Microsoft: Strategy

and Position
Brian Wells, MPH
%e EarIy Computer Environment
W think there is a world market for maybe five
computers - Thomas Watson, chairman of BM,
1943
W There is no reason anyone would want a
computer in their home - Ken Olson, President,
Chairman and Founder of Digital Equipment
Corp., 1977
Company History
W Founded as a partnership in 1975 and incorporated in
1981
W 1980 - Microsoft purchases Seattle Computer's SC-
DOS (QDOS) and renames it MS-DOS
W Microsoft and BM helped start the modern PC era
W ntroduced Windows in the mid-1980s to challenge
Apple's GU
W Went public in 1986
W 1993 - Microsoft introduces Windows NT
W Early 1990s - Monopoly charges against Microsoft and
prevented a $1.5B acquisition of ntuit
Company History
W 1995 - Microsoft's launched MSN
W 1997 Sun sues Microsoft for creating an
incompatible version of Java
W Microsoft responded by dropping Java from Windows
XP
W 1997 Microsoft purchases WebTV
W 1998 US Justice Department and 18 states file
antitrust charges against Microsoft
W 1999 Microsoft invests $5B for a stake in AT&T to
help acquire MediaOne Microsoft also buys Visio for
$1.3B
Company History
W 000 Gates resigns as CEO and appoints longtime
friend Steve Ballmer
W 001 Federal Appeals Court struck down an order to
break up Microsoft
W 00 Netscape files suit against Microsoft for
antitrust
W 003 Microsoft settles suit with Netscape and agrees
to pay AOL $750M
Microsoft %oday
Company Mission:
To enable people and businesses throughout the
world to realize their full potential.
Microsoft Advertising Campaign
Microsoft %oday
W World's largest producer of software for PCs and
other devices
Microsoft develops, manufactures, licenses, and
supports its broad line of products
Microsoft has offices in more than 80 countries
W Key people:
William H. Gates (Chairman and Chief Software
Architect)
Steven A. Ballmer (CEO and Director)
Microsoft %oday
W Some of Microsoft's products:
Access
Excel
MS Office
FrontPage
Outlook
Project
Microsoft Network (MSN)
Flight Simulator
Many, many more
Microsoft %oday
W Company Financials
Sales for 003: $3,187 mil.
W 7 in US
W 8 in other countries
Net ncome in 003: $9,993 mil.
W Company Personnel
n 003, Microsoft employed 55,000 people
Microsoft %oday
W Microsoft and its top competitors
Annual sales
W Microsoft-$3B
W BM-$89B
W Oracle-$10B
W Time Warner-$38B
Market Capitalization
W Microsoft-$98B
W BM-$141B
W Oracle-$56B
W Time Warner-$79B
Microsoft
IBM
OracIe
%ime Warner
Microsoft
IBM
OracIe
%ime Warner
Core Competencies and
Competitive Advantages
W Microsoft performs many operations well
W Employee empowerment and compensation
W Customer Support Microsoft Knowledge Base
W Digital Nervous System
W Large installed product base
Core Competencies and
Competitive Advantages
W No close competitors for the desktop operating
system market
W Microsoft's Active Directory provides
functionality throughout its server products
thus simplifying management
W Many of its products are considered the
standard by information technology managers
(Office, Exchange, SQL, etc.)
W $50B+ cash reserve
Business Strategy
W Development and introduction of a wide variety of
new software products
W Achievement of market acceptance of these
products
W Constant enhancement of existing products
W Focus on satisfying customer requirements
Strategic ProbIems
W Slower growth and stagnant stock price
Microsoft's core markets are maturing
W Anti-trust cases
Microsoft has to tread lightly with future strategy and
acquisitions
W Microsoft often represents a target for viruses
W Microsoft software remains plagued by security
problems
W No clear solution to the emerging Linux problem
t's not a bug, it's a feature!
Strategic ProbIems
W Microsoft is often seen as an imitator, not an
innovator
Win95 nnovation Actual Origin
cons on desktop Xerox (1981)
Long File Names UNX (1979)
Taskbar HP Vue
Right-button menus Sun SunView
DCOM Xerox Alto; RPC (1981)
nternetworking TCP/P UNX (198)
Start Menu Apple Menu (198)
ive orces ModeI of Competition
Competitive Landscape
W Main competitors:
BM
Oracle
Time Warner
W Other competitors:
Apple Computers
Hewlett-Packard
Novell
Logitech
Sun Microsystems
etc
Competitors
W Linux represents a rising threat
More companies using threat of Linux when negotiating with
Microsoft
Key advantage for Microsoft switching costs
Linux may be more cost-effective for small companies but the
switching, training, and software costs for large companies could
be prohibitive
Linux advocates support for Microsoft's anti-Linux strategy as it
increases Linux awareness
Competitors
W Apple
Rival platform to PC and thus rival OS
W Apple plans to release its latest, advanced OS Tiger in the
first half of 005, a year before Longhorn
Apple targeted less by viruses and malware than Windows
Apple has far smaller market share (~5)
Apple has been very successful in the online music and
portable music markets
Competitors
Emerging Business Strategy
Response to Competition
W Diversification of its core software business
We're taking everything we know about the PC
and applying it to smart, mobile devices, to the
nternet, and to gaming. - Bill Gates
W Aggressive pursuit of equity investments, joint
ventures, and strategic alliances
ew Ventures: Products
W New Windows Operating system (Longhorn)
and applications
W Emerging mobile PC market (smartphones,
PDAs)
W New X-Box console and online gaming
W Advanced Access Content System License
Administrator
W Continued Research and Development - .NET
architecture
W Tablet PCfull-featured, powerful, highly mobile
laptop, with applications such as pen and speech
capabilities
ew Ventures: AIIiances, etc
W Microsoft and Fiat Auto Partner for Major
Telematics Deal
W Microsoft invested $5 billion in AT&T
W To promote MSN Mobile, Microsoft bought 16.67
million shares of Nextel Communications
W Microsoft formed joint ventures with NBC
t now owns 50 of MSNBC Cable L.L.C. and 50 of
MSNBC nteractive News L.L.C.
ew Ventures
One thing love about this [decade] is this is a
period where the reality is driving the
expectation. - Bill Gates, 004 nternational
Consumer Electronics Show Keynote
ConcIuding %ougts
W Microsoft remains in an excellent position to
dominate the market
W Emerging threats and competitors remain a
concern
W Legal problems continue but seem to be
subsiding
We always overestimate the change that will occur in the
next two years and underestimate the change that will occur
in the next ten. Don't let yourself be lulled into inaction.
- Bill Gates, The Road Ahead
t's tough to make predictions, especially about the
future - Yogi Berra
Sources
W Research under fire in Microsoft/Linux Debate: http://www.internetnews.com/ent-
news/article.php/397361
W nterview with Steve Ballmer:
http://news.com.com/Ballmer3A+Xbox+to+7take+Sony7/008-108*3-
568571.html?tag=nefd.lede
W Microsoft PressPass: http://www.microsoft.com/presspass/features/004/jul04/07-
15MSABUFiat.asp
W Cross-ndustry Alliance to Facilitate Compelling New Consumer Entertainment
Experiences:
http://biz.yahoo.com/prnews/040714/law051*1.html
W Microsoft Case Study:
Anderson, Jamie. Microsoft. London Business School. April 00.
W Microsoft Corporation:
http://premium.hoovers.com.lp.hscl.ufl.edu/subscribe/co/
W Microsoft News:
http://premium.hoovers.com.lp.hscl.ufl.edu/subscribe/co/news/
W BusinessWeek Online Technology Commentary:
http://search.businessweek.com/search97cgi/s97*cgi?action=FilterSearch&filter=bwf
ilt.hts&QueryText=microsoft&x=10&y=11
"uestions? Comments?
Observations?