Industry:

Software & device industry is dynamic and highly competitive, with frequent changes in both
technologies and business models. Each industry shift is an opportunity to conceive new products,
new technologies, or new ideas that can further transform the industry and our business.
Success of gaming and entertainment consoles is determined by the availability of games for the
console, providing exclusive game content that gamers seek, the computational power and reliability
of the console, and the ability to create new experiences via online services, downloadable content,
and peripherals.
Microsoft specializes in Business Software & Services (total market is worth $15153bn) & Microsoft

has $407bn share in total, which is quite significant.

Significant expenses are related to compensating employees, designing, manufacturing,
marketing, and selling our products and services, data-centre costs in support of cloudbased services, and income taxes.

Strategic Group & Positioning:

Microsoft specializes in many type of products for consumers as well as for businesses. Microsoft
over the years created a very successful coherent network & integrating people, partnerships,
businesses, etc making everyone Microsoft technologies
It faces challenges from old as well as new firms in software market. It OS system is quite static in
market share or might be increasing where as in case of MS office they are constantly trying to go
ahead & capture market. Recently patterned with Dropbox for online editing of documents.
They cut services to old Window XP to reduce cost means they are really moving fast in removing no
profitable sectors from company.
Recently they removed Nokia tag from acquired company Nokia & changed it to Microsoft Lumia
devices, it shows company is ready to play in world of smartphone with help of strong device
manufacturer and its own software system. Selling most devices in low price segment might increase
their share in smartphones.
Competitors Analysis:. Microsoft's primary competitors, Apple and IBM, both have competing
operating systems with a great deal of marketing to accompany them; however, both suffer from
weaknesses that Microsoft has been able to exploit. Apple's operating system for its Macintosh line of
computers, while superior in many ways to DOS and Windows, is limited to the Macintosh personal
computers; therefore, it doesn't run many of the popular business applications that are readily
available to DOS and Windows. To an extent, IBM's OS/2 operating system suffers from the same
problem.

Competitive Position & Strategy: Competition is on the basis of product quality and variety,

unique capabilities of our products, timing of product releases, and effectiveness of

distribution and marketing.
Microsoft has successfully standardized the industry to rely the industry on Microsoft
platforms. This makes no close substitutes.
Microsoft depends on Offices dominance. It is dominant 95% market share in the
productivity suite market.
Windows competes effectively by giving customers choice, value, flexibility, security, an
easy-to-use interface, compatibility with a broad range of hardware and software

applications, including those that enable productivity, and the largest support network for any
operating system. Microsoft entered in phone manufacturing by acquiring Nokia.
Xbox Platform is effectively positioned against competitive products and services based on
significant innovation in hardware architecture, user interface, developer tools, online gaming
and entertainment services, and continued strong exclusive content from our own game
franchises as well as other digital content offerings.
Microsoft products compete effectively based on our strategy of providing powerful, flexible,
secure, and easy to use solutions that work across a variety of devices.
Windows Phone competes based on differentiated user interface, personalized applications,
compatibility with Windows PCs and tablets, and other unique capabilities. Windows phone
OS developing and it may provide substantial revenue in future
Lumia phones will compete by being tailored for virtually every demographic and geography
worldwide, offering unique industrial design and imaging technologies at high and low
ranges of price points, and by incorporating Microsofts digital work and digital life
experiences.
Search and display advertising includes Bing, Bing Ads, MSN, Windows Services, and Xbox
ads. Microsoft is the exclusive algorithmic and paid search platform for Yahoo! websites
worldwide. Office 365 Consumer is designed to increase personal productivity through a
range of Microsoft Office programs and services delivered across multiple platforms via the
cloud.
Studios designs and markets games for Xbox consoles, Windows-enabled devices, and
online. Growth depends on our ability to attract new users and increase engagement by
developing a deep library of content which consumers seek.
Environment Analysis: Piracy is main concern as more than 80% business use pirate software in

China. So for Microsoft can not expect revenue from China.

Political Factors: China is not doing enough to control piracy of software. More than 80% of

businesses in China have piracy problem & Microsoft cant expect revenue from China.
Microsoft is subject to variety of lawsuits & claims.

A significant fluctuations in exchange rates between the U.S. dollar and foreign
currencies may adversely affect revenue.
Economical Factors: Worsening economic conditions, including inflation, recession, or other

changes in economic conditions adversely affect our revenue. If demand for PCs, servers,
and other computing devices declines, or consumer or business spending for those products
declines, revenue will be adversely affected. Substantial revenue comes from our U.S.
government contracts. An extended federal government shutdown resulting from failing to
pass budget appropriations, adopt continuing funding resolutions or raise the debt ceiling,
and other budgetary decisions limiting or delaying federal government spending, could
reduce government IT spending on the products and services.

Product distribution system relies on an extensive partner and retail network. OEMs building
devices that run software have also been a significant means of distribution. The impact of
economic conditions on our partners, such as the bankruptcy of a major distributor, OEM, or
retailer, could cause sales channel disruption.
Challenging economic conditions also may impair the ability of customers to pay for products
and services they have purchased. As a result, allowances for doubtful accounts and writeoffs of accounts receivable may increase.
Social Factors: By acquiring Skype and launching Outlook Microsoft will eventually do better

than earlier in social areas. CEO stand against women in pay might not turn out be good for
firm as they depend mostly on retaining best talents. Firm reach to differently abled person is
good and it also trying to expand in adultery needs for aging population.
Disclosure of personal data could cause liability and harm reputation.
Technological Factors: It mainly depends on technological advancements of its products in
comparison with its rivals. It require protection against viruses on OS. Bing require to more data.
Windows phone need to be offered from different phone makers as well and fast advancement in
windows phone OS.

Five Forces Analysis

Threat of Entry: Low

Barriers to entry in software businesses are low and software products can be distributed broadly
and quickly at relatively low cost .Open source OS are no threat for Microsoft because they are niche
to tech OS and highly complicated for normal consumers. A firm that is trying to create a new OS
would not only have to overcome the financial costs and necessary time, but also the lack of
knowledge/experience and the fight to pull users from their existing OS of choice.
New entrants in gaming console & steaming devices are Google & Amazon who have very low
market shares.
Free productivity suites like Google Docs and Open Office are providing an alternative to users who
dont need the full power of the Microsoft Office suite.
But the likelihood of this is low since the Office suite is far ahead of the competition in terms of
capabilities and has a sticky user base as users are reluctant to shift to new platforms. New company
like Quip might pose serious threat in long run as major social networking sides are using Quip. To
compete they have freed office on iOS recently.

Threat of Rivalry: Low

The threat of rivalry is relatively low for Microsoft. There is only software differentiation and
Microsoft is ahead in terms numbers of users because simplicity to use it.
In personal computers it is the strongest player covering up to 90% is OS users. Only one
main competitor with any real market share, Apple and the Max OS X. Both Microsoft and
Apple have created their OS over the years with passionate consumersThe gaming division
of Microsoft is under a high threat of rivalry from Nintendo and Sony. Of total 63% of the
market remains the domain of video game consoles. Console gaming has another 5-10
years left in its current form & first-mover in this is risky strategy. Xbox continues its long
history of losing money as much as $2 billion per year. Early 2014 results show that Xbox
One is selling at only half the rate of Sonys Playstation 4, with cumulative Xbox One sales
at under 70% of PS4, leading Xbox One a total failure.
Surface tablet was initially hit with negative reviews, Surface Pro 2 gained some traction
amongst users. However, as the competitive tablet industry has already established
products such as the Apple's iPad and Google's Android tablets, Windows tablets faces
strong headwinds as it tries to increase market penetration.
Windows Phone faces competition primarily from Apple, Google, and Blackberry. Skype
competes primarily with Apple and Google, which offer a selection of instant messaging,
voice, and video communication products. Web-based offerings competing with individual
applications can also position themselves as alternatives to Microsoft products.
Threat of Substitutes: Low
Threat is low in OS market as costly Apple devices. Linux poses little threat where consumers are
highly technical. There is greater threat in gaming console as it is continuously evolving and Sony is
selling at cheap.
Threat of Powerful Suppliers: Low
Microsoft gets device components from sole suppliers. Its competitors use some of the same
suppliers and their demand for hardware components can affect the capacity available. If a
component from a sole-source supplier is delayed or becomes unavailable, whether
because of supplier capacity constraint or industry shortages, we may not obtain timely
replacement supplies, resulting in reduced sales. Component shortages, excess or obsolete
inventory, or price reductions resulting in inventory adjustments may increase our cost of
revenue. Xbox consoles, Surface devices, and Lumia phones are assembled in Asia and
other geographies that may be subject to disruptions in the supply chain, resulting in
shortages that would affect our revenue and operating margins. These same risks would
apply to any other vertically-integrated hardware and software products we may offer.
Given the size and brand recognition that Microsoft has and the number of other suppliers
available, many suppliers know they would have to offer a good price in order to work with
them. None of the items supplied are necessarily unique, and the very few times that a
supplier has tried to enter a videogame market through forward vertical integration, it has not
gone very well.

Threat of Powerful Buyers: Low

For existing customers, it makes hard to switch.

Microsoft has had deals with almost every major PC company (buyers in this instance) to include a
copy of the latest Windows version as part of the cost of a pre-built PC. This has become expected
from people buying non-Apple computers and if a buyer was to decide not to include this, it would
probably lead to negative repercussions. There is room for tablets and some netbooks to run
versions of iOS or Android OSs, but when some laptop manufacturers tried to switch from Windows
being preinstalled to Linux, it did not fare well. The cost of having Windows included is also not a
large amount of the cost of the computer, so it does not carry that much weight for the company
building the machine. These attributes lead to a low threat from buyers.
From a game console standpoint, the threat from buyers is low as well. The console gaming market
is a multi-billion dollar industry and there are a large number of retailers who stock Xbox 360s.
There is enough of an economic profit from consoles and associated merchandise to validate whole
stores dedicated to just selling these items. The possibility of a retailer attempting to develop and
distribute their own console is incredibly unlikely due to the cost and barriers.
The bargaining power of buyers within the enterprise software industry is fairly minimal for several
reasons. First, the concentration of buyers is growing quickly; however, they are a very diverse and
non-unified group, because they all have different backgrounds and needs. Second, more companies
are deciding that enterprise software is a necessity for their business. Therefore, they are often
willing to pay the going rate. Lastly, there are extremely high switching costs from one supplier to
another, due to the high cost of the related infrastructure for these types of systems.
Recommendations: Microsoft need o competitive in gaming console market. Compete with PS4 in
pricing also. Improvements in graphics is very much needed to compete with PS4.
Microsoft did not launch any new item of its own kind in last decade except Surface which was
mostly failure too. So it should also concentrate on R&D rather than acquiring businesses & ending
competitions.
In Windows phone a lot of research need to be done. They are not costly but not user friendly too.
For office more things need to be done in terms of strategic like acquiring new rising firms or
capturing left market before entrants capture it.
Bing require lot of improvement as it is mainly US focused and cant compete with Google search as
Google is more brand in search engine and internationally useful.