Porter’s Five Forces Analysis of Microsoft

Microsoft Corporation is the largest software company founded by Paul Allen and Bill Gate in 1975, the company controlled an overwhelming share of the personal computer operating system, cloud storage, office software suite, video game console Xbox, servers etc. Microsoft Company has intense pressure in the software competition over Google and Apple since they introduce operating system in both mobile device and PC. But still Microsoft conquer the market of operating system and software which resulting in more than 90% market share of operating system. Their vison is to create innovative technology that can be accessible to everyone. Therefore, to archive that vision, they decide to reduce the cost of software and service and make sure everyone can afford to use it. By doing so, they manage to lock-in their customer and influence the world to use more their products and service than others.

Porter’s Five Forces Analysis of Microsoft

Besides that, Microsoft trying to differentiate their service with rivals, for instance, introducing a cloud service known as Microsoft Azure platform which integrated with almost Microsoft office tools, its cost effective, highly secured and reliable with no downtime. It allows industries to outsource their cloud computing and pay for what they have used. In other hand, it cutting down the need of servers, industries can only purchase cloud storage to store and secured their data for future analysis such as big data etc. Hence, this prove that Microsoft use IT strategies to sustain competitive advantage, besides that, the company focus more on learning techniques and doing deep research rather adopting IT in order to continuously come up with new ideas, innovations and use those ideas to enhance their software and service for future business competition.

Porter’s Five Forces Analysis

The influence of the five force to Microsoft company overall as follow below:

  • Bargaining power of buyers is high.
  • Bargaining power of suppliers is low.
  • Threat of new entrants is low.
  • Rivalry among existing competitors is high.
  • Threat of substitute products or services is moderate.
Force Analysis
Bargaining Power of Customer Today the world has grown more than enough in the context of information technology in such way that many company offering a highly-advanced platform or operating system. Additionally, those operating systems might be open source such as Linux or commercial like Mac OS. But one way or another those companies are highly compete with Microsoft which lead to increase the bargaining power of buyers. Therefore, to sustain this competitive advantage, Microsoft pursued an offensive IS strategy by introducing another platform known as window server and window azure. By doing this, Microsoft manage to neutralize the threat and continue dominant the software market. With the IS strategies and business strategy, today Microsoft product can be identified as an important factor that can be used to control buyer bargain power to a certain level. With those implementation, Microsoft has been announced as the second valuable brands in the world with value of $63 billion. This prove enough that, Microsoft has high bargaining power of buyers in the software market and maintain strong competition over other industries.
Bargaining Power of Suppliers The bargaining power of suppliers is low, its well known that there are so many suppliers or company provide competitive advantage on providing operating system and advance technological product to their customers. Yet, the majority of software market is being dominant by Microsoft with it platform. Besides that, with surprising IS strategies Microsoft manage to come up with three cloud services know as Infrastructure as service(IaaS), platform as service(PaaS) and software as service(SaaS). Bargaining power of suppliers can rise or reduce based on quality of the product or service provides by company. However, buyers can bargain for a lower and they can demand high quality service or product which make limited supplier in bargain with buyers, because supplied afraid when the increase the price customer will switch to another industry due to low switching cost. However, Within Microsoft Company, the bargaining power of supplier is low because of brand loyalty with customer and low switching cost over other company like amazon. Therefore, Microsoft software are knowledgeable and intangible product rather than physical product which help them to lock-in their customer and minimizes the number of suppliers required in the organization.
Threat of New Entrants The threat of new of entrant is low because of its dominance of the operating system, cloud computing and productivity of software. It required mass of investment, technology and reputation for companies to entering into such operating system competition. For instance, Window 10 operating system and office suite software take almost 95% software market, hence it’s a valuable factor to Microsoft in the sense that there would not be any rivals that is likely to arise in front of the company. To play defensive, Microsoft to strength its new product line to secured and prevent future competition by taking most valuable piece of technology real estate is moved to the automobile navigation system and cell phone. Doing this was a huge advantage to Microsoft because of high switching cost associated with analysis and learning a new operating system that could support cell phone and automobile navigation system while other companies like IBM are trying to shift the market by providing open source platform such as Linux. However, Microsoft still keeps up favorable position that ought to protect itself from future rivalry.
Rivalry Among Existing Competitors Rivalry among the existing competitors is higher even though there are few competitors in software market and the business is growing constantly. It’s well known that operating system, software and cloud computing industry is highly competitive market. Microsoft, IBM and Apple compete with a specific end goal to surpass each other and increase market share. Furthermore, they also contend for the same resources and the same buyers. Each of them follow their own IS strategies to archive their end goal. Therefore, since that rate of rivals is higher, Microsoft decide to use an offensive IS strategy by incorporated a low-cost strategy offering the most affordable platform and change the entire market by introducing Xbox 360 as gaming console, its highly quality product with lower price. The mostly target customer are casual gamer and family oriented. Although, there are other rivals such as Sony and Nintendo offer the similar platform, therefore its highly competition since all of them offer the same price and target the same customers. However, in term of differentiation, Nintendo and Sony charge more for their platform which making Microsoft to be more of a direct competitor. Despite the fact that there are higher rivalry levels inside existing players in the business, Microsoft has generally appreciated a predominant position in regard to its rivals.
Threat of Substitute Products or Services Within the Microsoft Company, the main threat is not from one of the industries, it’s within its sector as is typical in most of the companies. A threat from substitute may exist if there is an alternative product or service perform same function with higher performance and lower price. The presence of open source software is the greater threat to Microsoft company. For instance, currently window Linux is an open source software which currently can substitute windows operating system, result other company within the sectors are start to accept window Linux and pushing to install into their system. However, this incident was a call to Microsoft, they realize that it’s time to change the game and shift the market to cloud applications. To keep close customer relation, Microsoft decide to switching cost to customer by introducing Microsoft Azure platform that can perform several services to customer in cheaper price. Today, 200 million people use azure platform with no any other alternative product or service to substitute. Thus, lead Microsoft to conquer again the software market and stay ahead of its competitors. Therefore, threat of substitute is moderate, the main reason is that substitute of the product can decrease Microsoft market share which is something that Microsoft does not allow to happen. But still, rivals would never be able to archive what Microsoft company could provide. Therefore, based on the analysis, threat of substitute of service is minor issues in Microsoft Company.

To conclude, Porter’s five force analysis shows that Microsoft company has currently dominant the software, operating system and cloud computing. Currently, Microsoft use offensive strategy, they are trying to provide high quality product and service in order to gain control over buyer bargain power to a certain level. Furthermore, with competition getting stronger, Microsoft decide to pursed IS strategy in order to differentiate their product their rivals, such as Azure platform, Xbox and Operating system, they are trying to be up-to-date with technology whenever is introduced. Therefore, with respect to the name of the company, innovation and IS strategy, they have secured and maintain the future business and continue to be on top ahead of the competitors.

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