Strategic Analysis 1

Eshon Howard

Bus 336

Jenna Soard
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Introduction
It’s 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 company’s

stock price is stagnant (Cravens, 2006). The challenges Microsoft faces are direr than at any time

in the company’s history. Therefore, the information in this document will analyze Microsoft’s

past, present, and make suggestions for improving performance in the future.

Background

Microsoft is one of the world’s 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 Microsoft’s

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 company’s revenue

soared an average of 36% throughout the decade and Microsoft was one of the most widely held

stocks on the market (Cravens, 2006).

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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

Microsoft’s 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. Ballmer’s 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 Microsoft’s 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 Microsoft’s targeted projections. This departmental report should be

included in the overall strategic plans of the company. This document will also outline

Microsoft’s plans to increase the company’s exposure in the following areas:

• Search Engine Technology

• Security

• Telephone Communications

• Voice Recognition

• Filing Systems

• Digital Rights Management

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Organizational Mission Statement

Microsoft’s 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 today’s 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 Microsoft’s 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 Microsoft’s 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.

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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
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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 people’s 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™
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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 Microsoft’s product offerings are used by virtually every person or organization

that utilizes computer technology on a regular basis. However, Microsoft’s products are

generally marketed to small and medium sized companies and home businesses.

Demographics/Psychographics/Geographics

The majority of Microsoft’s consumer profile is males between the ages of 18-49

(www.quantcast.com, 2011). As many as 74% of Microsoft’s 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 company’s

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
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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 Microsoft’s 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 Microsoft’s 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, Microsoft’s personal sales force, and customer and partner incentives. Based

upon our analysis, we recommend the following applications:

Release the Longhorn Operating System—Microsoft 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

company’s 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
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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 tools—should 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 incentives—Microsoft 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 Microsoft’s

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

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• 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 Microsoft’s decline.

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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