A porters 5 forces analysis of Microsoft Corporation - Essay Example

Porter’s five forces analysis of Microsoft Corporation Degree of competitive rivalry Microsoft Corporation has been facing high level of market competition for the recent years. Although the organisation has obtained clear dominance in the software industry, its market position is being continually threatened these days. For instance, the emergence of Linux operating system (OS) in 1998 intensified the market competition and caused Microsoft to lose a significant portion of its market share (Red Hat Enterprise Linux).

Rapid improvement of technological applications also added to a higher competitive rivalry. Majority of the current software and OS providers follow a competitive pricing approach and this situation raises a series of potential challenges to Microsoft Corporation. The following figure represents computer OS market share. (Source: Perry, 2008). Threat of new entrantsThreat of new entrants is extremely high in the computer software industry. Faster product developments and technological innovations allow a new entrant to easily capture the market.

The current industry trends indicate that people are highly attracted towards new software developments as they always try to replace the existing technology with more improved ones. It is obvious that a number of new market players have entered the software industry over the last two decades. However, higher entry costs reduce the threat of new market entrants to some extent. Nowadays, majority of the governments invests heavily in research and developments. Therefore, new entrants are overcoming the fund deficiency issue.

Threat of substitutesAvailability of substitutes raises potential threats to the Microsoft Corporation. Studies show that software design ideas are widely copied and most of the people and business are interested to use pirated software versions. According to Claburn (2011), it is expected that millions of people are using pirated Microsoft operating systems. Majority of the duplicated software provide full features to their users exactly as the original software do. Since such pirated or duplicated software are easily available at cheaper costs, many of the users are not interested to buy an original Microsoft version.

Even though governments give great emphasis on the enforcement of intellectual property laws, software piracy and duplication cannot be prevented completely. Buyer powerWhile evaluating the marketing activities of Microsoft Corporation, it is clear that the firm exercises great control over its buyers (Levy, 2005). It is a known fact that Microsoft products are of supreme quality and thereby have a well market reputation. Furthermore, they are branded products. Hence, buyers generally do not have bargaining power over the company.

However, the current trends indicate that emerging software developers market their products at competitive prices and this situation may force the Microsoft to allow its customers to have more control over its sales. In addition, customer switching cost is very low in the computer software industry. Supplier powerBargaining power of suppliers is very low in Microsoft mainly because of the higher supplier switching costs. Since Microsoft is a well recognised brand, it has numerous potential suppliers.

Therefore, the company has the option to terminate a supplier if he/she/it tries to bargain with the organisation. Moreover, a large number of potential suppliers are trying to contract with the firm. Hence, Microsoft’s suppliers may not try to take more advantages of the company. ReferencesClaburn, T. 2011. Pirated Software Hurts U.S. Jobs, Economy, Microsoft Says. InformationWeek [online] [accessed 17 April 2012].Levy, Y. 2005. Michael Porters Five Strategic Market Forces. Photopla.net [online] [accessed 17 April 2012].Perry, M.J. 2008. A First: Microsoft OS Market Share Falls Below 90%.

Carpe Diem. [online] [accessed 17 April 2012].