Business Case Study: Microsoft

1. What are the goals and objectives of Microsoft? How well has the company performed? Show your analysis and interpretation.

As Bill Gates himself said in the mid-1990s, “The key to our business is building annuities, by tapping the broad revenue streams that will rely on our software expertise.” The company can achieve this goal by sticking to its two pronged strategy of “reinforcing the core” (in the form of OSes and applications) and building new businesses. The case cites Xbox, MSN, various business solutions, and mobile/embedded devices as the real areas of innovation in the years to come.

There have been roadblocks on the way to achieving the primary goal, though. For starters, a mass exodus on the senior management level around five years ago seriously hampered the organization at the time. Also, the litany of legal battles that were waged against Microsoft, starting at roughly this time, tied up a lot of the energy that the company was formerly known to generate. Nonetheless, you do not become a linchpin component of the DJIA without doing something right!

2. What are the nature and characteristics of businesses/industries that they are in? What is the business selection strategy? What businesses are they entering or exiting? Are they related or unrelated?

Microsoft has become a presence in virtually every arena related to computing (be it personal, small-business network, or even governmental). Using a resource-based approach, the company has never really tried to enter markets that were unrelated to the nucleus (except for the MSNBC endeavor, which it could be argued was not a full-fledged reach since they partnered with NBC, a major network with knowledge in that area). Whether Microsoft was exploring new ways of penetrating the server market or creating a new web browser, the company always attacked markets that were highly-related to its strengths, and usually ended up dominating after the first or second attempt.

3. What are the unique resources they have developed to create a competitive advantage? Are they general or specific?

In my mind, Microsoft has developed two major specific resources that aid it in the quest to be the world’s preeminent technological power. Both resources actually stem from the company’s significant war chest that it has grown over the years. First, this money, when viewed in concert with all of the patents and applications it has created over the years, allows Microsoft’s brand name to be seen the world over as the most reliable name in computer-oriented technology.

Secondly, the history Microsoft has behind it on its own eliminates any barriers to entry the company might otherwise have encountered when designing a new technology. The unending bankroll that Microsoft possess assures it, unlike 99.999% of the rest of Corporate America, that no new project will go under-funded.

4. How does the corporate office contribute or create value for its business units?

Until a few years ago, when Ballmer divided the company into pseudo-separate business units responsible for their own profits-and-losses, it could be argued that Microsoft was one of the most centralized companies on the planet. Bill Gates, despite being a perfect leader of this type of organization, still had his hand in everything; which some view as detrimental to innovation.

Now, with these changes made, the company is primed to operate at a higher level given its size. Each unit still has the full support of management and is never too far from the ears of Ballmer and Gates. Yet, Microsoft no longer has to rely on the highest ups to get things done, thanks to this new layer of hierarchy and responsibility.

5. What kinds of structure and systems has Microsoft set up to manage its business units? How well do they work?

Based on this idea of corporate structure that has barely moved beyond pure centralization, it is no surprise that Microsoft runs as an operating company. There is really no piece of the company (other than maybe MSNBC) that makes real decisions without headquarters approval first. In fact, the closest Microsoft has come to acquisition that was emblematic of a holding company occurred during the discussions with SAP recently. Taking on a job force the size of SAP and seamlessly inserting the technology and corporate culture into that of Microsoft might have been unwieldy. As such, I think walking away from those talks was the best thing the company could have done. 6. Has the company created and sustained its corporate competitive advantage? Explain the sources of sustainability for Microsoft.

It is next to impossible to believe that Microsoft will fail anytime in our lifetimes. The company is just so strong and diversified, and on top of that, is committed to attacking the newest areas of technology. Honestly, if the

government could only give the company what amounted to a slap on the wrist during the antitrust case of 2000, then who on Earth could possibly stop it.

More than any other time, I believe that Microsoft was vulnerable in the mid-1990s before full adoption of their products had occurred. Since no other behemoth came into the market to challenge them, it was only a matter of time before Microsoft became the force that it did. And, as a result, the competition can only blame itself for giving Microsoft such an unstoppably sustainable competitive advantage.

The case points out that during the 1990s, Microsoft OSes and applications were perceived as being of a lower quality than some of the other competitors out there. Yet, somehow, despite these reviews, the company was able to push forward. So much so, in fact, that it was able to continue to raise prices on its products while everyone else was in the midst of price cuts. In my mind, this is Microsoft’s calling card of success. Essentially, the company has become so powerful, even shoddy merchandise cannot stop it.-