Introduction to management

T D N : 2 M I C R O S O F T Corporation
Microsoft Corporation is a public multinational technology
company, which develops and sells a wide range of consumer and
enterprise software, hardware, services, and electronics. It
operates as a software company and serves customers worldwide.
Founded by Bill Gates and Paul Allen in Albuquerque, New Mexico,
in 1975, the company is currently based in Redmond, Washington.
Microsoft has held a position in the top ten biggest corporations in
the world throughout its lifetime. Its market reach has ensured that
the Windows Operation System was a household feature during the
technology boom of the 1980s and 1990s. Due to its size, Microsoft
often dictates the direction of the industry, therefore reaffirming its
position going forward. Microsoft maintains 76.56% of the global operating system market.

The company aims to create an innovative relevant and accessible technology that fits with people’s needs. It is known
for path breaking technology and for its Microsoft Office products used across most offices because of its lower costs.
Microsoft’s vision includes its strategy of technological empowerment clearly. It talks of the organization’s objectives and
values. Microsoft employs approximately 221,000 people in full-time positions worldwide. Around 60 percent of
Microsoft’s employees are in the United States. The employees are spread out over four business units: operations,
research and development, sales, and marketing, and general and administration. Its business strategy can be classified
as product differentiation. The company develops advanced technology products and services and sells them for premium
prices. Microsoft business strategy is currently focused on ‘cloud-first, mobile-first’, growth through mergers and
acquisitions, and exploring business opportunities related to augmented and virtual reality. Long seen as one of the world’s
largest and most successful IT companies, Microsoft's global revenue grew from 2021 to 2022, increasing by 18 percent
year-on-year and reaching over 198 billion U.S. dollars. As of September 2022, Microsoft has a market capitalization of
$1.771 Trillion which makes it the world's third most valuable company by market capitalization.

Microsoft’s Vision
“Our vision is to create innovative technology that is accessible to everyone and that adapts to each person’s needs.
Accessible technology eliminates barriers for people with disabilities and it enables individuals to take full advantage of
their capabilities. (—Bill Gates, Chairman, Microsoft Corporation)

Microsoft’s Mission Statement

Microsoft’s corporate mission is “to empower every person and every organization on the planet to achieve more.” This
mission statement shows that the business focuses on the empowerment of people and organizations, through the
company’s information technology goods and services. The corporate mission statement presents the business purpose
and a general idea of the technology business’s strategic approach to satisfying the corporate vision statement. In this
sense, Microsoft’s corporate mission specifies what the business aims to do to increase customers’ success. On the other
hand, the vision statement directs the development of the computer technology business toward a desired future
condition. Currently, Microsoft’s corporate vision includes what the business can do for individual and organizational
customers. Also, the corporate mission is strongly aligned with the corporate vision statement. This alignment is essential
to optimizing strategic decisions, especially in addressing the competitive force from multinational firms like Apple,
Google, Amazon, and IBM.
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Innovative from the Start?

The Era Bill Gates While Microsoft had existed since 1975, its meteoric rise started with its entry in the operating systems
business in 1980 (Dyar, 2002). The then small firm got the contract from IBM to produce DOS and was luckily able to hold
on to the rights of the operating system afterwards. Because of the free software selection on MS-DOS, Microsoft quickly
became the leading PC operating system vendor on the market. There exists some debate, whether Bill Gates had the
foresight to see the potential in his product or whether he was just a “talented hacker” who happened to be at the right
place and in the right time (Manes & Andrews, 1993). Nevertheless, Microsoft was amongst the first companies to
recognize the potential in a technological platform able to accommodate many standardized software products as
opposed to the then more lucrative custom software solutions (Cusumano, 2009). In 1990, Microsoft launched its “Office”
software suite, a line of applications as well as the updated OS Windows 3.0. Both products went on to earn a “jaw-
dropping” success in the market, with MS Office reaching a 96% share of retail suit sales (McCracken, 2000). During his
time as Microsoft’s CEO, Bill Gates was effective in recognizing and capitalizing on current trends in the tech industry. His
now famous internal letter on “The Internet Tidal Wave”, in which he urged the entire company’s efforts to “assign
Internet the highest level of importance” proved this talent (Gates, 1995). However, while Microsoft had the talents and
capital to exploit such trends, the company was never able to reliably anticipate them. Internet computing back then was
led by Netscape, internet search by Yahoo (and later Google), software-as-service by Salesforce, open-source computing
by Linux and so forth (Cusumano, 2009).

So how did Microsoft become so successful?

Microsoft is engaged in developing, licensing, and supporting a range of software products and services catering to
different requirements. In 2000 Steve Ballmer was appointed the new CEO of Microsoft. Bill Gates had met Steve Ballmer
at Harvard University before he left. Although there was some concern over Ballmer’s ability, Microsoft retained its top
spot in both business and personal computer markets. Microsoft’s primary strengths and most of its profits were obtained
from the business side. Although the company recognized that they had a major presence in consumer markets as
technology advances. The successful Altair deal back in January 1975 inspired Bill Gates and Paul Allen to form Microsoft.
Their revenues for 1975 totaled $16,000. Microsoft's big break was in 1980 when a partnership was formed with IBM
which resulted in Microsoft providing a crucial operating system, DOS, for IBM PCs. This meant that for every IBM
Computer sold a royalty was paid to Microsoft. In 1990, Gates showed the future for Microsoft with the introduction of
Windows 3.0. 60 million copies of Windows had been sold now which effectively made Microsoft the sole keeper of the
PC software standard. Microsoft before 1990 was predominantly a supplier to the hardware manufacturers. That was
their target market. As technology advanced and personal computers become so popular, the bulk of Microsoft’s revenue
was generated from sales to consumers. It was the first software company to reach $1 Billion in revenues. Microsoft also
entered the gaming and mobile phone market and was successful in capturing a large market share. The Windows Mobile
OS is used by numerous sellers including HTC, LG, Samsung, and LG. In 2001 Microsoft released the Xbox followed by Xbox
Live in 2002. Both releases were very successful which placed Microsoft second in the video gaming market. The Xbox
360, released in 2005 was a very powerful gaming console while facing strong competition. Microsoft had to cut the prices
of their gaming consoles to gain a higher market share due to competition. This was a successful move; the Xbox 360 was
the most used game console in American homes. Microsoft acquired Skype in 2011 for $8.5 Billion; this was the largest
acquisition in Microsoft’s history. Microsoft acquired Skype to compete with Apple’s Facetime and Google’s Voice.
Microsoft planned to add Skype to its products such as Outlook, Xbox and Windows smartphones. Microsoft has also
recently moved into cloud computing with the Windows Azure platform which was announced in 2008. The Windows
Azure platform lets consumers build computing infrastructure in the “cloud” and offer it to its users. In 2011, Office 365,
a cloud version of Office business software suite was released which included applications such as Word and Excel.
Another popular product, Microsoft's SQL Server 2012, featured many enhancements to previous versions. This included
 Introduction to management

Always On which provided options to improve the database availability and easy cloud set-up and compatibility. Features
also included performance and programmability enhancements. DSP-Explorer provides support for all versions and
features of Microsoft SQL Servers, across a wide variety of windows platforms.
Competitive advantages
Microsoft thoroughly understands how to build a competitive advantage. It has what Warren Buffett calls a strong moat:
competitive advantages that protect it from rivals and enable its large profits. Microsoft's intellectual property, specifically,
its patents and proprietary software code contribute to its uniqueness. Microsoft's brand name is a significant part of its
moat. Economies of scale, the network effect, the brand strength, intellectual property, and regulation can all contribute to
competitive position. Without these factors in place, competition from comparable products and services eventually erodes
operating margins. These competitive advantages illustrate how Microsoft operates globally with popular product suites
such as Windows, Office, and Azure. The network effect, economies of scale, and strong branding all work in Microsoft's
favor, but it operates in highly competitive markets that are changing at accelerating rates.

Microsoft and Steve Ballmer

Microsoft and Steve Ballmer After Microsoft founder Bill Gates stepped down as its CEO in 2000, he was replaced by his
Executive Vice-President of Sales and Support, Steve Ballmer. Despite Gates staying in the company as Chief Software
Architect, the tech giant’s stock plummeted dramatically following the announcement (Farber, 2013). This was not due to
the company suddenly being unprofitable. During his tenure from 2000 - 2014, Steve Ballmer managed to contribute to the
company’s profitability and increased the net income by 215% to USD 23bn (Vance, 2012). However, while Ballmer
succeeded in protecting Microsoft’s core market, the company failed to keep up with the rapid expansion of its “creativity-
driven competitors” Google and Apple (Dhillon & Gupta, 2015, S. 55). Microsoft’s Zune failed to take on the iPod (Rosoff,
2012) and Bing could not compete with Google (GlobalStats, 2019). This perceived lack of innovation was reflected in the
company’s stock price.
 Introduction to management

Microsoft has one of the largest market-reach out of any technology company

As the Windows Operation System is the go-to platform for over 70% of the operating system market, Microsoft already
has access to an incredible customer base. This penetration offers Microsoft the ability to sell its products and services to
its existing client base.

Disruption in the technology industry severely impacts firms that do not innovate.

While companies that employ strong innovation tactics in their operations suffer less from the impact of a changing
market landscape, those that do not innovate and change with the times can be swiftly and severely impacted by a change
in consumer behavior and consumption patterns. Changes in the way companies operate and individuals interact in their
professional lives have represented a major disruption in many industries. Corporations need to ensure a nimble approach
to innovation to mitigate the impact of this risk.73% of employees want flexible, remote work. Having such a large market
share in a fickle, dynamic market as consumer technology, Microsoft’s position allows it to carve the path of the industry.
Whether or not Microsoft leverages its position to innovate and dictate the industry path or not is yet to be seen. Many
large firms that had previously been seen as “too big to fail” have disappeared due to the lack of their ability to change
with the times.

Business management & Marketing Analysis of Microsoft 2022-

MBA Skool Team, Marketing Strategy of Microsoft strategy, -statista.com -adapted
UNIVERISTY OF St. Gallen, Case study change management at Microsoft Pr. Marcus Schögel Mauro Gotsch (2020) ADAPTED

Relevant Videos:
A brief history of Microsoft Windows: https://bit.ly/1IBQJoY
Top ten facts about Microsoft: https://bit.ly/1UbGakf

Questions:
1) Present Microsoft ’s business profile
2) Identify the vision and the mission of Microsoft
3) Explain the competitive advantage of Microsoft?
4) Describe the role of Bill gates and Steve Ballmer in the management of Microsoft.