Siemens to Resell Motorola Handsets”, April 16 2002, p. 28.
18