For more than a decade Nokia was the world leader in the mobile phone market. It is evident from the fact that Nokia 1100 was the world’s bestselling mobile phone. NOKIA was also one of the first companies to recognize the market potential for a product combined from gaming console and a mobile phone. Failure to recognize the market potential in the smart phone segment has put NOKIA out of the market eventually. Microsoft made one of its huge acquisitions by purchasing Nokia’s mobile business in 2014. A number of fixed costs are associated with smart phone manufacturing. By acquiring Nokia, Microsoft has fixed costs such as Intellectual property, Test equipment, and manufacturer contracts. In other words,…show more content… This would suggest that the investment decision could possibly go wrong any time from now Opportunity cost for Windows Phone:
The Investment decision to acquire a company like Nokia that has already been losing its shine among the customers for making no major improvement to tackle the competitor, creates serious doubts among the shareholders and the customers of the Microsoft. On any given day, a company would obviously prefer quick profits from their investments. By buying out Nokia, Microsoft clearly suggests that it is looking to broadening the business towards making its own mobile phone. Now what is the opportunity cost for the customer to buying a Windows smart phone? The good thing that happened from the acquisition is that the consumers have three major choices of Operating system to buy from. The opportunity cost of buying a NokiaWindows smartphone is the foregone cost of buying either an Android or iOS smart phone. The question is that to what extent the customers would prefer Windows smart phones over the likes of Android and iOS smart phones.
The incentive problem and solution:
For a very long time Microsoft stood reluctant to make Microsoft office suite available for Apple users. Later on, the executives at Microsoft decided