ASSESSEMENT3 Team Case Report on MICROSOFT’S STRATEGY MANAGEMENT.doc

assessement-3 team case report on microsofts strategy managementhaiyang dongass 3 s0199195page 8 of 16assessement-3team case report on microsofts strategy managementmgmt19114- strategic managementterm 3, 2010prepared and submitted byrajeshkumar, karuvampalayam ponnusamy- s0173226 (team leader)peng shi - s0102296faith, naeku -s0191291haiyang dong - s0199195tutor: rae, subramaniam.due date: 20 january 2011.date submitted: 20 january 2011executive summarythis report is been conducted to analyze the external and internal environment of microsoft in order to see whether this enterprises need to improve in some of its businesses. in order to achieve the above aim, this report had firstly discussed and analysed the external and internal environment of microsoft through the situation analysis (swot), industry and competition analysis in terms of both five force analysis and the key competitors analysis; besides, strategy formulation has been conducted in terms of the briefly look at the microsofts organizational, operational, hr, marketing, r&d strategies as well as the general financial performance. finally this report had analysed the microsofts macro-environments through the pest model. after the above analysis, there are two main findings of the report:in order to keep the sustainability of microsoft, this company need to split its office and internet services business from it and have them dependently competing in the markets;in order to ease the piracies problem in emerging countries, microsoft need to create flexibility in pricing of os software;the former activity can be accomplished throughout the whole year, from january of 2011 to november of 2011, whilst the latter activity can be accomplished in the first half year of 2011, in order to catch up with the summer hot sales in emerging countries. table of contentsexecutive summary2chapter 1: introduction4chapter 2: discussion and analysis to address52.1 situation analysis52.2 industry and competition analysis72.2.1 five forces analysis72.2.2 key competitors82.3 strategy formulation92.3.1 organizational strategy92.3.2 operational strategy92.3.3 human resources strategy92.3.4 marketing strategy102.3.5 research and development strategy102.3.6 general performance102.4 macro-environmental analysis10chapter 3: recommendations123.1 sustainable competitive advantage123.1.1 split of office and internet services from microsoft123.1.2 create flexibility in pricing of os software123.2 implementation and action plan13chapter 4: conclusion15references16chapter 1: introductionmicrosoft is the worlds leading company in personal computer software development and other relative areas, which was found by bill gates and paul allen in 1975. currently this company is headquartered in redmond of washington d.c., being the worlds largest computer software supplier (microsoft 2011a). this company contemporarily has approximately 64 thousand employees with the revenue of 62.48 billion usd and profits of 18.76 billion usd in 2010 (microsoft 2011b). microsoft had deployed diversification strategy with involvements of multiple industries compromising computer software, consumer electronics, digital distribution, computer hardware, video games, it consulting, online advertising, retail stores, and automotive software (microsoft 2011c). starting from the early 2000s, microsoft had been receiving a series of negative news through which this company was severely undermined its future development, and in 2005, the delaying of new version of windows operating system had even further guide peoples imagination that this software giant was in its strategic disarray. however, in late 2005, the issuing of new version of operating system together with the entering of new internet era, which was known as web 2.0, this company had started reinventing itself. since then, it started to enter the other industries under its brave diversification strategies and had developed its consumer electronics, digital distribution, and other products and services. however, people are doubting the reason why microsoft give up secure its first position in computer software industry but spend time and energy in other brand new industries for its managers, with bearing all following risks and disadvantages created.under the former question, this report will analyze the microsoft and its business environment and internal environment in brief, and through the information and analysis of which, the author would critical discuss about the microsofts competitive advantages as well as prospects for long-term success. therefore, recommendations would be made for microsofts long-term developmental directions and future strategies. chapter 2: discussion and analysis to addressin this chapter, the situation analysis, industry and competition analysis, strategy formulation as well as the macro-environmental analysis would be undertaken in order to support the further analysis of microsofts strategies on chapter 3.2.1 situation analysisthe situation analysis will be taken in by the model of swot analysis, under which the strengths, weaknesses, opportunities, and threats will be outlined and analysed. strengthsentrance of multiple businesses and all developing well. this can actually help microsoft disperse the overall risks in the company and make which have larger level of flexibility;microsoft has very large financial equities which can support its business operations in any of the kinds with the top rating from the fortune 500;microsoft has a relatively flexible workforce which are hired for seasonal of cyclical projects (microsoft 2011b);microsofts employees are famous for their hardworking attitude and loyalty, which can also reveal this companys outstanding corporate value and culture (microsoft 2011b);microsoft is operating internationally in approximately 100 countries, and with successful localization strategy the cultural differences can be minimized (microsoft 2011b);microsoft has been announced as the first place in rapid development of products with efficient processes in updating and new products developing (microsoft 2011b);microsofts software products as well as other type of products are having high name recognition and consumer acceptance, helping it wins strong reputation for being innovative company (microsoft 2011b).weaknessesbill gates had been quitting the company, which lost employees their spiritual leader and figure head (hitt et al. 2009);microsoft had strong dependence on the pre-install of microsoft operating systems on computer and hardware manufacturers (hitt et al. 2009);employees stresses are heavy with quick update and development of new products under deadlines with an increasing employee turnovers (hitt et al. 2009);sales of software industry as well as marketing share is downsizing (microsoft 2011b);reorganization too frequently with the increasing autocratic atmosphere (5-layers management) inside the corporation to make employees lacking creativities (hitt et al. 2009);most of products are not key players in the market with the investors disappointment (microsoft 2011b);meeting too much powerful competitors in each field of the products and using its dominant market position to destroy of steal competitions products whilst stifle product innovation (hitt et al. 2009).opportunitiesglobal trend of more people connected to internet with using of microsofts products including operating system and internet explorer, and etc. (chowdhury 2010);demand for personal computers in asian countries, american, and other places of the world is still having strongly increase with increasing popularity of portable devices as well (chowdhury 2010);new technologies emerged including streaming and cloud which are both relative with microsofts software (chowdhury 2010);growing needs for service-oriented architecture and web services (hitt et al. 2009);social networking on internet would be the development direction for msn community and mini-blog (croucher 2009)mobile phone application showing increasing trend and great potentials in future (croucher 2009).threatsapple being gradually stronger threat with both hardware and mac os software, starting threatening microsofts marketing dominant position (hitt et al. 2009);linux being the next generating star of desktop operating system with open source and successful promotional strategies (hitt et al. 2009);manufacturers including sun, ibm, and oracle start having pre-install software other than microsoft in hardware (croucher 2009);emerging computer, mobile, and other portable devices do not need microsoft operating system (croucher 2009);recent economic crisis slowed down manufacturing of personal computers which directly causing microsoft os software downsizing (croucher 2009);emerging countries piracies out of control and extremely damage microsofts sales (croucher 2009);hi-tech products life cycle is getting shorter which put heavier stress in innovation of company (croucher 2009).2.2 industry and competition analysisin the industry and competition analysis, the five forces analysis as well as key competitors would be analysed. 2.2.1 five forces analysisthreat of new entrants: the threats of new entrants in the markets that microsoft is operating in shall be low, as currently market share has been divided by several giant companies and entering boundaries both in terms of capitals and technologies are high, entering this market would be ended up with either be purchased by giant companies or closing down with lacking of market share, thus the threats of new entrants are low.supplier power: the supplier power might be very low as two factors, 1) there are too many suppliers for microsoft, according to statistics, microsoft would choose 100-200 suppliers through nearly twenty times of which, making suppliers power very low (falke 2009); 2) components manufactured and purchased from suppliers are sharing highly similarities, which makes supplier power very low.buyer power: the buyer power is relative high owing to two factors, 1) there are too many major players competing in the markets which microsoft is competing in, which make low price a successful attractiveness; 2) most of the microsofts products are having similar functions with competitors, which makes buyer power very high.threats of substitutes: the threats of substitutes would be relative high, as the technology advancement in the consumer electronic and software is really fast, time for developing of new products would be largely shortened, which give opportunities for the substitutes increase. industry rivalry: rivalry in all industries microsoft had entered are fierce and different competitors are adopting very different but effective strategies to attract customers, including apple and linux in terms of os, ibm in terms of hardware, oracle in terms of commercial software, sony in terms of game console, and google in terms of internet advertisements. besides, the high profitability of software industry is making rivalry forces even more powerful. 2.2.2 key competitors competitors generic competitive strategy: with the arriving of the era of web 2.0 as well as the gradual development in terms of information technology, telecommunications, as well as internet and other forms of media, competitors of the market are attracted by nearly the same markets, thus for many of the competitors of microsoft in different industries are also adopting the similar corporate strategy with microsoft on the basis of dominance in one market and then developing diversified products into different industries. the most typical competitors in terms of this are apple, ibm, and oracle, whose products have all covered more than three industries (chowdhury 2010). also there are some competitors trying to be dominant or keep dominant in the same market including linux, google, and nokia, also in those areas microsoft had encountered large pressures from those competitors (croucher 2009).key industry success factors: the general trend of the it, telecommunication, consumer electronics and media industries is to fast update and continuing development of innovation. besides, as mentioned above, the industries are mutually crossed together in terms of the core technologies; therefore, lots of competitors are also devoting themselves into various different industries with diversification strategy. thus the key industry success factors would be innovation and diversification, which are also the future trends of these industries (hassan and naka 2010). 2.3 strategy formulationthe strategy formulation of the microsoft would be undertaken through several aspects including organizational, operational, human resource, marketing, as well as research and development strategy, and the general performances. 2.3.1 organizational strategyas mentioned in the case study of hitt et al.s book (2009), microsoft has been undertaking the diversification as its organizational strategy, through which the focus of innovation is its core strategy (microsoft 2011b). moreover, according to microsofts annual report in 2010, there are altogether three guiding strategies for the 2011s development, which are 1) the commitment to cloud computing; 2) make product portfolio get stronger; 3) achieve better financial performance for shareholders. 2.3.2 operational strategymicrosoft is dedicating on serving various needs of its different customers all around the world and to increase the quality and usability of all products it had developed and is developing with innovative ideas in the global markets. besides, microsoft is also contributing on localization for all its products in terms of deploying local languages and deploying localized management (microsoft 2011b). moreover, microsoft had developed its operational centers in every corner of the world to support all forms of operations, and business areas are divided in europe, middle east, africa, japan, greater china, asia-pacific, and etc., all of them are supported by one or several regional center (microsoft 2011a). 2.3.3 human resources strategyalthough with relatively higher employees turnover rate, microsoft has been announced as having the worlds most comfortable and friendly working environment, through which employees could working in high efficiencies, flexibilities, and good relationships (microsoft 2011b). moreover, microsoft is dedicating in creating strong corporate values and cultures through which various people coming from different cultural backgrounds can work together with conflicts quick resolved and teamwork maintained harmonious. teamwork spirit and innovative are the two most valuable characteristics considered by microsoft human resource strategy (microsoft 2011d). 2.3.4 marketing strategyseveral marketing strategies have been applied in facing with highly rival markets:strategic alliance, as microsoft had signed both business and technical collaboration contract with novell and others in order to make the products technologies and marketing positions more enhanced and protected (microsoft 2011b). fatigue marketing strategy, combining all major media can be availably seen by customers, including most printed and visual advertisements together with internet advertisements to inform customers about their existence and their updates of products (havrylyshyn and wolf 2009). segmentation, in new entered markets such as enterprise-wide computing solutions, microsoft had segment the market with many small segments and enter one of the segmented markets with focus strategy (havrylyshyn and wolf 2009).offer combined services with discounts to corporate customers (havrylyshyn and wolf 2009).2.3.5 research and development strategyresearch and development expenses had been spent for 8.2 billion, 9.0 billion, and 8.7 billion in the recent three years (2008-2010) which all contained 14-15% of the company revenue (microsoft 2011b). microsoft is currently planning on investing continuously on wide range of product fields. besides, purchase technologies are also one of the r&d strategies of microsoft, through which it could gain localization of certain area of products (hwahsin and glascock 2010). 2.3.6 general performancethe key financial performance data can be illustrated as following (microsoft 2011b):revenue 2010: $62,484 million, with 6.93% growth compared to 2009;net income 2010: $18,760 million, with 28.77% growth compared to 2009;earnings per share 2010: $2.1, with 29.53% growth compared to 2009;total equity in 2010: $46,175 million, with 16.73% growth compared to 2009;stock price in fiscal year 2010: $22.00 $ macro-environmental analysismacro-environmental analysis will be conducted through the pest model, through which the political, economic, socio-cultural, and technological trends will be analysed.political (microsoft 2011b)antitrust legislation regulates microsofts development in software industry;anti dumping policies in emerging countries making microsofts over-seas sales affected.economic (microsoft 2011b)recent economic crisis slowed down manufacturing of personal computers which directly causing microsoft os software downsizing (croucher 2009);emerging countries piracies out of control and extremely damage microsofts sales (croucher 2009).socio-culturalglobal trend of more people connected to internet with using of microsofts products including operating system and internet explorer, and etc. (chowdhury 2010);demand for personal computers in asian co