Table of Contents

1.1 Discuss how Microsoft can use Porter's five forces model for competitive strategic value. ........... 1
1.1.1 Introduction .............................................................................................................................. 1
1.1.2 Threats of New Entrants ........................................................................................................... 2
1.1.3 Bargaining Power of Suppliers .................................................................................................. 3
1.1.4 Bargaining Power of Buyers ...................................................................................................... 5
1.1.5 Threats of Substitute Products ................................................................................................. 6
1.1.6 Rivalry Among Current Competitors ......................................................................................... 8
1.1.7 Conclusion ............................................................................................................................... 10
1.2 Explain how marketing information systems can aid Microsoft in its business operations. .......... 11
1.2.1 Introduction ................................................................................................................................... 11
1.2.2 Marketing Information System ............................................................................................... 11
1.2.3 Components of Marketing Information System ............................................................................ 13
Internal Records .......................................................................................................................... 14
Marketing Intelligence ................................................................................................................ 14
Marketing Research .................................................................................................................... 16
Marketing Decision Support System ........................................................................................... 17
1.2.4 Conclusion ............................................................................................................................... 18
Bibliography ............................................................................................................................................ 19
1.1 Discuss how Microsoft can use Porter's five forces model for competitive
strategic value.

1.1.1 Introduction
An organisation is most concerned with the level of competition within the industry. Each
business has its own competitive strategy that determines its competitive advantage.
Developing an appropriate competitive strategy has become fundamental for every
business. Michael E. Porter has established the five forces model in 1979 that focuses
on five particular factors determining the intensity of competition in a market (Robbins
and Coulter, 2012). As illustrated in figure 1, the competitiveness of an industry depends
on the threats of new entrants which ultimately encapsulate the barriers of entry and exit,
bargaining power of suppliers, bargaining power of buyers, the threat of substitutes and
rivalry among current competitors. Porter’s five forces have served as a strategic
management tool to Microsoft Corporation in order to analyze its micro-external
environment and how each element of the five forces contributes to the intensity of
competition in the industry. Relative to the competitiveness of the industry, Michael Porter
proposed generic strategies which could help determine how Microsoft Corporation could
acquire a sustainable competitive advantage and long-term profitability in the whole
Technology sector.

Figure 1. Porter’s Five Forces

Entrants

Bargaining

Rivalry Among

Bargaining

Adapted from Robbins and Coulter (2012).

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1.1.2 Threats of New Entrants
New entrants to an industry bring new capabilities and ambition to acquire market share.
When new contestants enter the market offering similar products and services, the
competitive position of the existing players within the industry will be at risk. However, it
is not so easy for startups to enter an industry. One of the biggest challenges is
overcoming the barriers to entry (Boyce, 2021). Especially, when it comes to the
technology industry where established players such as Microsoft Corporation keep
defining the standards regularly, the window of outstanding profits for the startup
businesses is severely reduced and hence discourages new players in the market. Figure
2 below depicts several factors that new entrants need to overcome or achieve when
entering a market.

Figure 2. Threats of entrants.

Adapted from B2U (2016)

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Despite that, due to the liberalization of market access, new entrants can come up with
innovation, new ways of doing things and put pressure on Microsoft Corporation through
lower pricing strategy, reducing costs, and providing new value propositions to the
customers. However, technological transformations are evolving at a rapid pace. Creating
a competitive advantage through the innovation of new products and services not only
enables Microsoft Corporation to reach economies of scale, but it also attracts new
customers and provides reasons for existing customers to remain with Microsoft.
(Microsoft, 2020). Nevertheless, the tech industry requires heavy investment and
standards to keep on upgrading, which renders entry more difficult for various new
contestants. Similarly, leaving the industry might be difficult all of a sudden due to the
heavy investment stuck in the infrastructure of the tech industry. Hence, it makes the
industry the least competitive.

1.1.3 Bargaining Power of Suppliers

Businesses in the tech industry purchase their raw materials from different suppliers to
carry out their daily operations. One of the five competitive forces that affect the
profitability of a company is the bargaining power of suppliers (Martin, 2019). If suppliers
have strong bargaining power, they can charge higher prices, reduce quality, or threaten
to compete directly with the customer and thus, affect the profit margin of a company.
Factors that entice the suppliers to bargain are the size of suppliers and the availability of
substitute suppliers. The fewer there are, the more powerful they are (B2U, 2016). Table
2 below exemplifies the factors that coax suppliers to haggle.

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Figure 2. Bargaining power of suppliers.

Adapted from B2U (2016)

Microsoft Corporation has a large portfolio of products and services. The technology giant
deals in mobile and computer software, video game consoles, computer hardware and
related services. Microsoft software is an intangible product that is developed in-company
but the components that are used for hardware development are supplied by numerous
suppliers (Adamkasi, 2017). Microsoft has relationships with thousands of suppliers
around the globe, including hardware and packaging suppliers that manufacture their
devices and components (Microsoft, 2021). Therefore, the bargaining power of suppliers
against Microsoft is reduced due to the size and number of existing suppliers in the
market. Furthermore, Microsoft Corporation has designed the Microsoft Supplier Program
to uphold ongoing partnerships across all businesses to ensure continued success with
its suppliers (Microsoft, 2021). By building good relationships and an efficient supply
chain and with the suppliers make the bargaining power of the suppliers low.

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1.1.4 Bargaining Power of Buyers
The bargaining power of buyers is one of the competitive forces that affect the profit
margins of an industry. If buyers have strong bargaining power, they can pressure
organisations to lower prices, increase quality, or provide additional services (Martin,
2019). Consumers have strong bargaining power when they are fewer in number and
there are numerous sellers in the industry. Therefore, the consumers have the choice to
switch from one company to another. Nowadays, customers have become more informed
about the market price throughout various facilities such as the internet, advertisements
and so on. Prices and quality can easily be compared and information on different
products can be obtained easily. Nevertheless, buyers’ ability to impose on firms is low
when they are voluminous, when the purchased quantity is unsubstantial and when the
products are dissimilar compared to competitors’ products. Table 3 below illustrates some
factors that impact buyers’ power.

Figure 3. Bargaining power of buyers

Adapted from B2U (2016)

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Microsoft Corporation has made its products and services accessible to its customers
through various channels globally. In addition, Microsoft distributes software through
original equipment manufacturers (OEMs) that pre-install their software on computers,
smartphones, servers, tablets and other intelligent devices that are sold to the end
customers (Microsoft, 2013). Consequently, the number of Microsoft users has increased
enormously on a larger scale. Microsoft software users will not easily switch to the
competitors’ products despite their similarities due to the switching cost.

Microsoft users have familiarized themselves with the software and have made efficient
usage of the products and services in various ways. However, this is not the case for
hardware products. Due to the availability of various alternatives in the market, it is easier
for consumers to switch to other products and therefore make their bargaining power
stronger. Overall, the bargaining power of Microsoft customers is of a moderate level
(Adamkasi, 2017). Microsoft Corporation can advocate the continuity of innovating new
products. It will provide an opportunity for the firm to streamline its sales and production
process.

1.1.5 Threats of Substitute Products

A substitute product is in the form of an indirect competitor from another industry that
satisfies the consumers’ needs and wants similarly to the product produced by
organisations within the industry. For example, a customer can buy coffee instead of tea.
The threat that substitutes products represents to companies from a particular industry is
that consumers have the option to choose another product. It also affects the profitability
of the company if the price of the substitute product is relatively lower than its product
(Luenendonk, 2019). Therefore, the level of competition among existing organisations
diminishes when there are fewer substitutes for products in the market and vice-versa.
Hence, there will be more potential to earn higher profits in the case of the non-availability
of substitutes. Figure 4 below highlights the threats of substitute products.

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Figure 4. Threats of substitute products.

Adapted from B2U (2016)

Over the years, technology has revolutionized the world and has created amazing tools
and resources. Microsoft Corporation has paved the way for multi-functional devices and
has re-engineered itself in a multitude of ways to ensure that its products are part of
technology’s future. Products and services like Bing, Microsoft Office 365, Cloud
Computing, Personal Computers among various others, have facilitated various activities
in organisations and people's lives globally. For example, people can have much
information through Microsoft Bing in few seconds rather than flipping through various
books or encyclopedias. The global adoption of increasingly advanced technologies
reduces the availability of substitutes and further lowers the threat of substitute products
that Microsoft experiences (UKDiss, 2019).

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Substitutes, such as non-online or manual-mechanical processes, tend to have lower
performance compared to Microsoft’s current products. In relation, while moderate
switching costs help facilitate substitution, this external factor is not enough to significantly
strengthen substitutes. Based on this aspect of the Five Forces analysis, the threat of
substitute products is a minor issue in Microsoft Corporation’s industry environment.
However, Microsoft Corporation can increase the switching cost and consistently innovate
its products to maintain its competitive advantage.

1.1.6 Rivalry Among Current Competitors

This last force of Porter’s Five Forces analyzes the intensity of current competition within
the industry and how each firm exerts pressure on one another (Luenendonk, 2019).
Rivalry among competitors is likely to be most intense when there are many organisations
in a particular industry with a little or no product differentiation and when the industry is
characterized by slow growth, high fixed costs and high exit barriers (B2U, 2016). Rivalry
among competitors tends to increase in intensity when companies either feel competitive
pressure or see an opportunity to improve their position. The more intense the rivalry is,
the less favourable it is for organisations to achieve a high-profit margin and market share.
The rivalry may take the form of price wars, advertising attacks, the introduction of
competing products, and increased warranties or levels of service. Figure 5 below
delineates some factors that intensify the competition in the industry.

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Figure 5. Rivalry among current competitors.

Adapted from B2U (2016)

Microsoft Corporation competes with many well-known brands such as Apple, Cisco
Systems, Facebook, Google, IBM, Sony, Nintendo and Slack, and many web-based and
mobile application competitors in the global marketplace (Dudovskiy, 2019). Microsoft
needs to effectively compete to remain successful and to preserve its market share.
External factors such as moderate switching costs, high aggressiveness of firms and high
diversity of firms exert a strong force of competition against the organisation. Customers
have a moderate tendency to shift to competitors’ products because it might consume
much time to adapt to the changes. For example, Windows users might have some
difficulties adapting to IOS or other operating systems if they are not familiar with the
software. But, on the other hand, gamers might prefer Sony PlayStation rather than Xbox
if the games are much affordable than the other. In this aspect of the Five Forces analysis
of Microsoft, external factors support the strong force of competitive rivalry, which is a
priority issue that affects Microsoft’s competitive advantage. By making aggressive
marketing campaigns and innovation to new products on a wide variety of features,
Microsoft Corporation can compete sustainably, preserve its market share and increase
its profit margin.

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1.1.7 Conclusion
Porter’s five forces have served as a supportive and powerful tool that enables Microsoft
Corporation to analyze its micro-external environment in order to confront the setbacks
and competitive challenges in its industry. Throughout the five forces analysis, Microsoft
Corporation has been able to constitute its competitive advantages to compete
sustainably in the market and to achieve long-term profit margin and market share.

Page 10 of 23
1.2 Explain how marketing information systems can aid Microsoft in its business
operations.

1.2.1 Introduction
Effective marketing starts with a strong understanding of the customers that gives
marketers unique insights into the customers’ needs, desires and how to satisfy them
better than the competitors. The most reliable source of customer insights is good
marketing information that can be collected from both internal and external sources of the
organisation and is generated by a variety of different activities, including marketing
research. The vast amount of marketing information is managed by a marketing
information system (MIS), which is a computerized system that collects information
systematically, analyze, annotate, store and distribute the information from internal and
external sources to marketers and other end-users in a continuous basis (Business
Jargons, 2021).

1.2.2 Marketing Information System

The marketing information system (MIS) is a combination of people, technologies, and
processes for managing marketing information, overseeing market research activities,
and using customer insights to guide marketing decisions and broader management and
strategy decisions (Devault, 2020). The MIS has made the decision-making process more
effective in marketing and other departments of an organisation by making relevant and
accurate information accessible at the right time with just a few clicks. It may also provide
information to external partners, such as suppliers, resellers, or marketing services
agencies (Kotler, et al., 2017). The MIS can be used to keep the internal teams informed
and on task. It can also facilitate communication more efficiently and reliably with an
external market research company. Moreover, the MIS can facilitate future strategic
growth decisions since the data is stored within the system and is instantly accessible.

The MIS is a practical tool that facilitates important marketing operations like price, new
product development, packaging, distribution, promotion, and media at Microsoft and also
provides relevant information to its marketing and sales departments on a reliable basis,
allowing its teams to make strategic, profitable decisions.

Page 11 of 23
There are various types of data that markers use and there are many different approaches
to bring together a marketing information system. Ideally, a marketing information system
can be classified as presented in table 1 below.

Table 1. Required information in marketing information system

Type of information Composition

Sales reports, sales analyses and cost
Internal Information analyses related to sales.

size, structure, trends, opportunities,

External Information threats in the environment, competitors
and customers.
Combination of internal and external
Position Information information.

Mathematical and statistical treatment of

Decision Information data.

Subjective opinions, ascertained by

Forecast Information survey, or on a statistical analysis of
trends.

Page 12 of 23
1.2.3 Components of Marketing Information System
Marketing Information System collects, analyses, and supplies a lot of relevant
information to the marketing managers. It is a valuable tool for planning, implementing
and controlling marketing activities. The role of MIS is to identify what sort of information
is required by the marketing managers. It then collects and analyzes the information. It
supplies this information to the marketing manager at the right time (Weller, 2017). MIS
collects the information through its four major components as depicted in figure 6 below.

Figure 6. The four components of marketing information system.

Adapted from Weller (2017).

Page 13 of 23
 • Internal Records

Organisations build extensive internal databases, electronic collections of consumer and

market information obtained from data sources within the company’s network. Information
in an internal database can come from many sources (Kotler, et al., 2017). The marketing
department provides information on customer characteristics, sales activities, and
website traffics. The customer service department keeps records of customer satisfaction
or service problems. The accounting department provides detailed records of sales,
costs, and cash flows. Operations reports on production, shipments, and inventories. The
salesforce reports on reseller reactions and competitor activities, and marketing channel
partners provide data on point-of-sale transactions. Harnessing such information can
provide powerful customer insights and a competitive advantage.

Internal records can provide marketers at Microsoft Corporation with real-time data about
internal operations, including orders received, customer profiles, customer service,
inventory records and sales invoices. This helps ensure that sales and leads can be
traced back to the marketing effort that produced them, and positive and negative
feedback can be tracked to the source.

• Marketing Intelligence

Marketing intelligence involves the systematic collection and analysis of publicly available
information about consumers, competitors, and developments in the marketplace (Kotler,
et al., 2017). Marketing intelligence aims to enhance strategic decision-making by better
identifying the micro-external environment, evaluating and monitoring competitor
behaviors, and providing clear detection of opportunities and threats (Akrani, 2013).
Marketing intelligence provides valuable information such as the changing market trends,
competitor’s pricing strategy, change in the customer’s tastes and preferences, new
products launched in the market and promotion strategy of the competitors. Marketing
intelligence provides organisations with two essential insights as illustrated in figure 7
below.

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Figure 7. Marketing Intelligence.

Adapted from Chapple (2013).

Marketing intelligence has been beneficial to organisations by enabling them to monitor

the micro and macro-level strategies of the competitors and customer behavior within the
industry. Organisations tend to monitor every action of the competitors in the industry by
visiting their websites, blogs, stores, or social media. It also gives an outline of the
consumers' perception of the competitive brands, or services. In contrast, marketing
intelligence recognizes specific groups of consumers, including geographical and
demographic information, what they purchase, and any other factor data that can assist
think tanks during business intelligence research.

Page 15 of 23
Marketing intelligence can aid Microsoft Corporation in understanding the needs of its
customers and improves customer retention potential. Microsoft can also monitor the
actions of its competitors as well as identifying new opportunities in the market. By having
updated information from the micro-external environment, Microsoft can improve its
products according to the market trends if needed. Ultimately, good marketing intelligence
will allow Microsoft to gain a competitive edge.

• Marketing Research

Marketing Research is the systematic collection, organisation, analysis and interpretation

of primary or secondary data to find out the solutions to the marketing problems (Kotler,
et al., 2017). Several Companies conduct marketing research to analyze the marketing
environment comprising of changes in the customer’s tastes and preferences,
competitor’s strategies and the scope of a new product launch by applying several
statistical tools. For example, marketing research gives marketers insights into customer
motivations, purchase behaviour, and satisfaction. It can help them assess market
potential and market share or measure the effectiveness of pricing, product, distribution,
and promotion activities (Kotler, et al., 2017). In order to conduct the market research, the
data is to be collected that can be either primary data or secondary data such as books,
magazines, research reports, journals and other sources (Business Jargons, 2021). The
secondary data are publicly available, but the primary data is to be collected by the
researcher through certain methods such as questionnaires, personal interviews,
surveys, seminars and so on. Marketing research contributes a lot to the marketing
information system as it provides factual data that has been tested several times by the
researchers.

Microsoft Corporation can use marketing research to gain a better perspective and
understanding of its market and ensure that it stays ahead of the competition. Also,
Microsoft can analyze its threats and opportunities by using both primary and secondary
data in order to gain a competitive advantage. Marketing research can provide Microsoft
with valuable information to implement strategic planning and ways to focus on
consumers’ demands and needs.

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 • Marketing Decision Support System

A marketing decision support system is concerned with data collection and processing,
methods and procedures, as well as associated software and hardware, which a
company employs to gather and interpret necessary information from various sources
and use that information to make marketing decisions (Gilorkar, 2021). A marketing
decision support system can be developed to support a wide range of decision-making
issues and problems on a variety of levels. The main thrust of the marketing decision
support system is to support marketing decision-making in a strategic planning context,
which includes product design and planning, research and development, large-scope
forecasting, customer profile analysis, and so forth (Rao, 2020). In addition to supporting
strategic marketing decisions, a marketing decision support system can support
marketing decisions on the tactical and operational levels as well. Decisions regarding
basic pricing, perishable-asset revenue management, budgeting, sales forecasting, and
inventory control tend to fall into this category. Certain marketing decision support
systems can also help facilitate the environmental scanning process, where data from the
external environment is filtered, tailored, and interpreted into customized, meaningful
information, and then used in conjunction with managers’ experience and intuition to aid
decision-making. The marketing decision support system can also automate news
findings and assess the possible impact of that news on a firm’s strategy (Rao, 2020).

The marketing decision support system can help marketers at Microsoft Corporation in
identifying the important decision variables and, subsequently, making better decisions
based on those variables. With the aid of the marketing decision support system,
marketers can make strategic decisions to improving their product portfolio. Also, they
can plan their marketing budget and sales forecast based on the result after analyzing
data that has been collected by the marketing information system.

Page 17 of 23
1.2.4 Conclusion
The marketing information system is an important aspect in a growing business today
with increased competition and environmental changes affecting the consumer world.
Information gathered by the MIS can be used as a strategic weapon to counter the threats
to business, make business more competitive and bring about the organisational
transformation. The MIS provides support to managers as they work to achieve corporate
goals. Managers are able to compare results to established new objectives and identify
new opportunities for improvement.

Page 18 of 23
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