Strategic Analysis Eshon Howard Bus 336 Jenna Soard

Strategic Analysis

Introduction Its the new millennium and Microsoft is no longer the most relevant force in the software industry. The company has not been expanding into new markets and the companys stock price is stagnant (Cravens, 2006). The challenges Microsoft faces are direr than at any time in the companys history. Therefore, the information in this document will analyze Microsofts past, present, and make suggestions for improving performance in the future. Background Microsoft is one of the worlds most identifiable companies and brands. Microsoft is a behemoth is the computer software industry. The company offers a diverse array of products ranging from software, middleware, and even video gaming consoles. With an operating system market share of over 90%, Microsoft is the most dominant brand in the computer technology industry (N.A., 20011). Company History In the early 1970s, the computer industry was geared more toward the hardware component of computing. During this era PC software did not exist. It was then that Microsofts founders William Gates and Paul Allen embarked on a mission to make software the dominant force behind the software industry. By the 1990s, not only did software become the driving force behind the industry but, Microsoft became the world leader of the software industry. Eventually Microsoft grew to be valued at over $7 billion with a gross income of over $1 billion a month. By 1999 Microsoft boasted a workforce of more than 31,000 employees. The companys revenue soared an average of 36% throughout the decade and Microsoft was one of the most widely held stocks on the market (Cravens, 2006).

Strategic Analysis

In the 2000s the growth of Microsoft slowed down considerably to the point of the company only reporting single digit growth (Cravens, 2006). A portion of the blame for the decrease in growth was the onslaught of antitrust litigation brought forth by the United States Government. These lawsuits resulted in sanctions being placed on a key component of Microsofts strategic marketing initiatives: its bundling practices. To combat this decline, Microsoft appointed long-time employee Steve Ballmer to take over as Chief Executive Officer of the company, and gave him respective duties as business manager. Ballmers qualifications for the position were astronomical. He had held management positions in virtually every Microsoft subdivision including, operating systems development, operations, and sales support. Purpose of the Marketing Plan The objective of this document is to analyze the current state of Microsofts business activities. We will analyze the current marketing strategies to reveal inefficiencies and to weed out counterproductive methods in our management activities. The information in this essay can be utilized to fulfill Microsofts targeted projections. This departmental report should be included in the overall strategic plans of the company. This document will also outline Microsofts plans to increase the companys exposure in the following areas: Search Engine Technology Security Telephone Communications Voice Recognition Filing Systems Digital Rights Management

Strategic Analysis Organizational Mission Statement

Microsofts mission is to enable people and businesses throughout the world to realize their full potential. The company mission statement is a promise to its customers to create technology that is accessible to everyone. Microsoft leads the industry in accessibility and in building products that are easier to use. Microsoft takes a strategic approach by focusing on integrating accessibility into product planning, research and development, and testing. Situational Analysis In todays computer industry, Microsoft has not been as dominant a factor as it once was. The massive size of the organization has created bureaucracy issues for the company. In addition to that, Microsoft is now faxing stiff competition from Linux, and open-source operating system with the potential to gain market share in Microsofts core business. Now past marketing stratagems and techniques that were successful for Microsoft in the past; such as leveraging Window to gain new customers, are being sanctioned by governments all over the world (Dougherty, 2010). Current Products Windows Microsoft licenses to a variety of proprietary desktop and server software manufacturers. From Microsofts very beginning, they have taken other people's ideas and repackaged them as their own, either by copying or acquiring. What we don't see is anything truly innovative. The influence of Microsoft on society, and more generally the increase in commercialization, is responsible for the lack of any genuine innovation in later years. While competition in computer hardware drives devices faster, smaller, and cheaper the lack of comparable competition in software makes programs seem slower, and expensive.

Strategic Analysis Office

The Microsoft Office suite of software applications is the most widely used in the category of office productivity. This and Microsoft Windows are Microsoft's only sources of profit and market dominance. The typical ("standard") Microsoft Office installation consists of Word, Excel, and PowerPoint on the desktop. The other more shared programs were added many years after the initial desktop programs to add value and provide a more complete system. They also gave users a reason to upgrade the desktop applications which otherwise have not changed much. The Office 2003 editions consist of the following applications:

Access - Databases Excel - Spreadsheets Outlook - E-mail, contacts, calendar PowerPoint Slide Presentations Publisher - Marketing materials Word - Word processing

Gaming Microsoft wanted to improve its market share by releasing a gaming console. The Xbox 360 represents a leap ahead in high-definition video gaming and entertainment. By combining powerful hardware, software, and other services, the Xbox 360 fully engulfs users in a gaming experience that is more unrestrained, spectacular, and realistic; where the possibilities are limitless and your imagination knows no limitations. Microsoft hopes to gain a competitive advantage by attracting a key segment of the gaming market (Economist, 2009). Internet

Strategic Analysis

Microsoft Internet Explorer is the free internet browser included in every version of Microsoft Windows operating system. Being included in the majority of personal computers when they're sold, most peoples first browser is Internet Explorer. Beyond mere inclusion with Microsoft Windows, Internet Explorer is integrated into the operating system. Pricing Strategy Traditionally, Microsoft uses its financial leverage to sell Windows at lower prices to establish market share (Cravens, 2006). However, this strategy is a known predatory practice and is solely the reason behind the aforementioned antitrust proceedings and governmental opposition in key emerging markets. Corporations desiring Microsoft software will typically purchase a license. These licenses are the beginning of software-as-a-service purchasing. It's designed to create a more steady revenue stream. Customers are spending from 33% to over 100% more for Microsoft software compared to before licensing began (N.A., 2011). Licensing also includes an option to allow customers to purchase future upgrades in advance to avoid paying full price for new versions later. Distribution Windows is distributed individually or included with a PC purchase. The software can be purchased online, at brick and mortar locations, used for free at universities, or you can receive it from a Microsoft donation. Microsoft has also relied on bundling as a distribution method but, the practice is illegal in most countries. Promotion Microsoft promotes Windows software through a variety of different mediums including television, radio, print ads, and online digital media. With each new release of an application, Microsoft usually promotes features of stability and security, especially in their Windows

Strategic Analysis

product line. These are of key concern to most businesses. In promoting their product stability, Microsoft is countering two other product groups: competitors and previous versions of their own products. Microsoft is continually criticized for having relatively insecure, unstable products. Therefore with each new release they must advertise increased stability and security against their own older products. Current Target Markets One of Microsofts product offerings are used by virtually every person or organization that utilizes computer technology on a regular basis. However, Microsofts products are generally marketed to small and medium sized companies and home businesses. Demographics/Psychographics/Geographics The majority of Microsofts consumer profile is males between the ages of 18-49 (www.quantcast.com, 2011). As many as 74% of Microsofts core consumers are Caucasian with 0-2 children in the household. The targeted demographic tends to be more affluent with as many as 56% earning $60k or more (www.quantcast.com, 2011). Strikingly, 46% of the companys consumers have no college education. (). Microsoft has consumers all over the world but, the majority of them reside in the United States with 19.3%, and secondly in China with 9.4% (www.quantcast.com, 2011). Current Competitors Linux Linus Torvalds started Linux by creating his own Unix-like program in 1991. Linux permitted both free and commercial delivery of the open source operating system. Linux has become accepted on servers, but it has only a small presence in personal computing. The Linux strategy is to make operating systems free of charge, open, and changeable. Developers are free to adjust

Strategic Analysis

their operating systems to best meet their needs. All distributions share the Linux name, and are free open source operating systems. Currently, Linux is challenging Microsofts core business as no other competitor ever has (Cravens, 2006). Google Google offers productivity software called applications that are designed to mimic the functions of Microsofts Office Suite (Brooks, 2009). These applications, though not as familiar, give users the functions of word processing, spreadsheets, and database management. The popularity of Google combined with these free applications can allow Google to have an entry point into the world of office software. Recommendations These recommendations were designed to compensate for the lack of new product releases on which to hang compelling marketing campaigns. The goals was to identify strategic issues facing Microsoft and construct an outline for addressing it through broad advertising, sales tools for partners, Microsofts personal sales force, and customer and partner incentives. Based upon our analysis, we recommend the following applications: Release the Longhorn Operating SystemMicrosoft should ensure that there are no further delays with the release of the Longhorn operating system. By evaluating the current security issues with the project, Microsoft should make certain that these concerns are thoroughly examined so that this attribute can be combined with the new marketing platform. Implementing a broad advertising campaign aimed at the target market to raise its responsiveness of detailed problems, such as the operational complexities that limit the companys ability to react to new opportunities. This campaign would generate sales leads as customers order marketing CDs or visit designated Microsoft websites to learn about solutions to

Strategic Analysis

these issues. Microsoft should also produce marketing collateral, such as brochures, case studies, direct mail, and e-mail campaigns that partners can customize with their own company logos and information. Targeted marketing toolsshould be designed for customers who have articulated an interest in information about Microsoft solutions. They should include measurement tools, such as return of investment calculators, operational effectiveness evaluations, and security worksheets, which help customers calculate the prospective gains from using Microsoft solutions. We also recommend hosting seminars, either sponsored by Microsoft or its partners. Microsoft experts can also distribute case studies that illustrate how companies solved comparable issues by using Microsoft solutions. Promotions and incentivesMicrosoft should offer special incentives to both household and business customers, such as special software upgrading opportunities or partner rebates when they sell certain products. At a variety of stages within the process, customers will also be exposed to additional Microsoft products. A customer, who expresses interest in Microsofts products, should be presented with complimentary products. Measurement Microsoft should design and implement specific criteria in order to accurately measure the success of the marketing strategies. These measurements will allow Microsoft to make timely adjustments and respond to unforeseen events. The follow areas are what need to be considered:

Increases in sales of particular products Gains in market share

Strategic Analysis 10

The number of recruited partners involved in the campaign

Conclusion The redirection back to complete dominance of the software industry will be a difficult battle. However, if Microsoft utilizes the information presented in this document, the company should be in a better position to achieve its long-term goals. If the different divisions of Microsoft continue to focus on achieving goals as a cohesive unit, the feedback should demonstrate the reversal of Microsofts decline.

Strategic Analysis 11 References

Brooks, J. (2009). Microsoft takes aim at Google Apps. eWeek, 26(17), 16-21. Retrieved from EBSCOhost.

Core

Microsoft

Office

System

Products

Are

Complete,

Released

to

Manufacturers. (19 August). PR Newswire,1. Retrieved February 7, 2011, from ProQuest Newsstand. (Document ID: 386128421). Cravens, D. W., & Piercy, N. F. (2006). Strategic management. New York: The McGraw-Hill Companies, Inc. Dougherty, W. C., & Schadt, A. (2010). MANAGING TECHNOLOGY: Linux Is for Everyone; Librarians Included!. Journal of Academic Librarianship, 36(2), 173-175. Retrieved from EBSCOhost. Microsoft Office System Launches With Record Number of Programs, Servers and Services to Boost Information Worker Productivity. (21 October). PR Newswire,1. Retrieved February 7, 2011, from ProQuest Newsstand. (Document ID: 426306041). N.A. (January, 2011). Quantcast [Retrieved] February 4, 2011 [from] http://www.quantcast.com/ Web-wide war. (2009). Economist, 393(8659), 70. Retrieved from EBSCOhost