Boston Consulting Group Matrix for Microsoft - Case Study Example

INTRODUCTION This paper builds on the assignment done for the first part about knowledge of companies and builds a marketing report for the chosen company, Microsoft. The paper maps the BCG (Boston Consulting Group) matrix for Microsoft as well as identifying the market segments that the company operates in. Further, Ansoff’s matrix analysis is done for Microsoft and the strategic options before the company are explored as well. Microsoft is a household name throughout the US for its undisputed position in the market for desktop and operating system software. Its founder, Bill Gates is a legend himself and is often quoted for the way he built the company from a start-up to its present status as a software behemoth. DIFFERENT PRODUCTS AND SERVICES Microsoft offers many different products and services as part of its portfolio of offerings and these range from the hugely popular Windows operating systems to the Web services like MSN and Hotmail. Microsoft’s vision is to “put a computer on every desk and in every home, running Microsoft software”. This vision that was originally envisaged when Microsoft was in its infancy is close to being fulfilled. The gamut of products that Microsoft offers is integrative right from the Windows operating systems that it provides to the software that runs on top of it. Thus, it simultaneously makes the Operating system and the Microsoft Office suite of products that run on top of the OS. Among the services that Microsoft offers, there are the web based applications like MSN, and Windows Live range of services that it offers. These are pure play web based offerings aimed at the web based applications market. The OS software comes in many versions ranging from the now outdated Windows 2000 to Microsoft Vista and XP. This is the bread and butter product for Microsoft earning substantial revenues for itself in the process. BCG MATRIX APPLIED TO MICROSOFT The BCG Matrix is based on the PLC method and determines the importance of each product in the portfolio according to the two dimensions of market share and market growth (Value Based Management, 2008). Thus the classification of the BCG Matrix is one of Stars (High Growth, High Market Share), Cash Cows (Low Growth, High Market Share), Dogs (Low Growth, Low Market Share), Question marks (High growth, Low Market Share). If we apply the BCG Matrix to Microsoft’s portfolio of products according to the variables that have been analysed, we get the following analysis: Stars: The products in this category are the Operating system software that Microsoft sells as part of its portfolio. It is not uncommon to bundle the OS software along with the sale of each new PC to potential users. Thus, Microsoft enjoys great market share in this range and this category is also a high growth segment given the fact that PC sales are always in demand. Cash Cows: The Office suite of products and the other applications that Microsoft sells to be built on top of the OS are in this category. The market share is high but the growth is low in this segment. Dogs: The older versions of software that MS provides as a back up for integration purposes fall in this category. Question Marks: The web applications and services like MSN fall in this category. There is a huge potential for growth but MS is not a leader in this market. MARKET SEGMENTS Microsoft operates in different market segments that can be divided on the basis of the number of PC’s that each corporate in the segment has. It operates right from the high end segment of companies that have more than a 2,500 PC’s to the home based customers who have one or a few PC’s. Thus the upper segment is the Global, Strategic Industry majors where Microsoft can be thought of having a leadership advantage. This is the segment where Microsoft services the premium customers. The next segment is where the corporate accounts are concerned. This is the segment that has ownership of PC’s that range from 500-2,500 (Directions on Microsoft, 2008). The next segment is the upper mid-market segment that has caters to the mid sized corporate’ having 25—500 PC’s. The last two segments are the Core mid market and lower mid market segments that have ownership of PC’s in the hundreds range. The last tier of the segment is the home based users and small businesses who have PC ownership in the range of 1-25. It can be seen that Microsoft operates in all the segments right from the Global majors to the individual businesses. The other kind of market segmentation is the country or the geographical region wise segments. In this basis, Microsoft has a near monopolistic advantage in all the regions in the North American zone as well as the other regions around the globe. Microsoft enjoys leadership in all the market segments and its support offerings span the entire segmentation divide. As we shall see in the section related to strategic options, Microsoft can do more in some of the segments that cater to web applications and the market for browser based software. ANSOFF MATRIX If we apply the Ansoff’s matrix to Microsoft, we get the following segmentation and division according to the criteria used (Quick MBA.com, 2008). Market Penetration - the firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share. This applies to the Operating systems and web services that the company offers. Market Development - the firm seeks growth by targeting its existing products to new market segments. The category of the office suite of products that are aimed to target new segments falls in this category. Product Development - the firms develops new products targeted to its existing market segments. The products that are provided for compatibility and the older versions of the products that the company markets fall in this category. Diversification - the firm grows by diversifying into new businesses by developing new products for new markets. The category of web applications and the suite of browser based products that the company is developing can be seen as attempts to diversify into new product areas and markets. STRATEGIC OPTIONS The strategic options before the company are to penetrate the market for the emerging web applications space in a big way. Microsoft’s unchallenged leadership is now being threatened by companies like Google that have garnered a huge market share for themselves in the search engine and web applications space. Further, Yahoo is posing a serious threat to Microsoft in the area of web computing and online entertainment. It is in this regard that Microsoft tried to takeover Yahoo last year. As we noted in the first section, Microsoft’s original vision of putting a computer on every desk and having it run Microsoft software has largely been fulfilled. Thus, now it is time for Microsoft to be innovative once again and look for newer pastures. This means capturing the web based market and positioning itself as a serious contender to the likes of Google and Yahoo. It should continue to focus on its flagship product, the operating system that has undergone several transformations and now caters to almost all types of users. From professional to home to premium, the operating system software is prevalent in all the segments. If Microsoft wants to build on top of that and improve the Office suite of products, it can revamp some of the designs for applications like MS Word that are now being overtaken by Adobe and others in the desktop publishing space. Microsoft has been the benchmark for software applications and the standard against which tech companies have been measured against for a long time. With changing market scenarios, Microsoft is being challenged by newer and more agile companies in the software and computing applications space. It is time for Microsoft to think and act like the nimble start up it once was and not like the bureaucratic behemoth it now is. In conclusion, Microsoft remains the leader in the market irrespective of its newer competitors chipping away at its base. It was always known for its predatory prowess and it may well have to dip into that to counter the economic conditions that are now prevailing world wide. It is anybody’s guess on whether Microsoft would emerge out of the current slowdown stronger. Sources QuickMBA.com (2007). Ansoff Matrix. QuickMBA.com. Available from: http://www.quickmba.com/strategy/matrix/ansoff/ (Accessed Feb 21 2009) DeGroot, Paul. (2006). Support Offerings by Market Segments. Directions on Microsoft. Available from: http://www.directionsonmicrosoft.com/sample/DOMIS/update/2006/07jul/0706psor_illo.htm (Accessed Feb 21 2009). Microsoft.com (2009). Available from: http://www.microsoft.com (Accessed Feb 21 2009). Value Based Management.net. (2008). BCG Matrix. ValueBasedManagement.net. Available from: http://www.valuebasedmanagement.net/methods_bcgmatrix.html (Accessed Feb 21 2009) Read More