Introduction
Joint venture is a form of temporary business partnership based on mutual benefit. Microsoft and NBC News had a joint venture through MSNBC.com. However, substantial strategic differences led to breakup in 2012. This paper will examine the joint venture between Microsoft and NBC News (Stelter 1).
Microsoft’s business objective in joint venture with NBC News
Microsoft’s joint venture with NBC was aimed at seeking growth strategy in online digital content. Microsoft was the largest software maker in the world yet it was struggling in online news service. A joint venture with NBC News at the time was viable as it enabled Microsoft to tap into the new business environment of online news service. It should be noted that NBC News was one of the pinnacle sites for general news in the United States. Moreover, NBC News sites were ranked fourth in terms of traffic.
Microsoft management believed that the joint venture would open it to a new platform of online news service thereby fulfilling their growth strategy in digital content. Through the joint venture, Microsoft would tap into existing NBC News traffic. Additionally, Microsoft would plan adequately before setting up their platform. In essence, Microsoft would use NBC News to expand into a new venture appropriately and without considerable economic risk as opposed to starting an online news service from scratch (LBSR 1).
Why Microsoft preferred a joint venture rather than an outright acquisition in this case
Acquisition is essential in implementing business strategy, especially growth strategy in a new venture, as was the case in Microsoft. However, acquisition depends on various factors such as the type of business, the cost of acquisition and the projected profit margin, among others. Additionally, it should be noted that acquisition is best executed when dealing with a competitor where the deal results in direct transfer of the competitors’ customers to the company (Waggoner 1).
However, when moving into a new venture, like sale of digital content, which had strong players like AOL, CNN and Yahoo, Microsoft had to collaborate with another business player to assess their ability in the market (Liedtke 1).
Therefore, Microsoft’s choice of a joint venture rather than an acquisition was important as it enabled them to assess their performance in the market before deciding to go solo. Moreover, Joint venture offered Microsoft adequate time to explore the new venture and strategize adequately for either acquisition or start up (Goedhart, Koller and Wessels 1).
Why the joint venture unraveled and whether it would have been better for Microsoft to pursue a solo venture or acquire NBC News outright from the beginning
Joint venture unraveled because the two companies developed different strategies during their partnership. It is clear from the views of both companies’ representatives that they had different strategies for moving the joint venture ahead. The companies felt stifled from expressing their visions for the joint venture. For instance, Microsoft complained that it was being limited to MSNBC.com news even though users wanted multiple news sources (Liedtke 1).
Moreover, the company was bothered with the requirement to feature content from MSNBC.com in all their websites. Additionally, MSNBC’s strategy on cable channel was seen as politically motivated, which did not go well with Microsoft. On the other hand, NBC News also felt caged by the joint venture since they could not make decisions freely. In essence, this led to the ‘amicable breakup’ (Liedtke 1). It should also be noted that the two companies were looking to compete.
Nonetheless, joint venture was the best possible deal at the beginning for Microsoft since a solo venture would have taken years to build market presence. On the other hand, acquisition of NBC looked would have been expensive if it were possible (Bamford, Ernst and Fubini 1).
Works Cited
Bamford, James, Ernst David, and Fubini David. “Launching World-Class Joint Venture.” Harvard Business Review. 2 (2004): 1. Harvard Business Review Publishing. Web.
Goedhart, Marc, Koller Tim, and Wessels David. The Five Types of Successful Acquisitions. 2010. Web.
LBSR. Making joint Ventures a Strategic Success. 2015. Web.
Liedtke, Michael. “Microsoft, NBC dissolve MSNBC.com joint venture.” Associated Press 2012:1. Print.
Stelter, Brian. “Microsoft and NBC Complete Web Divorce.” New York Times 2012. Web.
Waggoner, Dena. Joint ventures and Strategic Alliances. 2015. Web.