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BUSINESS HISTORY

MINI PROJECT - MICROSOFT CORPORATION

I - MBA - "H" SECTION

SUBMITTED BY

S.KRISHNA PRASAD 3511210502

INTRODUCTION
BUSINESS:
A business is an organization involved in the trade of goods, services, or both to consumers. Business model determine the outcome of an active business operation. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit or state-owned. A business owned by multiple individuals may be referred to as a company, although that term also has a more precise meaning.

BUSINESS HISTORY:
Business history provides a unique resource to enable educators, practitioners, and policymakers to learn from the past through rich and nuanced evidence on the key issues faced by the world today. Since the work of Joseph Schumpeter and the Research Center in Entrepreneurial History in the 1940s, Harvard has taken an interdisciplinary and global approach to understanding business history. Business history is the branch of economic history that deals with the history of business organizations, methods, government regulation, labour relations, and impact on society. It also includes biographies of individual companies and entrepreneurs.

COMPANY TAKEN

MICROSOFT CORPORATION

LITERATURE REVIEW ON BUSINESS


The term "business literature" encompasses the broad range of written materials that companies use to market their goods and services. Examples of business literature include publications as disparate as product catalogs, service brochures, and corporate newsletters. The content of such literature can differ dramatically, depending on the goals of the company distributing the material. Ultimately, however, business literature generally falls under the umbrella of the firm's marketing and public relations efforts. Business literature that is intelligently shaped and effectively disseminated can be a valuable tool for companies. This is especially true of small businesses, which have fewer resources and thus need to make certain that every marketing and/or workforce development initiative they do launch has a positive impact. Conversely, small business owners who fritter away valuable time, money, and other resources on uninspired - or downright poor - business literature creations may feel the negative repercussions even more acutely than larger companies.

LITERATURE REVIEW ON THE COMPANY


Microsoft, a public US company trading shares on the NASDAQ stock exchange in New York, is active globally, with offices in over seventy countries. Originally set up to make operating systems for the Altair 8800 system, the company has since produced industry benchmarks in the market, first with MS-DOS in the 1980s, and with Windows in the 1990s. By dominating this market with a near total monopoly on the world's home and business PCs, it was in a position to develop software applications to complement and support its product range. The most successful examples of these include Microsoft Office, a clutch of desktop publishing applications, and more recently the online integrated programmes and services of MSN.

THE HISTORY OF MICROSOFT:


Microsoft was formed by a Harvard College Dropout called Bill Gates. Bill Gates was born William Henry Gates III on October 28, 1955. He was born to a family that was successful in business, living a comfortable upper middle class life in Seattle, Washington. Early in his elementary school days, Bill Gates quickly shot to the head of the class, consistently outscoring his peers in most subjects, but especially math and science. His parents soon

enrolled him in Lakeside Prep School, where the atmosphere was intellectual enough to stimulate the young Gates. This move to Lakeside would prove historic, for it was here, in the spring of 1968, that he was introduced to computers. At that time, computers were still too large and expensive for the school to purchase one of its own. Over the next ten months or so, the school struck agreements with various corporations who allowed the students to use their computers. Bill Gates, his buddy Paul Allen and a handful of others quickly took to computing. In fact, they began to skip classes, opting instead to stay in the computer room and write programs, read computer books and find out exactly how these machines worked. They soon learned to hack the system, and altered and crashed valuable files until they were banned from the computer. Soon, however, Bill and his friends were actually hired by the computer company to find bugs and explore weaknesses in the system, which kept causing the computers to crash. Instead of paying the boys for their time, they were granted something even better--unlimited computer time. Gates has been quoted as saying that that was the time when he got into computers fulltime. "I mean, then I became hardcore. It was day and night," he said. The boys used their time eating, drinking and breathing computers. They studied manuals, explored the system, and hounded the employees with questions until they had formed a base of knowledge that would eventually lead to the formation of Microsoft. The computer company that was hiring the group went out of business in 1970, and the boys had to find alternate sources for computer time. They were soon hired by Information Sciences Inc. to write a program for payroll. This time they actually earned money as well as enjoying the unlimited computer time. It was during this time that the group gained notoriety for their skill in computer programming. They were hired or contracted by various organizations to find bugs and fix them. Each job helped Gates and his friends learn their skill and delve ever deeper into the world of programming. In the fall of 1973, Gates left for Harvard University. He enrolled as a prelaw student, but spent most of his time in the campus computer center, programming away. He stayed in touch with Paul Allen and they continued to talk about future projects and the possibility of one day having their very own business. Allen even moved to Boston to be closer to Gates, so they could continue working on projects. Allen continually urged Gates to quit school and work with him full-time, and Gates was unsure of what he wanted to do. This was soon to change. One year later, Paul Allen saw the first microcomputer on the cover of a magazine. He bought the magazine and went immediately to show it to Gates. They realized the time was right. The home PC business was about to explode and someone would need to provide software for the machines. By stretching the truth somewhat, Gates arranged for a meeting with the Altair manufacturers. He had called them to let them know he had a program written for them. After the appointment was made, Gates and Allen stayed up for nights, feverishly writing the program he had promised. It worked perfectly at the meeting, and everyone was impressed. They sold the program, and saw that this was something they could do for real. Within a year, Gates had dropped out of Harvard and Microsoft was formed.

The company went through some rough first years, but eventually were able to license MS-DOS to IBM. The IBM PC took the public by storm, and its success signalled the success of Microsoft. Microsoft continued writing software, for businesses as well as the consumer market. In 1986, the company went public, and Gates became a 31-year old billionaire. The next year, the first version of Windows was introduced, and by 1993 a million copies per month were being sold. In 1995, Gates knew that the Internet was the next area of focus, and the course of Microsoft shifted dramatically. The popular Internet Explorer browser soon became a bestseller. Today, Microsoft software is everywhere.

MICROSOFT AND THEIR MARKETS:


According to their website, Microsoft loosely define their three core markets as:

Business Entertainment Platform Products & Services

PAST BUSINESS TRENDS OF THE COMPANY


Since its inception in 1975 by co founders Bill Gates and Paul Allen, Microsoft Corporation have steadily and rapidly become one of the world's most successful companies, with brands amongst the most global. It now commands a position among the top worldwide corporations, ranking number three in the FT Global 500while enjoying revenues in excess of $36bn. This essay seeks to provide an overview and history of the company, while undertaking a succinct analysis of its business successes. The reasons for this success of the company shall be explored, and the prospects for continued future prosperity will also be assessed. The development and subsequent strength of the brand has revolved around specialised marketing to each of its target audiences. Fill (2002) identifies the company's overall marketing strategy as taking a radical new approach to the needs of the market and break away from the way in which brands in the sector are normally perceived. Although Microsoft's core markets now appear to be in maturity, it initially sought to build presence in these markets via distinct product positioning which set it apart from its competitors. The strategy is evidently a success, as applications such as Office and Internet Explorer rapidly became benchmarks. Microsoft's website offers a good indication of how the company very clearly segments its markets. Business, for instance, is split into areas covering all aspects of industry (education, finance, retail etc.) while home markets concentrate on education, entertainment and utility segments.

Within its business market, Microsoft offers integrated applications tailored to specific industries. It aims to cover all business technology needs over two distinct areas: business solutions such as supply chain management and customer relationship management, Windows Server System, covering network and hardware management. On a more micro level, the company aim to tailor its services to customers via its Certified Partners scheme. Using a worldwide network of regional business units and individual professionals, it can be sure that its customers are receiving service from people who know the industry or are more familiar with local business issues. Functions performed in this regard include what its website refers to as add-in products to build on standard functionality to meet industry-specific and company-specific needs. Such personalised service is something often found lacking in large multinational organisations that often use a one size fits all approach to whole territories. The company's contact with its customers extends as far as individual training and certification on how to use its software. Using this multi-functional approach to business solutions, the company is able to frequently interact with its business markets, helping consumers to believe the company is marketing directly to their individual needs. East (1997) highlights the importance of retention in durable markets (i.e. one off or long lasting purchases). He argues that the cost of losing customers in such markets are high as setting-up costs often include higher overheads associated with the purchase. Microsoft appears to have been very successful in retaining its customers, due in part to convenience or the overall high cost of switching. It can be assumed that the interaction the company appears to have with customers creates a reinforcement effect, which will increase a customer's propensity to remain loyal to the company in future purchases, defined by East (1997) as learned reinforcement. Using a combination of strategic partnerships with PC manufacturers, as identified in their 2004 annual report, proactive marketing and the strategies discussed below, Microsoft has managed to build and maintain a near complete monopoly in its core markets.

PRESENT BUSINESS TRENDS


UNDERSTANDING AND MARKETING TO THE TARGET AUDIENCE:
According to their website, Microsoft Corporation would define their business position as the worldwide leader in software, services and solutions that help people and businesses realize their full potential. The company's success in adapting to changing market conditions and demands represents perhaps one of the key reasons for their continued success. In addition, it is their ability to exploit its strengths which help it to maintain its position, a point which will be explored in greater detail later in this essay. The company, with vast amounts of funds available to formulate the kinds of integrated global marketing campaigns historically observed (over $8.3bn spent globally on marketing activity in 2004), has nevertheless attempted to understand its market from a corporate level in many ways.

COMMITMENT TO ONLINE DEVELOPMENT:


By placing the evolution of its applications into Web-based services for enterprises and consumers (Hoover 2005) at the forefront of its product development strategy, Microsoft is demonstrating its perception that the Internet is and will continue to be important to its consumers. In addition, it has attempted to integrate its Hotmail email programme into a more far reaching MSN passport system, and relied on online functionality for the success of its games consoles. Davenport (1997) acknowledged that the company identified as far back as 1997 that they needed to embrace the Internet and incorporate it into virtually all products and services. Whether or not such a strategy will continue to prove successful remains to be seen, but success should be assisted by Microsoft's original online vision and the experience it has gained since then.

MICROSOFT'S CORPORATE STRATEGY:


During its lifetime, Microsoft has pursued an aggressive policy of take-overs and acquisitions. Via this strategy, Microsoft has shown that it is ready to adapt quickly to market conditions in order to appeal to its consumers. The company has carried out over 50 acquisitions in the last ten years. One of numerous examples of this includes the 1999 purchase of Hotmail, the world's most popular free email service, and reflected Microsoft's sound belief in the strategic need to deliver high quality free email services to its customers in the face of strong competition from other free email providers (Yahoo!, Lycos etc.). In addition, Microsoft has shown that it is prepared to purchase companies who could improve their overall product quality. Prior to the launch of its Xbox games console, the company embarked on a strategy to secure exclusive rights to top rated games, including the purchase of developer Bungie, creator of the popular game Halo. The approach has allowed the company to acquire competencies it may have lacked if it had followed a strategy of internal development, and allowed it to bring high quality products to market within a relatively short timeframe. Concurrently, Microsoft has strongly pursued a policy of internal development, placing a high level of emphasis on research and development. The company state in their 2004 annual report that the concept of integrated innovation was key to their strategy, which aims to deliver even greater value to customers. Hence, Microsoft has invested a great deal in product and service development (over $7bn in 2004). The company's willingness (something which may or not have been enforced upon them for legal reasons) to allow third party companies to complement their products demonstrates an evolution in strategy. Such a strategy would seem to be complimentary to their competence of moulding other company's products to fit their own product output as observed in the high number of acquisitions that have taken place. Hence, this type of integrated innovation would appear to see Microsoft playing to their strengths when delivering products to their markets.

A WORKFORCE THAT UNDERSTANDS TECHNOLOGY MARKETS:


According to Davenport (1997), Microsoft has built up a reputation for employing highly skilled individuals who understand the business and the industry. It is argued that, in doing so, the company's operations are able to better adapt to the industry and the observed changes in markets. The company's marketing activity, for example, must be able to communicate how the company is striving to meet the changing needs of the consumer. Highly skilled workers, therefore, will help the company to develop and implement strategies successfully as needed. Such a reliance on highly knowledgeable staff in which product development occurs in parallel to understanding what the customer requires may be one of the main factors in maintaining its position. With a marketing department that understands the technology market and anticipates its changes, the company is able to retain its image as technology and product innovators. The above has summarised many of the ways in which Microsoft has sought to appeal to its various target audiences. Observing the company's competitive position may also help to identify the decisive factors effecting future continued success.

SWOT: AN ANALYSIS OF MICROSOFT


For a full outline of identified strengths, weaknesses, opportunities and threats to the company, see Appendix B. Some of the key issues facing Microsoft as it aims to maintain past successes include the following.

SYNERGIES:
In the past, Microsoft has been extremely successful in developing new products by promoting, or bundling, them with existing brands. The Windows operating system is perhaps the best example of this, where applications such as Internet Explorer and Media Player have become industry benchmarks due to their out of the box availability. By exploiting the monopoly power it has on PC operating software, it is in a position to influence the success of strategic areas of future performance. In an industry where the battleground for future dominance in the technology industry is likely to be aggressively fought, as companies increasingly move towards wholly integrated media devices, the strategic advantage of such a means cannot be overstated.

LEGAL LAWSUITS:
Due to an observed monopoly Microsoft enjoys in the home PC market, it could be considered inevitable that competitors will seek to undermine or diminish this power though legal means. It is, however, stated in Microsoft's 2004 annual report that major progress has been made to stem legal action and improve relations with governments. Nevertheless, the threat of lawsuits remains one of the greatest threats to Microsoft's current monopoly of its market position.

SWOT ANALYSIS:
STRENGTHS

WEAKNESSES

Existing market position Strength of brand Finance available ($60bn+) Network of Microsoft Certified

Maturing markets Lack in credibility compared with some competitors

Partners OPPORTUNITIES

THREATS

Synergies Partnerships & alliances with PC producers Observed market changes

Antitrust legal cases from rivals Threat from upcoming online brands Unauthorised/illegal trade in pirated goods

FUTURE DEVELOPMENT POSSIBLE


A WORKFORCE THAT UNDERSTANDS TECHNOLOGY MARKETS:
According to Davenport (1997), Microsoft has built up a reputation for employing highly skilled individuals who understand the business and the industry. It is argued that, in doing so, the company's operations are able to better adapt to the industry and the observed changes in markets. The company's marketing activity, for example, must be able to communicate how the company is striving to meet the changing needs of the consumer. Highly skilled workers, therefore, will help the company to develop and implement strategies successfully as needed. Such a reliance on highly knowledgeable staff in which product development occurs in parallel to understanding what the customer requires may be one of the main factors in maintaining its position. With a marketing department that understands the technology market and anticipates its changes, the company is able to retain its image as technology and product innovators.

EMERGING ONLINE BRANDS:


The emergence of online global brands has led to strong competition, particularly within the media market, a developing Microsoft market according to Hoover (2005). Google and others are increasingly bringing a greater range of products to the market, many of which directly compete with Microsoft's own product portfolios. What perhaps differentiates Microsoft from many of its more traditional competitors such as IBM is its globalised nature. Anholt (2000), as cited by Fill (2002) suggests that by using technology in place of more traditional physical distribution channels Microsoft was able to negate the inefficiencies associated with the latter. Upcoming online brands, on the other hand, do not suffer the same traditional barriers, and may in time create better conditions to compete effectively with Microsoft. The above has summarised many of the ways in which Microsoft has sought to appeal to its various target audiences. Observing the company's competitive position may also help to identify the decisive factors effecting future continued success.

CONCLUSION
As the technology market evolves, it could be speculated that the successful companies within the industry will be the ones that are able to best suit the changing needs of consumers. If the upcoming trend towards technological integration of media products predicted by Microsoft and others does occur, the company is seemingly well placed to do this. The many analysed strengths of Microsoft detailed in this essay appear to be particularly pertinent to the evolution of the market's needs. The company appears to have sensibly accepted the role of integrating competing products within its own products, which may in future assist it in maintaining its position from a legal perspective. Adaptability in the market place, as it has been in the past, may prove to be decisive as competition from Google and other online brands strengthens.

BIBLIOGRAPHY

http://en.wikipedia.org/wiki/Business

http://www.hbs.edu/businesshistory/

http://www.answers.com/topic/business-literature

http://www.businessteacher.org.uk/free-management-essays/microsoft-corporationessay.php

East, R. (1997), Consumer Behaviour: Advances and Applications in Marketing FT Prentice Hall, UK

Fill, C. (2002), Marketing Communications: Contexts, Strategies and Applications (3rd Ed.), FT Prentice Hall, UK

Davenport, T.H. (1997) Knowledge Management at Microsoft

Web: 2005 Sales, source Hoover's Microsoft Company Report 2005