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Harvard Case - Microsoft--1995 (Abridged)

"Microsoft--1995 (Abridged)" Harvard business case study is written by Tarun Khanna, David B. Yoffie. It deals with the challenges in the field of Strategy. The case study is 18 page(s) long and it was first published on : Jul 14, 1998

At Fern Fort University, we recommend that Microsoft aggressively pursue a multi-pronged growth strategy focused on innovation, international expansion, and strategic acquisitions. This strategy should leverage Microsoft's core competencies in operating systems, software development, and IT management to capitalize on the emerging Internet and digital transformation trends. By embracing disruptive innovation and adopting a global strategy, Microsoft can solidify its position as a dominant player in the rapidly evolving technology landscape.

2. Background

The case study focuses on Microsoft in 1995, a time when the company was already a dominant force in the PC operating system market with its Windows product. However, the rise of the Internet and the emergence of new technologies like web browsers posed a significant threat to Microsoft's dominance. The case study explores the strategic challenges faced by Microsoft in navigating this rapidly changing landscape, particularly in light of the increasing competition from companies like Netscape and Sun Microsystems.

The main protagonists of the case are Bill Gates, Microsoft's CEO, and his leadership team. They are faced with the crucial decision of how to respond to the emerging Internet and its potential impact on Microsoft's core business.

3. Analysis of the Case Study

To understand Microsoft's strategic options, we can apply several frameworks:

a) Porter's Five Forces:

  • Threat of New Entrants: High, due to the low barriers to entry in the software industry and the rapid pace of innovation.
  • Bargaining Power of Buyers: Moderate, as customers have options for alternative software and operating systems.
  • Bargaining Power of Suppliers: Low, as Microsoft has strong relationships with hardware manufacturers and software developers.
  • Threat of Substitute Products: High, due to the emergence of new technologies like the Internet and the potential for alternative operating systems.
  • Competitive Rivalry: High, with intense competition from companies like Netscape, Sun Microsystems, and other emerging players.

b) SWOT Analysis:

  • Strengths: Strong brand recognition, dominant market share in operating systems, strong financial position, skilled workforce, strong relationships with hardware manufacturers.
  • Weaknesses: Limited experience in internet-based technologies, potential for complacency, reliance on a single product (Windows).
  • Opportunities: Growing Internet market, potential for new software products and services, expansion into new markets.
  • Threats: Competition from emerging players, potential for technology disruption, changing customer preferences.

c) Value Chain Analysis:

Microsoft's value chain is primarily focused on software development, distribution, and support. The company's competitive advantage lies in its ability to leverage its core competencies in operating systems and software development to create value for customers. However, the emergence of the Internet and the rise of new technologies like web browsers challenged Microsoft's traditional value chain.

d) Business Model Innovation:

Microsoft needed to adapt its business model to address the changing market landscape. This required embracing disruptive innovation and exploring new revenue streams beyond traditional software licensing.

4. Recommendations

To address the challenges and capitalize on the opportunities presented by the evolving technology landscape, Microsoft should implement the following recommendations:

a) Embrace the Internet:

  • Invest heavily in Internet-related technologies: Develop new software products and services specifically for the Internet, including web browsers, online services, and cloud computing solutions.
  • Acquire strategic companies: Acquire companies with expertise in Internet technologies and services, such as web browsers, search engines, and online advertising.
  • Partner with other companies: Form strategic alliances with other companies in the Internet space to share resources, knowledge, and technology.

b) Expand Internationally:

  • Target emerging markets: Expand into emerging markets with high growth potential, such as China, India, and Brazil.
  • Adapt products and services to local markets: Tailor products and services to meet the specific needs and preferences of different regions.
  • Develop a global marketing strategy: Develop a global marketing strategy to promote Microsoft products and services internationally.

c) Diversify Product Portfolio:

  • Develop new software products: Expand beyond operating systems and develop new software products in areas like office productivity, enterprise software, and gaming.
  • Explore new business models: Experiment with new business models, such as subscription services, cloud-based solutions, and freemium models.
  • Invest in research and development: Invest heavily in research and development to stay ahead of the technology curve and develop innovative products and services.

d) Foster a Culture of Innovation:

  • Encourage experimentation: Create an environment that encourages employees to experiment with new ideas and technologies.
  • Reward innovation: Reward employees who develop successful new products and services.
  • Embrace a 'fail fast' mentality: Encourage employees to learn from failures and quickly adapt to changing market conditions.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  1. Core Competencies and Consistency with Mission: The recommendations leverage Microsoft's core competencies in operating systems, software development, and IT management while aligning with its mission to empower people through technology.
  2. External Customers and Internal Clients: The recommendations address the evolving needs of both external customers and internal clients, such as businesses, consumers, and developers.
  3. Competitors: The recommendations are designed to address the competitive threat posed by emerging players in the Internet and software industries.
  4. Attractiveness - Quantitative Measures: The recommendations are expected to generate significant returns on investment, as the Internet and related technologies represent a vast and rapidly growing market.

6. Conclusion

By embracing disruptive innovation, expanding internationally, and diversifying its product portfolio, Microsoft can capitalize on the opportunities presented by the emerging Internet and maintain its position as a leading technology company. The company's success will depend on its ability to adapt to the rapidly changing market landscape, embrace new technologies, and foster a culture of innovation.

7. Discussion

Other alternatives not selected include:

  • Maintaining the status quo: This would have resulted in Microsoft losing market share to competitors in the emerging Internet space.
  • Focusing solely on operating systems: This would have limited Microsoft's growth potential and exposed it to greater risk from competitors.
  • Acquiring Netscape: While this would have given Microsoft control of the dominant web browser, it would have been a costly and potentially risky acquisition.

The recommendations are based on several key assumptions:

  • The Internet will continue to grow and become a significant part of the technology landscape.
  • Microsoft can successfully develop and market new products and services for the Internet.
  • Microsoft can successfully integrate acquired companies and leverage their expertise.

8. Next Steps

To implement these recommendations, Microsoft should:

  • Develop a detailed strategic plan: This plan should outline the company's goals, strategies, and tactics for achieving its objectives.
  • Allocate resources: Allocate sufficient resources to support the implementation of the recommendations, including financial resources, human capital, and technology.
  • Monitor progress: Regularly monitor progress towards achieving the company's goals and make adjustments as needed.

By taking these steps, Microsoft can navigate the challenges and capitalize on the opportunities presented by the evolving technology landscape and solidify its position as a leading player in the digital age.

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Case Description

Focuses on how Microsoft built one of the world's greatest franchises and poses questions about what, if anything, can stop the company. Teaching purpose: To teach building competitive advantage, the advantages of bundling, and the sustainability of competitive advantages over time.

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