Scribd
Upload
189 views5 pages

Case 19

Microsoft has diversified its business into three units to compete against increasing competition. It pursues an integrated low-cost differentiation strategy, developing unique products and services at low prices. This strategy addresses problems like imitation and piracy while meeting demand for affordable yet feature-rich products, especially in the mobile market. Microsoft also considers horizontal integration through acquisitions to minimize rivalry and innovation through combining companies' strengths.

Uploaded by

Princess
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
189 views5 pages

Case 19

Microsoft has diversified its business into three units to compete against increasing competition. It pursues an integrated low-cost differentiation strategy, developing unique products and services at low prices. This strategy addresses problems like imitation and piracy while meeting demand for affordable yet feature-rich products, especially in the mobile market. Microsoft also considers horizontal integration through acquisitions to minimize rivalry and innovation through combining companies' strengths.

Uploaded by

Princess
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

CASE STUDY IV: Microsoft’s Diversification Strategy

I. THE MICROSOFT CORPORATION


As the world’s biggest software company, Microsoft had a huge impact in the industry and has been
continually progressing to rival against their current and emerging competitors. Before Microsoft
achieved its current status, this Corporation had numerous downturn which gave way to its development.

In 1975, the successful Altair deal inspired Bill Gates and Paul Allen to form Microsoft in
Albuquerque, New Mexico. During the first year, they had a decent revenues and they had their big break
on 1980 when they partnered with IBM which resulted in Microsoft providing a crucial operating system,
DOS for the personal computers of IBM. The boom of Microsoft’s career continues and became the sole
keeper of the PC software standard.

Microsoft was the first software to reach one billion dollars in revenue as more version of their
windows were launched. Years later, Microsoft also entered the gaming and mobile phone market which
also captures large market share. Meanwhile on 2011, Microsoft acquired Skype which became the
company’s largest acquisition, and this action is done to compete against Apple and Google.

Since Microsoft's first acquisition in 1987, it has purchased an average of six companies a year
including LinkedIn, Nokia’s mobile and devices division, GitHub, ZeniMax media and others company
essential to Microsoft’s expansion and development and most importantly this acquisitions were made to
help Microsoft sustain its new developed programs that is intended to compete with other emerging
companies.

Despite Microsoft’s success, they also had their toughest economic downturn due to the burst of the
dot.com bubble where there is an excessive speculation of Internet-related companies and this is because
of growing importance and need to have a networked economy. Windows also had problems related to its
competitor’s developed programs that became popular which pushed Microsoft to develop programs that
can rival or even surpass those of the competitors to protect its position within the industry.

As part of Microsoft’s reinvention as an action against the increasing competition, they


reorganizes the company and applies the new diversification strategy which divides the company into
three business units including platform products and service, business division and entertainment and
devices. Because of this diversification strategy of Microsoft, there are different hindrances that arises
because the industry is threaten that Microsoft will monopolize different divisions; as an illustration, the
manufacturers prevents Microsoft in developing software for smartphones.
II. SWOT ANALYSIS

Strengths

o Microsoft’s strong alliance with other firms that gave way to numerous development of the
company
o Microsoft’s strong brand image which creates large market share
o Ability to compete simultaneously among three divisions
o Microsoft’s strong distribution channels for easy flow of company’s products and services
o Acquisition of well-known companies for development of new programs
o Labeled as world’s biggest software which creates high brand loyalty

Weaknesses

o Some product features are easy to be rivaled by competitors


o Susceptibility to cyber issues such as cybercrimes
o Product features that are imitable
o Slow innovation of products which are advantageous for competitors
o Very dependent on hardware manufacturers

Opportunities

o Possible growth and development through acquisition of different companies


o Gradual increase in demand for cloud based services which Microsoft also provides
o Possible innovation due to the diversification of business
o Wide arrays of products and services within the three divisions
o Availability of Microsoft’s products among mobile device industry
o Possibility of growth among mobile advertising which Microsoft is inclined

Threats

o Intense rivalry among companies offering software products


o Emerging competitors offering new popular programs
o Potential lawsuits often because of Microsoft’s threat to monopolize the industry
o Companies that offers free products to the market, i.e Linux
o Varying needs and desires of consumers
o Possibility of piracy on authentic products
III. PESTEL ANALYSIS
Political
o Difference in currency and taxation policies may affect the cost of business operations
o There are possible impairment of revenues on markets with weak protection of intellectual
properties
o Increasing international trade agreements
o Increasing governmental support for automation
o Stability of political aspects among major markets
Economic
o Economic stability among developed countries where Microsoft operates
o Complicated pricing strategy due to exchange rates fluctuation
o Effects of economic downturn of the company due to dot.com bubble
Social
o Entry to mobile device industry and cloud based services altered consumers’ perspective that
Microsoft as outdated and less innovative
o Stable attitudes of consumer towards leisure and demand for high quality customer service
paved way for Microsoft’s development
o Increase in cultural diversity which gave way to improve the company’s goods and services
Technological
o Automation of businesses and increasing demand of online transactions is an opportunity for
the company
o Increase demand in mobile device industry and cloud-based services
o Threat to strong rivalry among mobile device industry because of low-barrier to entry on this
industry
Environmental
o Increasing environmental concerns simultaneous to increase in demand for eco-friendly
products
o Concerns for increasing power consumption of data centers
Legal
o Legal disputes towards Microsoft’s possible monopoly on different divisions and patent
infringements
o Concerns about privacy related cloud-based services
o Energy consumption and electronic waste disposal regulations

IV. ALTERNATIVE SOLUTIONS

Business-Level Strategy

o Microsoft may use cost-leadership for their business level strategy because:
 This strategy will create larger market share for Microsoft by charging lower prices
as opposed to competitor’s higher market prices through cutting costs in producing
the products and services
 It will create opportunity to respond to the desire of price-conscious consumer by
cutting prices which can be achieved by outsourcing of company’s operations
o Microsoft may use differentiation for their business level strategy because:
 It is important for software products to be unique and not imitable to maintain its
status in the industry, Microsoft can achieve it through focusing on innovating the
features of its programs
 It will give edge to the Microsoft despite the strong rivalry because the consumers’
desires varies and this strategy will respond to this
 Piracy will also be prevented if products are differentiated because it would be costly
to imitate.
o Microsoft may use integrated low-cost differentiation because:
 They are capable of doing both the cost reduction and creating unique products which
can be the respond to the strong rivalry, problems for offering cheap prices such as
piracy, and imitation of goods
 It is very essential to mobile device industry where Microsoft is inclined because
these devices requires differentiated features but its users are mostly youth which
cannot afford expensive products

Corporate-Level Strategy

o Microsoft may use vertical integration because:


 Acquisition of supplier of raw materials such as microprocessors will help Microsoft
establish more control over its value chain
 Acquisition of distributors may minimize the company’s selling expenses and
distribution processes and costs can be controlled by Microsoft

o Microsoft may use horizontal integration because:


 Microsoft’s merger and acquisition of its competitors such as Yahoo, LinkedIn and
Nokia minimizes the increasing rivalry among the industry and creates good
integration that can lead to the creation of better product features and more efficient
services
 This strategy will help Microsoft build better position in the industry because it will
help the innovation of the programs and will give the power to the company
especially if known companies became affiliated to Microsoft
V. BEST ALTERNATIVE

Business-Level Strategy

The best alternative that I can recommend for the business level strategy of Microsoft is
the use of integrated low-cost differentiation strategy because it can create products and
services that is both cost-effective and unique which has high demand nowadays especially
because most consumers are teenagers which prefer a low-priced product but has great product
features. Moreover, this strategy also answers previously stated problems such as imitation,
piracy, patent infringements and affordability.

Corporate-Level Strategy

I suggest that Microsoft continue to use horizontal integration (diversification) because it


obviously benefits the company for a very long time and this strategy continuously benefit the
company until the present time. Diversification is a smart move of Microsoft because it
minimizes the competition and the integration helps the innovation of product features and
establishment of company’s position in the market.

You might also like