This reason for this report is to go over the key difficulties which Microsoft is currently facing and will probably face in its forseeable future. As his recently appointed expert this survey would give an information to Microsoft CEO Steve Ballmer about the strategies and your options that your company and its own management have and its own implications on its business and future potential clients. This statement would also provide an information about its center rivals using various analytical tools.
As CEO Mr. Ballmer once said in his interviews "You've got to be very natural about what your location is, but very positive about where you will be, And your day you can't be both of those things, avoid being a leader of any company like Microsoft. You must believe that; you have to believe; you have to trust. " Hence keeping his perception and optimism in mind this survey would give attention to Microsoft's current and future business strategies in helping it to be among the best and well respectable companies on earth.
The recent financial meltdown which struck the world possessed severe implication on all the major economies and the majority of the firms worldwide. Microsoft being one of them. Even after being strike with the financial crisis, it still continues to remain among the big players in the market.
After analysing the situation of Microsoft with help of some essential tools like SWOT, Porters 5 makes and Parenting Matrix we realize a few of the key difficulties and features which Microsoft requires to face those challenges coupled with a good authority and strategy. A number of the key difficulties have been reviewed below.
One of the key problems surfaced after SWOT evaluation(Appendix 1) was Microsoft's insufficient innovation. A lot of the products of Microsoft has unveiled in the last 25 years were influenced by existing products of its challengers. This can be evident from the fact that Windows operating system was much influenced by Unix and that was used by Apple in their os's. Similarly Microsoft's office collection was influenced by Lotus and Word Perfect. Microsoft's lack of innovation does not stop here, in the following years it prolonged to expose products which were in some way very much like products which already been around in the market. Microsoft's very own browser Internet Explorer was very much very much like Netscape and today with its introducing its new internet search engine Bing which is pretty much similar to Google, hence one can see a proceeds strategy followed by Microsoft when it creates an imitation of already existing products and by using heavy marketing manages to market its product among people and make an effort to then make get an enormous share on the market (Seeking Alpha).
According for some employees of the company the explanation for lack of innovation is that the business is busy replacing Windows rather than innovating new products and services. However from our SWOT analysis(Appendix 1) it can be seen that Microsoft has a monopoly of over 85% with its Windows operating system. Matching to Mike Smith who was a past software architect in Microsoft, "So much of what Microsoft does right now is maintenance, " and this is leading to cause increasing discontent among the software programmers within the business. So instead of working on innovating new products and services, the programmers of Microsoft were still providing to their previously created monopolies. This increasing discontent led to many builders leave the business for better opportunities. Just hiring the best staff and employees is not important the essential part is keeping them and making the perfect use of their skills and skill. Also to increase the annoyance of the employees, after Steve Ballmer became the CEO of Microsoft he located more emphasis of combination group collaboration wanting that would ease just how this large organisation is maintained. However on the other hand this resulted in employees spending most of the time in preparing for the meetings rather than spending time on innovating and creating services and technologies. The dissatisfaction in employees was also anticipated to cuts in their payment and benefits inspite of increasing profits received by the company in the past. They appear to feel like being stuck in a business whose previous successes is restraining its current and future growth. Based on the views of 1 of the engineers of the company "There's a definite lack of passion, we're missing some spunk". Hence it is vital for Microsoft to not only hire but hold on to its top developers (Business Week, Sep 26th, 2005)
Also from our from our further evaluation of Microsoft we can easily see that currently House windows 7 has sold more than 60 million copies since it was launched which makes it the fastest offering operating system ever before. This boosted the income of the business by 14% which also led to 60% increase of second one fourth income hence we could observe that however Microsoft's operating system is assisting it earn huge revenue presently would these profits sustain for a long period is a question to be attended to (Dina Bass, Business Week). The show of Microsoft Online services in '09 2009 was only 5. 27%(Appendix 4) which is very important for Microsoft to improve its earnings in this sector as with the cloud processing coming into the picture desktop processing would now move to web based processing which would make it difficult for Microsoft to check out its monopolistic tactics as for consumers it might be easier to switch from one website to the other(Seeking Alpha). This does indeed seem as a matter of matter as 80% of the profits of Microsoft originates from House windows and Office applications and all these now being available online from rivals offering deals like Google Apps, Zoho, Zimbra, StarOffice, OpenOffice who offer it as software that is online hence there is always a risk that this cash cow of Microsoft is probably not able to deliver same amount of revenue as it used to till now (Greg, Iperior). Also the operating system wouldn't normally be much of a matter of concern as such programs and online softwares can be sent to customer at much cheaper price online (The Economist). The earnings which Microsoft gained from its business department declined 2. 8%, online services decreased 4% credited to decline in online advertisings and even the entertainment section found a drop as well. Hence its about time Microsoft innovates some services and services keeping the continuing future of cloud based computing in mind (Dina Bass, Business Week)
According to New York based Nielsen 86% of users have used Google as their internet search engine in November 2009 in comparison to one minute 11% used Bing. Through our Parenting Matrix(Appendix 3) you can see Bing has very low market share and low earnings generating business compared to Microsoft Office, Glass windows and server applications also currently Bing has a very small share in comparison to Google however it is also interesting to notice that there surely is enormous potential Microsoft's Bing has in terms of the gaining foothold browsing engine market. It can also prove to be a tuff competitor for Google in the future. It can help Microsoft generate a lot of earnings in terms of advertising. But one can criticize the actual fact that even after spending millions of dollars on Bing, it generally does not offer anything significantly or extra unique compared to Google's search engine. However one expected Bing to involve some extra features which Google search doesn't provide in so doing showing its worthiness and an extra advantage to visitors to switch their se's.
With the intro of Cloud processing the majority of the computing would be done online as a result customer devotion towards online softwares and online applications would be low. Through Porters 5 makes evaluation (Appendix 2) we can easily see that in the forex market bargaining ability of buyer is more. A customer can simply change their software or online online application if they're provided with similar service at a cheaper rate with fair good quality. Hence by keeping their key concentrate on innovation this strategy would clearly charm to customers who are price very sensitive and aren't worried about quality of the merchandise or service. With majority of work being done online the users command high power and cost of moving over is nearly nil. If Microsoft adopts this strategy it will not only manage to keep competitors at bay but also ensure that this keeps its customers by constantly innovating and ensuring that its customers receive the best products at the best rates.
However this plan cannot be adopted by Microsoft instantaneously as it is highly reliable on its cash cows namely Microsoft Office and Windows operating systems. Following this strategy may have sudden drastic influence on the talk about price of Microsoft as the all the shareholders may not agree as this would lead to radical drop in the income attained by the aforementioned cash cows of Microsoft. This strategy can be integrated by Microsoft gradually and gradually keeping in mind the competitor's strategy (Gerry Johnson, Kevan Scholes, Richard Whittington, Exploring Corporate Strategy, 2008)
If Microsoft employs this strategy it could plainly be differentiating among its recently adopted monopolistic tactics in terms of its os's. Under this plan Microsoft can continue steadily to provide its regular products or services however keep the price at least thus which makes it very difficult for the new entrants to get into the market. With the help of good deal strategy it'll gain recognition among users thus increasing its market talk about.
However there are a few limits if Microsoft adopts this plan, its income may be heavily impacted as you will see very little range to earn heavy gains with this inexpensive category products. This would also have a drastic effect on its future re-investment as the margins were stored quite low. Eventually the investment need to analyze and development would be strike thus making it problematic for Microsoft to innovate and re-develop its search and entertainment and devices division thus making them a profitable project (Gerry Johnson, Kevan Scholes, Richard Whittington, Exploring Corporate Strategy, 2008).
Under this strategy Microsoft can concentrate on innovating products and services that are not only unique to its competitors but also add value for its customers. Presently Microsoft relies intensely on its cash cows because of its most its profit slowly but surely it can expect earnings from other streams which it can create using the targeted differentiation strategy which would give them competitive edge over its challengers. With introduction of new age computing the majority of the work would be done online thus minimizing the usage of desktop processing. By following this strategy Microsoft can charge its customers for which consists of top applications online thus providing them exceptional service and giving them their money's worth (Gerry Johnson, Kevan Scholes, Richard Whittington, Exploring Corporate Strategy, 2008).
This strategy can help Microsoft earn huge profit margins but it also places it into risk of being prevented by customers for other free web based applications. Also the client loyalty in this section would be quite low as the price of switching web based application is quite low.
Out of all available approaches for Microsoft the most suitable strategy is always to follow a Cross strategy (Gerry Johnson, Kevan Scholes, Richard Whittington, Exploring Corporate Strategy, 2008). Under this strategy it can not only differentiate its products and services but also choose to impose different charges for different products depending on its product quality and competition pricing. Along with the benefits of cloud processing Microsoft can concentrate on integrating customer's desktop computing to online processing. It can invest in server farms thus a customer's desktop data can be easily stored in Microsoft's server hence presenting the option to the consumer of logging in virtually any computer on the globe and accessing his desktop. Presently Microsoft has everything that it requires to remain the main element player in its domain name. Coupled with 25 years of experience and a good team of programmers and programmers it can give attention to innovating products that aren't only unique but also offer best value for price charged (Seeking Alpha)
In conditions of revenue generation it can concentrate more on ad based revenue for each and every select its webpage on ad placers. As people already are acquainted with Microsoft is would be easier to allow them to adapt to it. In relation to its office applications and os's Microsoft might have to reconsider its charges remember its competitors price strategy also Microsoft should innovate products that are required by the clients rather than inventing a product first and then planning how to sell it. It should keep its software designers and developers well motivated. More concentrate should get to collaboration and alliances with smaller but potential entities.
With relation to its current products and services Microsoft should give attention to bit of differentiation of its current offering in the market, This is partly achieved by know-how. Its newly launched internet search engine Bing has a whole lot of potential to increase, currently Apple is at negotiations with Microsoft to displace Google with Bing as their default internet search engine on its iPhone. This may well not be considered a major break through for Bing but it can be perceived as small part of the way up in increasing the market share in in search machines (Burrows and Cliff Edwards, Business Week, Jan 20th, 2010)
According to the analysis conducted by qualitative research organization who were secretly employed by Microsoft to evaluate with the help of 15 Google users to utilize Bing for one week as their search engine. The effect was that 10 people out of these 15 improved their search engine to Bing. Hence heading by general public reviews Bing seems to be gathering popularity. With Microsoft planning to increase its investment in Bing from 5. 5 billion to 11 billion in the next 5 years the continuing future of Bing as search engine seems smart. Though Bing has still a long way to travel in conditions of increasing its market talk about so on its way it can add some features to it thus which makes it unique and not just a copy of its rival Google (Digital ideas, December 3, 2009)
With these research we can hereby start to see the key challenges confronted by Microsoft in conditions of lack of innovation and ingenuity. We also recognize that without innovating it might be very difficult for Microsoft to create and preserve the same amount of income it used to earn until now with help of its cash cows Microsoft office and Windows. With the benefits of cloud processing Microsoft has to make itself for web based computing rather than traditional desktop computing. It also must carefully plan the costs it charges for its applications and its os's which can be found free through the internet. In addition, it has to continue its invention in terms of its new internet search engine Bing and make it unique thus giving enough known reasons for its customer to change their internet search engine to Bing. Thus with proper analysis Microsoft should select a proper strategy which is inline using its features and which would remove its full potential thus helping it keep its position among the very best companies on the globe.
(Gerry Johnson, Kevan Scholes, Richard Whittington, Exploring Corporate Strategy, 8th edition, 2008)
(Seeking Alpha, Jason Kelly, June 8th 2009, http://seekingalpha. com/article/141907-why-isn-t-microsoft-s-strategy-working-anymore).
(Business Week, Sep 26th, 2005 http://www. businessweek. com/magazine/content/05_39/b3952001. htm?chan=tc)
(Business Week, Jan 29th 2010, Dina Bass http://www. businessweek. com/news/2010-01-29/microsoft-windows-7-fuels-growth-while-office-xbox-lag-behind. html).
(The Economist, Jan 18th, 2007) http://www. economist. com/business-finance/displaystory. cfm?story_id=E1_RVVDVGJ
(Iperior, Greg, December 11 2008 http://www. iperior. ie/33-Challenges-facing-Microsoft. html
(The Wall Streets Journal) http://ptech. allthingsd. com/20061109/zune-challenges-ipod/)
(Business Week, Jan 20th, 2010, Peter Burrows and Cliff Edwards, http://www. businessweek. com/news/2010-01-20/apple-said-to-talk-with-microsoft-to-replace-google-on-iphone. html
(Digital inspiration, December 3, 2009 http://www. labnol. org/internet/google-users-switch-to-bing/11429/)
1- SWOT Analysis
Holding a global monopoly of over 90% with House windows operating system
Efficient Customer service
Well known and founded brand
More than 25 years of experience
Positive response to Windows 7 opertating system
Wide customer base
High degrees of placed capital (Revenue of $60bn v $23 of Google)
Licence model assures income stream
Strong entrance in to the game market
Lack of innovation
Low market show in online office tools(Office Live) in comparison to Sun open office
Weaker web based application
Complex code base makes it difficult to change and update central products (Google use modular way)
Office products expensive for small businesses, start-ups and charities
Game hardware (Xbox) has low margin
Need to be a game creator.
Late access in diversification into consumer product marketplaces (Sony and Apple have significant brain start)
Increased likelihood of growth and can give tuff competition to Google in conditions of generating ad income with Bing search engine.
Produce and enhance online office products to complement challengers, adding value to existing PC products.
Produce basic low-cost online office products for small businesses
Acquire game design company or recruit their own development team to increase success of game products.
Acquire or partner with Yahoo to boost position in the web website and online services businesses
Acquire business technology company (SAP or Oracle) to get foot hang on top quality market
Free office software model makes Yahoo very susceptible to market conditions and increasing entries will make it even harder
Can gain huge market talk about in the mobile industry even though it is making a past due entrance
Google, SUN, and SAP put together could present a crucial risk to existing Laptop or computer user bottom by developing cheaper or free online substitutes.
Google could develop full function office collection that could immediately contend with MS
More plus more entrants into online office software could fragment market and MS will lose its monopoly
Developing products for set up business level product market segments is a risky strategy (e. g. SAP)
Anti-trust issues will slow acquisition processes, hence hinder diversification strategy
Strong level of resistance to brand from some communities
With the advantages of Cloud processing there are increased chances of
competition increasing and new smaller entities coming into the marketplace.
Many companies coming up with their own operating system also planning to
distribute them cost free.
Customers can change to similar products and services from other companies which are mainly free. Also once computing shifts from desktop computing to online computing scheduled to cloud it would be easier for the clients to improve their desire as everything is likely to be done online.
In future with the introduction of cloud centered application customer would have a wide selection of online softwares and online applications.
Customer loyalty would generally be low
New technology creators worldwide
Recruitment and retaining of good developers.