Nora Sakari Case Analysis

Nora - Sakari

Introduction

This case is about Nora, one of the leading suppliers of telecom solutions in Malaysia. The case involves a possible joint venture with Sakari, the leading manufacturer in Finland of mobile phones and telecom systems. There is a large potential in the future development of telecom facilities in Malaysia and the to enterprises have discussed a joint venture

About Nora

Nora is a leading supplier of telecommunication services in Malaysia. They are looking for a Joint Venture to manufacture and commission digital switching exchanges to meet the needs of the telecomm industry in Malaysia. They are interested in securing a share of RM 2 Billion contract from TMB with the help of the Joint Venture.

Joint Venture Options

Nora’s JV options are Alcatel, NEC, Ericsson, Siemens, AT&T. But for many reasons the JV will not work with these companies. Some of the reasons are:

• Technical standards are not compatible

• Obsolete technologies being supplied

About Sakari

Sakari’s current strategy was to emphasize global operations in production and R&D. It planned to set up R&D centres in leading markets including South-East Asia. However it did not have a wide marketing operation and relied on Joint ventures for the same.

Sakari has its own reasons for the joint venture which range from its declining sales to its need to venture into newer markets. Sakari’s declining sales were attributed to two main factors: weak demand for Sakari’s consumer electronic products, and trade with Soviet Union came to a standstill. Hence for future survival they needed to expand the company overseas and the Asian region, due to huge population, provides good growth opportunities.

Nora-Sakari a goof fit?

Sakari’s SK33 switching system is the basis for the joint venture as the SK33 technology is a new and better technology than the one present with Nora. The SK33 switching system is based on open architecture. It also enables the use of standard components, software development tools and software languages. It uses components that are available in the open market. It can be upgraded to provide new services to clients and can interface easily with new equipment.

Nora bid for the TMB contract on the assumption that the joint venture with Sakari would fall through and hence they incorporated Sakari’s digital switching exchanges while submitting the proposal. Sakari’s technology will enable Nora to comply with the TMB contract. Nora is looking to learn from Sakari’s success and replicate that model in the Malaysian market.

Each company has the necessary skills to enable the other to meet their objectives. Sakari’s main objective is to acquire knowledge of, and gain access to, South Asian markets for Telecom products. Nora is a leading supplier of telecommunications equipment in Malaysia, providing Sakari the opportunity to gain access to the desired markets. Sakari is able to provide flexible, modular switching technology which is based on an open architecture not only enabling Nora to meet the terms of the TMB contract at a reduced cost, but positioning them to secure further contracts from TMB. Both are compatible as both are relatively small players in the telecom industry, both on growth trajectories. Also, both believe that research and development is the key to their continued success.

Both companies are looking forward to the joint venture as is evident from them having invested considerable time (more than 20 face to face meetings in both countries) and money in the joint-venture to date.

Why Not?

There was a lack of understanding on the differences due to national culture. The Finns are reserved, obstinate and serious people. They don’t engage in small talks with strangers easily. While the Islamic values which are reflected in the daily life of Muslims, influenced the behavior of Nora employees. Malay managers were influenced by their western counterparts who tend to stress knowledge and mental capability and often forget the effectiveness of the softer side of management which emphasizes relationships, sincerity and consistency.

The group of Sakari