Chapter Closing Case

Course Name: Strategic Management

Course Code: MGT 4356

Submitted To
Yeasmin Islam
Lecturer
School of Business & Economics

United International University

Submitted By
Name: Mohammad Aslam
Id No: 111 123 015
Section: B
Class Serial: 10
Trimester: Fall 2016

United International University

Date of Submission: November 20, 2016

CASE 01
Planning for Rise of Cloud Computing at
Microsoft

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1. If Microsoft does not build a cloud computing business what might happen to the
company over the next decade? Why did the company decide that it had little
choice but to invest in cloud computing?
Clouding computer is an emerging market that is posed for rapid growth in the years ahead.
Microsoft hopes that through proactive strategic planning, it has positioned the company to do
well in this new environment. The cloud is available at much cheaper rates and can
significantly lower the companys IT expenses. Microsoft decided they had little choice but to
invest in cloud. Cloud computing emerged as a new computing paradigm which was not
available a Microsoft at the beginning. There would be no. of significant effect if Microsoft
does not build a cloud computing business. Cloud computing was a latest application that
many of the company has adopted already and Microsoft would go out of trend if cloud was
not build, as a result Microsoft might lose its existing customer loyalty as some customers likes
to follow trend.
Secondly, apart from trend the software Microsoft had windows and office needs to be resided
on individuals own machine but through cloud an individual using a laptop that is running on
a non-windows operating system such as Apples OS X, Googles Android or Linux could
conceivably run applications hosted on server farms through their web browser. This means
using cloud provide service of ease and mobility that might lead them to lose this group of
customer as well. Microsoft would also need to bear the high cost of running windows and
office these need to purchase own servers and maintain them which increases cost and
mentioned in the case that cloud computing enables to reduce cost which on the other hand can
be passed to customers in the form of lower prices that Microsoft might not be able avail due
to absence of cloud which means the high cost would tend to raise their cost which might
reduce their profit significantly over the next decade.
2. The case talks about Microsofts strengths, which might help it to build a cloud
computing business. It does not talk about weaknesses. Can you think of any
weaknesses that the company might have?
In every organization have lots of benefits & weakness. The weaknesses of the Microsoft
Company are: Microsoft saw the rise of the cloud computing as both a threat their existing
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business and an opportunity to grow a new business. The company realized that it had a several
weakness of the company. Few of Microsofts acquisitions were successful and brought not
just revenues and products but new skills and competencies to the company. Microsoft is a
giant software corporation but it does not produce its own hardware and depends on computer
hardware manufacturers to develop products that run Windows OS. Only recently has
Microsoft entered the mobile technology sector and still heavily depends on its OS and
software sales for standalone and laptop computers.
3. How does the business model for cloud computing differs from the traditional
business model used by companies such as Microsoft? What are the implications of
this new business model for Microsofts future financial performance?
Cloud Computing differs from a traditional utility because competing providers, despite
offering common types of service, provide their version of these services in quite distinct ways.
However, they are not interchangeable, in that users cannot easily swap one providers service
with the same service type offered by another. In short, Cloud Computing services are not
substitutable commodities competing on the basis of price. Consumers and small businesses
are usually more price conscious and may be less concerned about performance guarantees.
New business model is a pay-as-you-go structure, which is appreciated by the consumers rather
than the traditional business model.
Large enterprises and government users that invest millions of dollars in their IT systems need
to balance cost considerations against a wide range of factors including reliability, security and
performance. Many enterprise and government organizations are subject to regulations
surrounding the handling of information, creating specific legal obligations. Integrating Cloud
services with existing IT infrastructure and datacenters is also a major issue, since new Cloud
services are usually extensions of existing business systems. Despite the challenges in meeting
this myriad of requirements, the substantial IT budgets of large enterprises represent perhaps
the largest new market for Cloud service providers.

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4. To develop its cloud computing business, Microsoft implemented a self-contained

unit within its organization dedicated to that task. Why do you think that it did
this?
As cloud computing is both threat to the existing business and opportunity for grow new
business, Microsoft decided to make investments in cloud computing. Microsoft has several
internal strengths, so Microsoft implemented a self-contained unit within its organization for
cloud computing business. Microsoft already had built server that is used to run its search, XBox live and hotmail business. So Microsoft does not need to build a whole new server. The
existing server would help to run cloud computing. The existing users of Microsoft
applications would likely to use those applications on cloud. So the exiting user would remain
with the company. So it is a great advantage for Microsoft. Along with the existing users there
will be potential users of Microsoft cloud computing Microsoft had very knowledgeable
employees. So Microsoft could use them to write applications for cloud computing. Microsoft
does not need extra employees for cloud computing.
5. Cloud computing is still in its infancy. If business history teaches us anything, it is
that events often do not turn out the way that planners thought they would. Given
this, might it have been better for Microsoft does adopt a Wait and see attitude?
What would have been the benefits of delaying investments? What would have
been the costs?
Cloud computing is in a period of strong growth, but the technology is still in its infancy and
will take a few more years to be matured , "Cloud technology is ideal for the current economic
climate, but it is vital that businesses understand how it can best serve their organization.
By choosing Microsofts cloud computing platform, customers will have cost-effective and
easily used tools to their IT pain points. The Windows-based infrastructure of Microsofts
cloud computing solution is familiar, which lowers barriers in the evolution to cloud
computing through lower training and staffing costs. By presenting a comprehensive picture of
global information technology, the cloud started gaining attention by spending 5% of the $ 1.5
trillion in the global information sector. Later Microsoft has taken a proactive strategic
planning, that helps the company to place a strong position in the new business environment.
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Microsoft realized that one of the prevention is cost for moving applications into Azure
operation system. To manage this, the company invested in the development of "tools" that
would help programmers complete the transition in a cost efficient manner.
Finally, it emphasizes its cost, in the analysis in the case we see the security concerns, for
collecting data and storing it private and public security system was needed for their particular
respective field.

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CASE 02
The United States Steel Industry

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1. Using the information contained in the case conduct a few forces analysis of the
U.S steel industry. What conclusion can you draw from this?
Porters Five Forces Analysis of Steel Industry in the United States of America Domestic
market:
a. Buyer power (High)
b. Supplier power (High)
c. Internal rivalry (High)
d. Threat from Substitutes (Low)
e. Threat of new entrants (Low)
Risk of entry/Degree of rivalry: Mini mills were being used by the foreign competition which
mean they were able to produce steel at less expensive rates passing that on to their customers.
Barriers to entry: starting in the 1970s since there were no trade barriers companies overseas
were able to manufacture and sell steel for a much lower price here in the United States
therefore affecting companies domestically.
Supplier power: Once steel became needed again suppliers were able to multiply what they
charged consumers and were able to produce large quantities at a time in order to stay up with
demand.
Buyer power: Since there were so many steel companies in competition consumers knew they
had the upper hand and were able to get the lowest prices on the metal leaving companies with
extremely low profits.
Threat of substitute: Demand had significantly lowered which affected the steel industry. To
add to this many people were now switching over to even more less expensive substitutes such
as aluminum, plastics and composites.
2. Do you think there is any strategic group in the U.S steel industry? What might
they be? How might the nature of the completion vary from the group to group?
In U.S. steel industry, there are two types of strategic groups. These are Page | 8

1. Large integrated steel makers group: this group includes the most dominant and large
steel of U.S. steel industry. Such as, U.S. steel, Bethlehem steel and wheeling-Pittsburg.
2. Mini-mills: this group includes small steel makers.
Competition between these two groups vary in many waysMini-mills used electric arc furnaces to smelt and produce scrap steels. But the large dominant
companies used blast furnaces (very capital incentive). Mini-mills did not need blast furnaces
as they did not use iron ore. So the costs of production of mini-mills were lower than large
companies. Moreover, mini-mills were used nonunion labor and these mills were mostly
located in rural areas. So the cost of labor of this strategic group is lower than the large
companies strategic group. On the other hand, unionized labor, high wage rate and inflexible
work rules made labor costs high for large established companies.So the mini-mills group
could charge lower price than large companies and there was plentiful supply of scrap steel.
3. Demand for steel is very cyclical .Why do you think this is the case? What might
steel makers do to better cope with the cyclical nature of the demand?
I think in this case demand is cyclical ,it has some reasons behind this first reason is customer
for whom steel was mostly a commodity type input ,could easily switch demand from company
to company, and they used this leverage to further bargain from price. Secondly in the early,
2000 things started to change. There was a surge in demand for steel from rapidly developing
economies of china, Indian, Russia and Brazil. By 2004, china alone was consuming almost
one third of all steel produced worldwide and demand there growing by more than 20% per
year. Thirdly a decline in the value of the U.S dollar after 2001 helped make steel imports
relatively more expensive and helped to create demand for steel exports from U.S. At last in
late 2008 and 2009 demand for steel slumped again as a deep recession gripped the United
States and many other nations following global crisis.
Steel maker might to follow some system to better cope with cyclical nature of demand they
should focus on their price and supply system.
4. Given the nature of the competition in the U.S steel industry, what must a steel
maker focus on in order to be profitable?
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A Steel maker must focus on productive workforces and new technology. They were able to
hold their own against foreign imports. A decline in the value of U.S dollar after 2001 helped
make steel imports relatively more expensive and helped to create demand for steel exports
from the United States. As a result of this changed competitive environment, prices and profits
surged.
However, in late 2008 and 2009 demand for steel slumped again as a deep recession gripped
the United States and many other nations following the global financial crisis. The following
year brought a recovery, however, with production rebounding 44% on the back of stronger
demand trends. This enabled many steel makers to cover their fixed costs and start to make
money again.
Steel companies who monitor and constantly create new sources of value are likely to be most
successful. They also focus on high growth sectors and markets.

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CASE 03
Regaining McDonalds Competitive
Advantage

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1. How important are efficiency, quality, customers, responsiveness and innovation to

McDonalds competitive positions?
McDonald's has achieved positive brand loyalty and recognition by keeping the quality of its
products and franchises globally consistent. It has achieved market focus and competitive
advantage by remaining true to founder Ray Krocs QSC&V (quality, service, cleanliness, and
value for money) core values. It is committed to growth through great tasting food, superior
service, everyday value and convenience. It has focused on a single concentration corporate
strategy combined with low-cost and multi-domestic strategies to best serve its customers
2. Does McDonalds have any distinctive competencies? If so do they impact the
business?
Yes, McDonalds have some distinctive competencies which makes them the number one fast
food distributor in the world.
McDonalds have a very specific set of competencies they try to achieve. They strive to be
cost leaders and offer their food at prices that cannot be matched by their competitors. In order
to do this, McDonalds store must be efficient and keep everyday operations costs as low as
possible. Doing so, they allow their stores to be superior to other fast food restaurants because
they can serve their food at lower prices than any other fast food company.
Another important competency they have here at McDonalds is the speedy delivery of their
food. They standardize the process of order taking. In order to maintain this advantage over
other fast food chains, they make the processes of cooking food simple for all their employees.
It must be easy to learn and easy to execute with a low failure rate to ensure the quick
production and delivery of their food. These standardized process of order taking, making
food and providing services raised the productivity of the employees and ensure same
experience in all branches for the customers.
Along with these, McDonalds developed good relationship with its suppliers, wholesaler and
food producers, which helped this company to manage its supply chain and reduce costs. Over
time, McDonalds buying power over supplier became higher as its purchases become higher.
This helped McDonalds to gain economic of scale in purchasing and to provide low priced
meals to its customers.
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These competencies comply directly with the vision of the company which is as
follows: McDonald's vision is to be the world's best quick service restaurant experience.
Being the best means providing outstanding quality, service, cleanliness, and value, so that we
make every customer in every restaurant smile.
3. Is McDonalds pursuing a low cost strategy or differentiation strategy?
A key to business success is the ability to develop a niche in the marketplace. To do so, need to
determine what makes business unique and incorporate this feature into marketing strategy. By
making use of differentiation marketing strategies, one can make his business stand out in a
crowded competitive marketplace
When it comes to marketing one business, there are three generic strategies:
Focus
Differentiation
Cost leadership
While the cost leadership strategy can be highly successful, it can be difficult to employ. It
involves marketing the company as the cheapest source for a good or service. This means that
one need to minimize costs and pass the savings on to customers.
The restaurant industry is known for yielding low margins that can make it difficult to compete
with a cost leadership marketing strategy. McDonald's has been extremely successful with this
strategy by offering basic fast-food meals at low prices. Their simple formula is: give
consumers value for money, good quick service and consistent quality in a clean environment.
To deliver value for money and consistent quality, it standardized the process of order taking,
making food and providing service. Standardized process raised the productivity of employees.
McDonalds also developed close ties with wholesalers and food producers, managing its
supply chain to reduce costs. As it become larger, its buying power enabled McDonalds to
realize economies of scale to purchasing and to pass on cost savings to customers in the form
of low priced meals, which droved forward demand.

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4. Why did McDonalds start to lose its competitive advantage in the 2000 ? What did
it do halt the erosion in its competitive position? What does this teach you about
the sustainability of competitive advantage?
In the late 1990s and early 2000s, McDonald followed low price strategy with providing high
fat foods. McDonalds use Trans -fat and beef oil in their food. Although it is not illegal. It
affects badly on customer's health because Trans -fat causes some kind of cancer. Consequently
, a number of customers who care about their health stop eating at McDonalds restaurants that
made revenue of company decrease McDonald has been impacted by negative press like the
documentary "Supersize Me" by Morgan Sprocket in which the contributed our society's
obesity to McDonald's and other fast food chains. IN fact, each McDonalds dishes provides
large amount of calories but not too much nutrition.
There are some factors that halt the erosion in its competitive position. McDonalds couldn't
provide better quality foods that lose the weight; it also killed the customer's valuable time to
prepare the food. As a result the sales of McDonalds were stagnating and profits were falling. it
initially seemed that McDonalds had lost its edge. Later on it has brought some change in its
food quality and management system to regain its competitive advantage. It decided to offer
better food quality and emphasize on the efficient top management so that they can satisfy the
consumer by providing their prefer food with quick service.

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