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Microsoft Corporation

The Business Strategy

Author:

Saurabh

Kamaldeep

Laltendu July 15th 2012

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Quotes from Bill Gates

Every day were saying, ‘How can we keep this customer happy?’ How can we get ahead in innovation by doing this, because if we don’t, somebody else will.”

“Your most unhappy customers are your greatest source of learning.”

“Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”

“As we look ahead into the next century, leaders will be those who empower others.”

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We have partneredIndex

• Microsoft Profile & Offering

• Vision Mission & Value

• SWOT

• Porter's Five Force Model

• Microsoft Finance

• Future Strategy

• Q&A

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Microsoft Corporation

IndustryComputer softwareOnline servicesVideo games

Founded Albuquerque, New Mexico, United States (April 4, 1975 (1975-04-04))

Founder(s) Bill Gates, Paul Allen

Headquarters Microsoft Redmond Campus, Redmond, Washington, U.S.

Key people Steve Ballmer (CEO)

Revenue US$ 69.94 billion (2011)

Operating Income US$ 27.16 billion (2011)

Net Income US$ 23.15 billion (2011)

Total Assets US$ 108.7 billion (2011)

Total Equity US$ 57.08 billion (2011)

Employees 92,000 (2011)

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Important Milestones

Date Event

1975Microsoft founded

Jan. 1, 1979 Microsoft moves from Albuquerque, New Mexico to Bellevue, WashingtonAug. 12, 1981

IBM introduces its personal computer with Microsoft's 16-bit operating system, MS-DOS 1.0

13-Mar-86Microsoft stock goes public

22-May-90Microsoft launches Windows 3.0Aug. 24, 1995 Microsoft launches Windows 95

25-Jun-98Microsoft launches Windows 98

Jan. 13, 2000 Steve Ballmer named president and chief executive officer for MicrosoftFeb. 17, 2000 Microsoft launches Windows 2000

22-Jun-00Bill Gates and Steve Ballmer outline Microsoft's .NET strategy for Web services

31-May-01Microsoft launches Office XP

Oct. 25, 2001 Microsoft launches Windows XPNov. 15, 2001 Microsoft launches Xbox

Nov. 7, 2002 Microsoft and partners launch Tablet PC

24-Apr-03Microsoft launches Windows Server 2003

Oct. 21, 2003 Microsoft launches Microsoft Office SystemNov. 22, 2005 Microsoft launches Xbox 360

Jan. 30, 2007Microsoft launches Windows Vista and the 2007 Microsoft Office System to consumers worldwide

Feb. 27, 2008 Microsoft launches Windows Server 2008, SQL Server 2008 and Visual Studio 2008

3-Jun-09Microsoft launches Bing decision engine

Oct. 22, 2009 Microsoft launches Windows 7

15-Jun-10Microsoft launches general availability of Office 2010

Nov. 4, 2010 Microsoft launches Kinect for Xbox 360Nov. 10, 2010 Microsoft launches Windows Phone 7

28-Jun-11Microsoft launches Office 365

Oct. 13, 2011 Microsoft closes its acquisition of Skype

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Product Divisions

Windows

&

Windows Live

Server

and

Tools

Online Services

Business Division

Entertainment

and Devices

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We have partneredWindows, Server and Tools, Online Services Division

Windows

Windows 7

Microsoft Visual Studio

Microsoft SQL Server

Set of Certification Programs

IT consulting ("Microsoft Consulting Services")

Cable news channel MSNBC

Online service MSN $ search engine Bing

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We have partneredBusiness Division

Business

Microsoft Office 2010

Outlook

Publisher

Visio

MS Project

MapPoint, InfoPath and OneNote.

Enterprise resource planning (ERP)

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We have partneredEntertainment and Devices Division

Entertainment and

Devices

Windows CE OS for embedded Systems

Windows Phone for SmartPhones

Computer Games - Microsoft Flight Simulator Series

Microsoft Office 2011 for Mac

Xbox 360

Game controllers - Joysticks & Gamepads

Personal computer hardware - Mouse, Keyboards

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Vision Mission & Value

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Vision

Our vision is to create innovative technology that is accessible to everyone and that adapts to each person's needs. Accessible technology eliminates barriers for people with disabilities and it enables individuals to take full advantage of their capabilities.

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Mission & Value

MissionAt Microsoft, we work to help people and businesses throughout the world realize their full potential. This is our mission. Everything we do reflects this mission and the values that make it possible.

ValuesAs a company, and as individuals, we value: Integrity and honesty. Passion for customers, for our partners, and for technology. Openness and respectfulness. Taking on big challenges and seeing them through. Constructive self-criticism, self-improvement, and personal excellence. Accountability to customers, shareholders, partners, and employees for commitments, results, and quality.

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Mission Statement Evaluation Matrix

Organization CustomersProducts Services Markets

Concern for Survival, Growth,

Profitability Technology

Microsoft Corporation Yes No Yes Yes Yes

PhilosophySelf-

ConceptConcern for Public Image

Concern for Employees

No No Yes Yes

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SWOT Analysis

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Strengths

Windows series, and Windows NT are globally known as the PC desktop operating system with a market share of 88%

Multinational corporation operating through regional subsidiaries in more than 60 countries

Relatively rapid product development processes that allow for timely updating and release of new products

Revenues and profits rising at 30% a year with merger/acquisition or investment over past five years

Software products have high name recognition, and consumer acceptance

Top rating from Fortune for best company to work at

Strong reputation for innovative products

Loyal, hardworking, and diverse workforce

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Weakness

Dependency on hardware manufacturers to pre-install Microsoft's PC operating system

Employee turnover has increased from 6% for a ten year period to 7.4%

Falling sales in the operating systems and server software s

Perceived by many as a cut-throat competitor that uses its dominant market position to marginalize competition by stealing/destroying the competition's products, stifling product innovation, and decreasing availability of competitor products

Little or no significant presence in the wireless market and Windows CE has been disappointing

Not a key player in the Internet space and few products for Internet applications

Products have a single application focus and do not work well with or on-top of other products

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Opportunities

Cheaper global telecommunication costs open new markets as people connect to the Internet

Mobile phone applications and exploitation of personal digital assistants

Popularity among people for Internet access

The demand for personal computers in American and global markets remains strong despite the growth and increasing popularity of personal handheld devices

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Threats

Apple and Linux threaten Microsoft's 88% market share of the desktop operating market

Currency exchange rates negatively impacting revenues in the global marketplace

Hardware manufacturers (Sun , IBM, AOL, and Apple) are issuing their own pre-bundled programs on their own hardware

Rapid development of mobile devices that will displace/replace personal computers

Recession or economic slowdown in global market

Software piracy of commercial and consumer software on a global scale threatens revenue streams

Technology life cycle is shorter and shorter

Unix dominates high-end mission-critical applications and its customers do not believe Windows can handle these operations

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Porter’s Five Force’s Model

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Industry rivalry: HIGH

The intensity of industry rivalry within the enterprise software industry is affected by several factors:

i) The concentration of competitorsii) Diversity of competitors,iii) Product differentiation andiv) Price differentiation.

Large multinational vendors and a handful of smaller localized firms compete in the enterprise software industryConcentration of competitors within the industry is high with big players such as Oracle, Google, Apple, SAP etcThe companies within the enterprise software/server platforms industry are very diverse.Larger companies not only produce and consult on hardware and software, but also manufacture operating systems, general computer software, and development platformsBusiness Tie-up among Market leaders

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Microsoft Vs Competitors

COMPETITION IN HARDWAREMOBILESPERIPHERALS

COMPETITION IN SOFTWAREOSBROWSERSGAMES SOFTWARE'S

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Microsoft Competitors

MOBILE

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Microsoft PERIPHERALS

Competitors

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CompetitorsMicrosoft

OPERATING SYSTEM

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Threat of New Entrant

Threat of new entrants to OS, Enterprise software industry and Gaming is low.

Capital requirements to enter the industry are very large Cost to design and develop enterprise software is extremely high Software development process is quite long and expensive due

to the reality of the software development lifecycle. Companies within the industry have already achieved economies

of scale, thereby reducing the potential profit for new entrant Considerable product differentiation within the industry. If new company had a differentiating software major companies

would takeover the new firm in order to acquire the technology for themselves.

Government policies

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Threat of New Entrant Cont……….

Threat of new entrants to Mobiles, Browsers and Peripherals is High.

Capital requirements to enter the industry are low Cost to design and develop low Many players exists in market and scope for new entrants is high

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Threat of Substitutes

There are few substitute products that compete with enterprise software.

The old way of maintaining and sharing company information was manual paper archival systems or printed reports from separate databases. The modern way of connecting all of a business information requires enterprise software.

A business could continue with building multiple disparate systems, however, they would never be able to achieve what an enterprise software business solution could provide. Therefore, enterprise software is more flexible, scalable, and less expensive than the older types of solutions.

The near absence of modern substitutes in the industry is a good sign for the companies within the industry.

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Bargaining Power of Suppliers: LOW

Within the industry, the bargaining power of suppliers is quite minimal. The main reason is because there are few suppliers with whom the companies must negotiate.

The fact that enterprise software applications are an intellectual and intangible product rather than a physical product minimizes the number of suppliers required.

The main type of supplier that an enterprise software company most likely has to deal with is one that physically records the media. Since the cost of physically transferring the software to media is minimal, the media producers and manufacturers have little effect on the industry as a whole.

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Bargaining Power of Buyers: LOW

The bargaining power of buyers within the enterprise software industry is fairly minimal for several reasons. First, the concentration of buyers is growing quickly; however, they are a very diverse and non-unified group, because they all have different backgrounds and needs.

Second, more companies are deciding that enterprise software is a necessity for their business. Therefore, they are often willing to pay the going rate.

Lastly, there are extremely high switching costs from one supplier to another, due to the high cost of the related infrastructure for these types of systems

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Financial Performance

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Revenue & Headcount Growth – 10 Years

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Future Strategy

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Managing Weakness

Migrate perceptions and re-brand - While Microsoft has successfully begun to alter its reputation among consumers, many IT purists and CIOs remain leery of Microsoft products because of their image as the evil empire.To manage this weakness and repair their tarnished image, Microsoft should re-brand as a company that serves to make business function easier and seamlessly, through enterprise software solutions.

Address security concerns - As technology becomes more seamless, and as devices outside of the PC are used more extensively, consumers are becoming more concerned about security, especially in the enterprise software area. Microsoft is poised to shape consumer preferences in this area, but to do so, will need to spend considerable revenues in researching and responding to security concerns.

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Investing in Growth

Innovating

Creating demand

Investing in competitors and

Going global

35 CSC Proprietary and Confidential