Analysis of Microsoft Band - Case Study Example

Case Study Analysis Table of Contents Case Study Microsoft Band 3 Introduction 3 Competition Analysis 3 Case Study 2: Consumer Behaviour 5 Introduction 5 Purchasing Behaviour of Consumers 6 Conclusion 8 Reference 10 Case Study 1: Microsoft Band Introduction Introducing a new product in the market always comes with several hurdles; one of them is facing the competitive forces. In the information technology and consumer electronics industry, the firms face severe competition as the products have mostly become standardized. All the major players offer similar kinds of products, but create differentiation by making certain changes which creates additional value for the customers. Electronic gadgets like cell phones, tablets, wearable devices are offered by a lot of companies but only a few can win the consumer market by proper value addition both in terms of product and brand. This paper is focused on a news paper article which covers the latest launch of “Microsoft Band” (Wingfield, 2014). The analysis of the competitive forces has been covered in this paper using Porter’s five forces. Competition Analysis The Porter’s five forces analyses the competitive environment of a company on the grounds of Buyer’s Power, Supplier’s power, Threat of Substitute, Threat of new entrant and rivalry among existing firms. Buyers’ power: The buyer’s power is determined by the switching cost of the customers. A lot of companies have entered the wearable device market, like GoQi, Fitbit, Motorola, Apple, Samsung and Sony. Each of them offers smart watches with fitness monitoring capabilities. Thus the customer is offered with a lot of choices and he can easily choose between any one of them. Since the products are mostly comparable, the major differentiation is in the pricing (Adams, 2014). The Microsoft band is offered at a starting price of $199, whereas its closest competitors like Apple Watch which is due in 2015, will have a starting price of $349 (TheInquirer, 2014) and the Moto 360 is offered at a base price of $299.99 (Hamblen, 2014). Clearly the Microsoft Band has distinguished itself as a low priced product while offering features which are comparable to its competitors’ products. Thus the buyer has moderate switching cost, because if the customer would want to switch to other rival companies, he will have to pay a higher price for a product which offers same features, so it can be stated that the buyers’ power is moderate. Suppliers’ Power: Microsoft works harmoniously with suppliers all over the world. The company has strict rules and regulations for their suppliers mentioned in the Microsoft Supplier’ Program. In order to be do business with Microsoft the supplier companies need to follow those regulations, like certain privacy agreements, non-disclosure agreement, credit compliance, quality compliance, etc. This suggests that the suppliers do not have the upper hand over the business operations. A lot of suppliers are present in the consumer electronics industry, so Microsoft has a very low switching cost. The company can easily change between suppliers if it finds any breach of contract or unacceptable demands. However, there are some trusted suppliers which Microsoft would not want to lose, like Infosys, Intergen, Beyondsoft Corp., etc. and the company holds a symbiotic relationship with them (Microsoft, 2013). Thus the overall the Suppliers’ power is low. Threat of New Entrant: The consumer electronics industry is always welcoming new companies every now and then. New companies that are offering smart watches like Garmin, Peble, GoQi have differentiated themselves significantly in terms of pricing and product features. However, competing with the brand value and product reliability of Microsoft, these new entrants will have to face a lot of hurdles. Microsoft holds the upper ground in terms of capital expenditure in product development and marketing campaign. The Microsoft has been known to invest a lot in advertisement and campaigning. In 2012, it has spent almost over a billion dollars on the marketing communication of Windows 8 and the company is likely to spend another hefty amount in the promotion of the “Microsoft Band” (Edwards, 2012). For a new entrant, it is practically not possible to compete with Microsoft on the grounds of promotion and creating brand value. Thus it can be stated that the threat of new entrants is quite low. Threat of Substitute: The smart watch was introduced first in the market by Sony with a motive of bringing technology closer to human lives. It was designed as an intermediate member between a wrist watch and a Smartphone. To put it simply, this gadget was introduced to bridge the gap between the Smartphone and human interaction, by creating an extension of the Smartphone that can be worn in the wrist. This product has been improved and upgraded by a lot of companies like Samsung, Apple, Motorola, etc. to make it a smart watch cum heath monitor device (Nakamura and Huang, 2014). The smart watch is itself a unique product of its own and does not have any direct substitute which can replace its features and ease of use. Thus it can be stated that the Threat of Substitute for this product is low. Rivalry Among existing Firms: The market for smart watch has developed rapidly over the years. With the entry of a lot of new brands, the competitiveness has increased severely. The smart watch market was mostly dominated by Samsung and Sony, which is now being taken over by Motorola and other fitness monitoring devices like Fitbit, GoQi, etc. The introduction of Moto 360 by Motorola has rapidly gained market preference because of its aesthetic appeal and several integrated features like Google Now integration and Heart rate monitor (Callaham, 2014). Apple although has not launched the Apple watch but it has announced its upcoming features. Microsoft may have entered the market late with the Microsoft Band, but it has not failed to create value addition in terms of pricing and product features. The Microsoft Band is promoted mostly as a fitness device but it also has all the features of a typical smart watch, like reading email previews, calendar alerts, and alerts for incoming calls. In order to compete with the voice enabled personal assistant like Google Now and Siri, Microsoft has also integrated its own intelligent personal assistant Cortana. The Microsoft band stays ahead of the Apple watch in terms of usability; the Apple watch needs to be connected with the iPhone in order to use the GPS functionality, whereas the Microsoft band has its own in-built GPS into the device. In order to add more value creation in terms of product features it has introduced some new features like UV monitor which allows the consumer to check the UV index before going out for a walk or run. It has also added NFC bill payments. However it lacks a camera, which Samsung has introduced in its smart watch. The smart watch market is full of products which are comparable to each other and each product feature over takes the other, so every company is looking for ways to differentiate its product one way or the other (Hamblen, 2014.). Thus it can be stated that Rivalry among Firms is high. Case Study 2: Consumer Behaviour Introduction The purchase behaviour of the consumers has been a subject of several psychological analyses. The marketers always want to have a clear idea of how the consumers think when it is associated with a product or a service. Getting the clear picture of the mental steps that the consumers go through before making a purchase allows the marketers to develop their marketing strategies in such a way so that it makes the decision making process easier. Implementing a marketing strategy which is in line with the purchasing behaviour will attract more customers, because the perceived value for them regarding a product or service is more than that of the rival companies. The evaluation of the purchasing behaviour does not end at the product purchase only; the post-purchase behaviour is as importance as the purchase itself, because it ensures whether or not the customer will come back to the same marketer or not. This paper is focused on the pre and post purchase behaviour of the customers in light of a news article. The news article highlights an incident where passengers who were stranded by Jet2 and Thomson airlines, will be given a compensatory amount of around $ 4 million (Birschoff, 2014). In the light of this incident the consumer’s purchasing behaviour has been analysed. Purchasing Behaviour of Consumers The purchasing behaviour can be explained by a series of steps which are as follows, Need or Problem recognition, Information search, Evaluation of Alternatives, Decision of Purchase, Post purchase behaviour (Kotler and Armstrong, 2006). In the light of the given incident the above mentioned steps have been discussed. Need or Problem Recognition: This is the initiation stage of any purchase making process, where the customer identifies a particular problem or need which needs to be addressed. Addressing the need is often in the form of consumption of a particular product or service. At this point the consumer is aware of his current need but does not have any idea as to which product or service will serve him better. In the light of the given situation, the passengers realized that they have an urgent need to travel from one place to another in short time and in an affordable way. Information search: At this stage after the customer has become aware of his needs or problems which he wants to address at an urgent basis, he then goes for information search. The customer looks for different ways in which he can address his issues. In this case the passengers looked for different transportation medium, that they can opt for. The information search is done keeping in mind both the primary needs and the secondary needs (Lee, 2005). Here, the primary need is reaching the destination in a short time and the secondary need is to find the affordable medium of transportation and also to make sure that the chosen medium’s timing is in line with the passengers’ schedule. The passengers had found that travel by air is the right choice for them. Evaluation of Alternatives: In this stage the customer assesses all the available alternatives before making his final choice. This evaluation process is different for different customers, as the parameters based on which the decision is taken are prioritized differently by different customers. In this case the passengers looked up for various flight schedule and ticket prices based on their affordability and time requirement. The consumer usually uses their previously collected information as a filtering mechanism while evaluating the alternatives. The previous bad experiences eliminate certain options, whereas the favourable experiences allow them to consider certain options in to their evoked set. This step often gets quite rigorous because the customer does not want to miss out on any option that might have given him a better offer. The right evaluation of alternatives has a vital implication in the post purchase behaviour, which eliminates the chance of cognitive dissonance (Sharma, 2014). Purchase decision: This the moment of truth for all the companies, when a customer takes his final decision and purchases a product. All the marketing strategies and marketing communications boils down to this moment when a customer chooses a particular brand over its rivals. The purchase decision is made after the customer has considered all the available alternatives and has finally made his choice which he perceived to have the best value proposition for him (Jacoby et al, 1976). In this case the passenger had chosen the flight Jet2 and Thompson based on their ticket price and previous performances and service quality. The passengers who had gone through all the rigorous stages of decision making would presume to get a better service quality from the flights. Post Purchase Behaviour: This stage is acts as a feedback from the customers. After making the purchase and subsequent consumption of a product or service, the customer judges its quality based on his presumed expectation. The judgement is based on all the options that he had considered in his evoked set. If he is satisfied with the consumption of the product or service which he had purchased, then he attains a sense of accomplishment, which creates a resonance between his expectation from the choice he made and the outcome of the purchase. However, if the customer is dissatisfied after the consumption of the product or service, or he feels that the product did not offer as much value as he had expected, then the customer feels disappointed. The theory of cognitive dissonance suggests that a customer goes in to a stage of mental conflict when he simultaneously holds two contrasting ideas, and he then takes all the necessary actions in order to reduce that dissonance. The conflict between the two contrasting ideas occurs when the customer feels that he could have made a different choice in the “Evaluation of Alternative” stage, and then he would not have to face the disappointment of dissatisfaction (Sharma, 2014). In this case the passengers were severely disappointed when they were delayed by the flights. This disappointment took them to a state of cognitive dissonance and in order to get out of this dissonance the passengers filed a lawsuit against the two airline companies. After the court ordered that the companies must pay a compensatory amount to the passengers, they were out of their dissonance state, because their dissatisfaction is being paid off in an alternate manner. Conclusion It can be concluded from the first case study that Microsoft is operating in a highly competitive market where its rivals have come up with almost equivalent products which can pose a serious threat to the Microsoft Band. However, the company has leveraged its technological advancements and financial strength to launch the product at a lower price and at the same time providing top of the line features. The Porter’s five forces as discussed in the main body of this paper not only highlights the competition among existing firms, but also points out the other relevant competitive forces in the industry. Microsoft has successfully identified all of the five forces and has designed its marketing strategy accordingly. The buyers’ power which acts from the consumers’ side has been managed by offering a lower price. The low pricing may work in the company’s favour and eventually gain popularity among the budget conscious customers. Microsoft has successfully monitored the existing brands and designed its strategies accordingly so that it can win over the existing smart watch market. As of now there is no potential substitute that can replace the usability of a smart watch, which nullifies the threat of substitute. Microsoft is well established brand which poses a serious threat to any new entrant who would like to compete with them. Finally the rivalry among existing firms as observed from the above analysis is quite high in the industry. Particularly in the smart watch market Microsoft has entered as a “late mover”, as a result it is facing severe competition from already established brands like Moto 360, Samsung Gear, etc. However, Microsoft owing to its technological and market expertise is most likely to stay ahead of its competitors in the near future. On the other hand, from the second case study it can be concluded that all the five stages of the customer purchase behaviour have its own implication to the marketers. In order to gain new customers, the marketers must focus on each of the steps so that they can make their place in to customers’ evoked set and finally be a part of the purchase decision. Dissatisfied customers often tend to spread negative word of mouth which degrades the brand image of the company (Lee, 2005). It also drastically reduces the chance of dissatisfied customer’s return to the same company. In this case, all the passengers who were stranded are likely to avoid Jet2 and Thompson airways in the future, as much as possible. Based on the five stages of consumer buying behaviour, the passengers’ successfully identified their need to travel. After that they performed a rigorous search in the internet to find out the all the other available airlines which will take them to the same destination at an affordable price. Based on the available alternatives they made the choice which they perceived to be best for them. The post purchase behaviour reflects the consumers’ mental status after the consumption of a product or service. In this case the passengers were deeply dissatisfied as the flight was delayed, which in led them to file a lawsuit against the airlines company. As a result it degraded the brand valuation of the company. The customer dissatisfaction has been discussed in the light of cognitive dissonance, where a mental conflict prevails within the consumers’ mind. This cognitive dissonance leads the customer to take drastic steps to reduce the mental conflict. In this case the dissonance led to filing of lawsuit. Thus, the marketers must ensure that situations which makes customers dissatisfied must be avoided at all cost, because its effects are far reaching and can eventually lead to severe brand dilution. Reference Adams, A. 2014. The Size Of The Smartwatch Market & Its Key Players. [online] Available at:< http://www.forbes.com/sites/arieladams/2014/03/07/the-size-of-the-smartwatch-market-its-key-players/ > [Accessed 23 November 2014] Callaham, J. 2014. Moto 360 now available with slim 18 mm silver and gold bands from Motorola. [online] Available at:< http://www.androidcentral.com/moto-360-smartwatch-now-available-slim-18-mm-silver-and-gold-bands > [Accessed 23 November 2014] Edwards, J. 2012. Heres the Massive Budget Microsoft Is Gambling On Windows 8 Ads. [online] Available at:< http://www.businessinsider.com/microsoft-spending-1-billion-on-windows-8-ads-2012-10?IR=T > [Accessed 23 November 2014] Hamblen, M. 2014. The ups and downs of Microsoft Band. [online] Available at:< http://www.computerworld.com/article/2850987/the-ups-and-downs-of-microsoft-band.html > [Accessed 23 November 2014] Microsoft. 2013. Procurement. [online] Available at:< http://www.microsoft.com/about/companyinformation/procurement/msvendor/en/us/criteria.aspx > [Accessed 23 November 2014] Nakamura, Y and Huang, G. 2014. Who Was First to Market a Smart Watch? Not Samsung. [online] Available at:< http://www.bloomberg.com/news/2014-09-11/who-was-first-to-market-a-smart-watch-not-samsung-.html > [Accessed 23 November 2014] TheInquirer. 2014. Apple Watch release date, price and specs. [online] Available at:< http://www.theinquirer.net/inquirer/news/2351287/iwatch-price-release-date-rumours-and-features > [Accessed 23 November 2014] Wingfield, N. 2014. Microsoft Jumps Into the Growing Market for Wearable Fitness Technology. [online] Available at:< http://www.nytimes.com/2014/10/30/business/microsoft-jumps-into-the-growing-market-for-wearable-fitness-technology.html?_r=2 > [Accessed 23 November 2014] Reference Callaham, J. 2014. Moto 360 now available with slim 18 mm silver and gold bands from Motorola. [online] Available at:< http://www.androidcentral.com/moto-360-smartwatch-now-available-slim-18-mm-silver-and-gold-bands > [Accessed 23 November 2014] Edwards, J. 2012. Heres the Massive Budget Microsoft Is Gambling On Windows 8 Ads. [online] Available at:< http://www.businessinsider.com/microsoft-spending-1-billion-on-windows-8-ads-2012-10?IR=T > [Accessed 23 November 2014] Hamblen, M. 2014. The ups and downs of Microsoft Band. [online] Available at:< http://www.computerworld.com/article/2850987/the-ups-and-downs-of-microsoft-band.html > [Accessed 23 November 2014] Microsoft. 2013. Procurement. [online] Available at:< http://www.microsoft.com/about/companyinformation/procurement/msvendor/en/us/criteria.aspx > [Accessed 23 November 2014] Nakamura, Y and Huang, G. 2014. Who Was First to Market a Smart Watch? Not Samsung. [online] Available at:< http://www.bloomberg.com/news/2014-09-11/who-was-first-to-market-a-smart-watch-not-samsung-.html > [Accessed 23 November 2014] TheInquirer. 2014. Apple Watch release date, price and specs. [online] Available at:< http://www.theinquirer.net/inquirer/news/2351287/iwatch-price-release-date-rumours-and-features > [Accessed 23 November 2014] Wingfield, N. 2014. Microsoft Jumps Into the Growing Market for Wearable Fitness Technology. [online] Available at:< http://www.nytimes.com/2014/10/30/business/microsoft-jumps-into-the-growing-market-for-wearable-fitness-technology.html?_r=2 > [Accessed 23 November 2014] Read More