Microsofts Current Strategy - Case Study Example

Microsoft Case Study By [Student’s Name] [Code + Course Name] [Name of Tutor] [Name of University] [City, State] [Date of Submission] Table of contents 2.0 Key Issues Facing Microsoft 4 2.1 Strengths 4 2.1.1 Brand Loyalty 4 2.1.2 Brand Reputation 4 2.1.3 Easy To Use Software 4 2.1.4 Robust Distribution Channels 4 2.1.5 Strong Fiscal Performance 5 2.2 Weaknesses 5 2.2.1 Feeble Acquisitions and Investments 5 2.2.2 Dependence on Hardware Manufacturers 5 2.2.3 Weak Security Laws 5 2.2.4 Mature PC Markets 6 2.2.5 Slow to Innovate 6 2.3 Opportunities 6 2.3.1 Services Based on Cloud Storage 6 2.3.2 Mobile Advertising 6 2.3.3 Mobile Device Industry 7 2.3.4 Growth by Acquisitions 7 2.4 Threats 7 2.4.1 Increased Competition in Software Products 7 2.4.2 Changing Consumer Habits and Needs 7 2.4.3 Open Source Projects 8 2.4.4 Potential Lawsuits 8 2.4.5 The Human Factor 8 2.4.6 Increasing Dissatisfaction by Employees 8 3.0 Microsoft’s Core Competencies 9 4.0 Conclusion and Recommendations 11 References 13 Appendices 15 1. 0 Microsoft’s Current Strategy Microsoft Corporation is a globally renowned provider of hardware and software services and products (Choi et. al., 2007). Recently, Microsoft formed the Office of Diversity and Inclusion to improve the leadership of their several divisions (Microsoft, 2013). The company appreciated that dominance in the global marketplace needs an inclusive business environment and a corporate culture where the brightest and best minds with varied experiences, perspectives and skills work collectively to satisfy the consumer demands. Microsoft’s current strategy entails coming up with a global diversity and inclusion strategy that is linked to the vision and mission of the company (Microsoft, 2013). As well, the company has put in place measures to fortify the global incorporation and perspective of the aforementioned strategy across the country. Further, Microsoft is improving the engagement levels with their top tier management; particularly the chief executive officer, as well as the diversity sponsors (Choi et.al., 2005). Further, the company is looking to enhance their accuracy and quality in diversity data across the globe. They aim to further increase their courses and training tools. Microsoft’s strategy is premised on the increasing competition from other brands, such as Apple and IBM (Kim and Kim, 2001). The company is considering coming up with more innovations and increase their competitive advantage. Their aim is to cement their excellence in information technology, improve quality and lower costs using their Microsoft platform. The company is using senior level experts and enterprise strategy consultants to realize their technology platform. In addition, the company is working to streamline their IT processes and service deliveries, as well reduce redundancy across all their operations (Microsoft, 2013). In line with this, the company aims to minimize the risk of future IT systems and their respective upgrades. 2.0 Key Issues Facing Microsoft 2.1 Strengths 2.1.1 Brand Loyalty Microsoft has carved a niche for itself as the leading software and OS provider to the point of controlling 90% of the market share for the PC OS (Choi et al, 2007). Many users of computers today grew up and probably were trained on a Microsoft OS. Only a handful of companies have tried, albeit without luck, to compete with Microsoft. 2.1.2 Brand Reputation Microsoft’s dominance on the global information technology scene has made it a reputable company, which has resulted in an increased market share and higher sales (Microsoft, 2013). 2.1.3 Easy To Use Software Microsoft’s software and hardware products are not only of great quality, but their user friendliness has increased their popularity (Dresser et.al., 2000). 2.1.4 Robust Distribution Channels Microsoft has entered into agreements with all the major computer hardware manufacturers around the world, such as Dell, Toshiba, Lenovo and HP to ensure that their machines are sold with pre-installed Windows software (Carpenter and Sanders, 2007). 2.1.5 Strong Fiscal Performance Year in, year out, Microsoft has been growing its revenues through acquisitions and investments in research and development activities (Porter and Kramer, 2002). The recent acquisition of Skype is an illustration of their financial might and statement of intention to continue to dominate the world of information technology 2.2 Weaknesses 2.2.1 Feeble Acquisitions and Investments Not all of Microsoft’s investments have been successful, WebTV, Danger, Massive and LinkExchange are examples of acquisitions that were overly hyped and ended up being divested or shut down (Bowman and Ambrosini, 2000). 2.2.2 Dependence on Hardware Manufacturers Despite being renowned on the software manufacturing and development front, Microsoft does not produce its own computer hardware; it depends on other companies to come up with products that run on Windows OS (Microsoft, 2013). In the event of cheaper alternatives were to be manufactured the hardware manufacturers can move to the alternatives. 2.2.3 Weak Security Laws Microsoft has been criticized with regard to their weak OS that are susceptible to a multitude of viral attacks. Its nearest competitors’ operating systems are more protected (Baker, 2007). 2.2.4 Mature PC Markets It is only till recently that Microsoft ventured into the mobile technology industry and still heavily depends on its OS, as well as laptop computers and software sales for standalone computers (Microsoft, 2013). Microsoft has ventured into a lucrative market, but it is largely comprised of mature players that will make it difficult for Microsoft to generate revenues in these sectors. 2.2.5 Slow to Innovate Despite having the state of the art and huge research and development facilities, and vantage positions for entering new markets with innovative products, they have failed so to do. Blake and Ambrosini (2000), point that they had an opportunity to be the pioneer player in online advertising, but it looked down on that chance. In addition, their entry to the mobile operating system industry is arguably too late, the market is largely dominated by Apple and Google. 2.3 Opportunities 2.3.1 Services Based on Cloud Storage Baker (2007) is of the opinion that cloud storage service is the next big thing and Microsoft could broaden their range of services on this platform as the demand for cloud service is on the increase. 2.3.2 Mobile Advertising Porter and Kramer (2002) estimate that in the next few years, mobile advertising will grow in double digits in the next few years, and Microsoft is at a good position to access these markets using their OS platform. 2.3.3 Mobile Device Industry Tablets and Smartphones are steadily growing, and the trend does not seem to be slowing down (Carpenter and Sanders, 2007). Microsoft could take advantage of this opportunity and come up with its own version of tablets and perhaps a new company smartphone. 2.3.4 Growth by Acquisitions It is not in question that Microsoft has huge reserves of cash and they could make use of the same by acquiring potential and upcoming technological startup firms and inject technology, marketing, skills and competencies into them. 2.4 Threats 2.4.1 Increased Competition in Software Products Globalisation and technological advancements have occasioned unprecedented competition in the software industry, and Microsoft is feeling the pressure to come up with successful OS in the mobile and PC markets in order to compete with Google and Apple that are enjoying the market share (Dresser et. al., 2000). 2.4.2 Changing Consumer Habits and Needs Nowadays, due to the increase in choice of gadgets consumers are shifting from standalone computers, to tablets, to laptops, to smartphones (Microsoft, 2013). In these markets, Microsoft has as slight market share and there is a likelihood that the company might never penetrate into the same industries. 2.4.3 Open Source Projects Over the last few years, there are several open source projects that have sprouted, and many of them are quickly becoming successful, such as Open Source Office and Linus OS (Kim and Kim, 2001). The former are free to any willing user, and they have a chance to substitute Microsoft’s expensive products. 2.4.4 Potential Lawsuits Ever since its inception, Microsoft has been on the receiving end of many lawsuits, most of which have been large scale. Lawsuits are a costly affair to any organisation, and following the same path for Microsoft is undoubtedly going to result into more expensive lawsuits. 2.4.5 The Human Factor Microsoft has been losing its priced employees to their competition at a very high rate. Choi, Millar and Wong (2005) argue that Microsoft might have gotten too big and comfortable with their market share and dominance for many years; therefore, it is unable to adapt quickly to the rapid changes characterising the information technology industry. 2.4.6 Increasing Dissatisfaction by Employees The compensation gap between the employees and executives in Microsoft has been widening (Choi et al, 2007). For example, in 2005 after the giant software had a cash reserve of $56 billion, the company passed an executive plan that would see their executives get a salary of $1 million and their employees would continue getting the market rates. This is a factor that pushed most of them away as the company was seen not to care about them. To further compound this, the company reduced their stock options and increased their prescription co-pays, as well as cutting back on employee benefits (Choi et al, 2007). The flat stock performance that followed, as well as the reduced benefits, fueled the massive exodus of employees. 3.0 Microsoft’s Core Competencies According to Kim and Kim (2001), the core competencies of a company are perceived to be more than just the technology that the company rides on. Dresser et.al. (2000), note that core competencies are what that differentiates them from their competitors; they are used in explaining the structure of an organisation. Microsoft offers their customers the right services when needed through strengthening IT as a business aligned organisation that is strategically focused. Microsoft realizes competitive advantage through their technological innovations, which are mapped and operated into a set of services that support business goals (Microsoft, 2013). Microsoft eliminates redundancies, inefficient processes and service delays for faster response times, as well as taking chances to take the lead by applying technology in ways that are innovative. It is on this background that many companies have struggled to measure up to the core competencies of Microsoft as their products have for the longest time been associated with quality and value for money (See Appendix 2). Microsoft’s products can be classified into eight: Windows, Business Solutions, Servers, MSN, Games and Xbox, Office, Windows mobile and Developer Tools (Microsoft, 2013). Microsoft’s revenues were largely contributed by Business and Client Solutions. The Client Solutions are made up of high end operating systems, including Tablet PC Edition, Media Center Edition, Windows XP Professional, and other standard operating systems from Windows such as Windows XP Home. On the other hand, Business solutions include Microsoft Visio, Microsoft Project, SharePoint Portal Server CAL, Microsoft Office, One Note, Microsoft Live Meeting, Office Communication Server, Microsoft Dynamics CRM, Microsoft Dynamics NAV, Microsoft Dynamics GP, Microsoft Dynamics Retail Management System, Microsoft Small Business Accounting, and the Microsoft Partner Program (Microsoft, 2013). These two solutions are the core competencies of Microsoft that generate high revenue (Choi et al, 2007). Currently, Microsoft owns a partner network that acts as a platform where businesses can display their expertise through Microsoft competencies. Choi, Millar and Wong (2005) explain that Microsoft has two types of competencies that can provide new businesses; silver and gold competencies. Both competencies enable consumers to set apart their preferred company from the competition as the companies are allowed to demonstrate that they have several customers. 4.0 Conclusion and Recommendations This report has comprehensively answered what the future holds for Microsoft. In particular, it has identified that the current Microsoft strategy is mainly to improve their leadership in several of their divisions, as well as coming up with a global diversity and inclusion strategy that is linked to their mission and vision of the company. Further, the key issues facing Microsoft have been identified as feeble acquisitions and investments, dependence on other hardware manufacturers, weak security laws, dealing with mature PC markets, slow to innovate, increased competition in software products, changing consumer needs and habits, high employee turnover and potential lawsuits. This shows that Microsoft has a lot of issues to deal with in order to reclaim their position of high quality products. In addition, it has identified the core competencies of Microsoft that have enabled the company to generate a lot of revenue. Microsoft should exercise more caution in investing and making acquisitions following the number of investments that they have engaged in and lost have been increasing. It would be a good idea for Microsoft to make use of their extensive research and development facilities to come up with tablets, Smartphones and personal computers that are specially designed for Windows. This will enable the company to compete with the more established players such as Apple and Google. In addition, it will reduce the company’s dependence on the hardware from other companies. What’s more, the company will be protecting itself from any eventuality of their pricey products being replaced by free open service projects. In addition, Microsoft should try to improve their OS and strengthen its defensive mechanism so that it cannot be susceptible to viral attacks. The fact that all its competitors have formidable defensive mechanisms against viruses, gives a bad picture for the world’s leading software producer. In line with this, Microsoft should increase their rates on innovation, because, in the world of today, technology is becoming sensational and obsolete for much shorter periods than ever before. It is for this reason that Microsoft products are losing favour in the eyes of many consumers. This is made worse by the unprecedented changing preferences of the consumers. Further to this, Microsoft should take advantage of opportunities to increase their cloud based services to address the increasing demand of these services. In addition, Microsoft should set up apps to tap into the mobile advertising market since it has potential to grow in double digits. Plans should be made to motivate employees to shield the massive exodus of their employees. For the priced workforce that has already moved on, aggressive measures should be implemented to ensure that the company attracts more, and particularly the best talent available. References Baker, S. 2007. ‘What every business should learn from Microsoft.’ Emerald Backfiles. 4, pp. 38-41. Bowman, C. & Ambrosini, V. 2000. ‘Value creation versus value capture: towards a coherent definition of value in strategy’, British Journal of Management. 11 (1), pp. 1-15. Carpenter, M.A. & Sanders, W.G. 2007. Strategic Management: A Dynamic Perspective. Prentice Hall: Upper Saddle River, NJ. Choi, C.J. Carla, C.J.Millar, M. Chu, R.T.C & Berger, R. 2007. ‘Increasing returns and marketing strategy in the twenty-first century: Nokia versus Microsoft versus Linux.’ Journal of Business and Industrial Marketing. 22(5), pp. 295-301. Choi, C.J. Millar, C.C.J.M. & Wong, C. 2005. Knowledge Entanglements. London: Palgrave Macmillan. Kim, J. & Kim, Y. 2001. ‘Applying and measuring strategic evaluation to the case of Microsoft’ Corporate Communications: An International Journal. 6 (3), pp. 34-55. Microsoft .2013. A Vision and Strategy for the Future. Retrieved 17 October from < http://www.microsoft.com/en-us/diversity/vision.aspx> Porter, M.E. & Kramer, M.R. 2002. ‘The competitive advantage of corporate philanthropy.’ Harvard Business Review, 80 (12), pp. 57-68. Dresser, E.J. Brewster, M.S. & Presser, R.K. 2000. ‘Modeling the dynamics of strategic fit: a normative approach to strategic change.’ Strategic Management Journal, 21, pp 429-53. Appendices Strengths Weaknesses Brand loyalty Poor acquisitions and investments Brand reputation Slow to innovate Easy to use software Dependence on hardware manufacturers Robust distribution channels Mature PC markets Strong fiscal performance Weakness over security flaws Opportunities Threats Cloud based advertising Potential lawsuits Growth through acquisitions The human factor Mobile advertising Open source projects Mobile device industry Changing consumer habits and needs Dissatisfaction of employees Read More