The History and Advertising Strategy of Microsoft Company

Microsoft Case Study

Microsoft responds to competitors and rivals by creating and revolutionizing new applications and services for their users to do their best. The case study talks about multiple times where Microsoft was up against a rival or competitor that posed a threat and Microsoft was still able to gain an advantage. Apple released Macintosh and Microsoft responded right away with Windows 1.0, believing it was a superior operating system. Lotus was controlling the domain at first but Microsoft was able to conquer them by offering a superior, easier to use and bundled product to beat them.

Microsoft often offers bundles, such as combining Microsoft: Word, PowerPoint, art and excel, and deals to get the advantage over their competitors, such as bundling windows with internet explorer. At its peak Microsoft held a 95% market share but was then hit with an antitrust case that limited them to its bundling deals down the road. After the antitrust case Microsoft went to a cost leadership strategy trying to lower its cost and sell for a lower price. They then beat Linux by offering smaller bundles and lower costs which made it difficult form Linux to gain a foothold in the industry and was then soon left by the wayside. They face other challenges from Java, WordPerfect and Lotus 1-2-3, but were able to maintain the vast market share by sticking true to their ideals of superior products at a lower cost.

Throughout their history Microsoft has been able to rely on its ability to create a superior product at a low cost to beat any competitor. Google was able to create a competitive advantage by being the first in the industry. It was the innovator for the search industry and had amazing success with their unique product. Google was able to gain a monopoly early with their product and high barriers to entry. Google also used the cost-per-click advertising which meant that advertisers only paid for advertising when the user clicked on the ad.

This advertising strategy of the cost per click allowed advertisers to get instant feedback because it was simply are people clicking on our ads or not and it was shown in their revenue for each ad. This feedback was highly useful for advertisers and this made even more advertisers to want to get in on googles new strategy. This created their economic value. This created an economic value for google and allowed google to shift to a customer oriented approach and thus gave them an even bigger competitive advantage, allowing them to grow and have 63.5% of the search engine market shares by November 2008 (exhibit 3).

In 2015 google received over $17 billion in revenue from ads alone which was up 12% from the previous year and was part of a constant growth every year. Being the first in the industry, innovating, and giving the best experience to the customer helped them have over 400,000 advertisers, more than yahoo and Microsoft. Microsoft only had 8.3% of the market share in November 2008(exhibit 3) and this was due to the, as the Microsoft team worded it, a “vicious cycle”. Although Microsoft was 3rd in the search industry, which would normally be a decent market share, it was still not enough to come close to competing with google.

A way to put this into perspective is that Coca cola has a 48% market share compared to PepsiCo’s 21%. Although the difference between them is only 27%, Coca-Cola is still the main provider of soft drinks for 25 of the top 35 fast food chains. Cokes revenue difference compared to PepsiCo’s last year regarding soft drinks alone was a difference of over $19 billion. Google had a 3.5% market share which is almost half of the Coca-Cola share. The difference between the Microsoft and google market shares was 55.2% and yet Microsoft was still trying to manage and compete in that industry.

The Coke vs Pepsi example is only one real world example of how every small market share difference impacts the industry by millions of dollars. Google had a massive competitive advantage and market share compared its competitor’s yahoo and Microsoft.Microsoft is well known for being an innovator and offering amazing products and prices and it continued the trend into the search and search related advertising. They couldn’t leave a market so ripe open. While google focused on the cost per click advertising and was gaining more and more market share that was soon competing with Microsoft, Microsoft realized it was time for some economic value creation.

The search industry had many unknowns around it and at first did not seem attractive to many consumer or companies. Microsoft had been the dominant power in the computer and software industry but once google started to gain market share and power Microsoft went on the defensive. A company like Microsoft that has been in power since 1975; and has overcome past competitors by relying on what they do best, creating great products at a lower price than its competitors. They were not going to let google change that. Microsoft’s strategy included fighting back against googles cost per click advertising with search and search related advertising but it also couldn’t attack departments it was not fully familiar with in the danger of spreading to thin and allowing other competitors to enter and take control from under their huge domain. They kept on creating new products for a cheaper price than other competitors and tried to hold onto its internet browser market that it was dominantly controlling but soon google came out with google chrome and it has been a battle since with the favor slowly tipping to google chrome in recent years.

Their defensive strategy held competitors at bay in many areas but some were too competitive to control. Although their strategy was defensive and tried to not let google gain to much of the market share and expand into other departments it sadly did not work and they allowed google to enter the internet browser department and has allowed them to gain a foothold with their google chrome internet browser. Microsoft should continue what it has always done but with a slightly more product differentiation strategy.

In the past, Microsoft has beaten its competitors by offering a better product at a lower price and it should remain doing so but with a few more markets. Microsoft is renowned for its bundles such as Microsoft word, PowerPoint and art but one thing it has yet to fully tap into is the cloud. Apple has already moved to cloud computing so it can offer its customers constant updates and bug fixes has allowed for customers to remain satisfied for longer. In a recent article by Forbes magazine it talks about how Apple is able to process shipping updates within weeks instead of months and projects that usually take years are able to be done in months because the cloud computing.

Cloud computing is a network of servers hosted on the internet and not on local servers or personal computers. This allows for them to spread the work around, have more people work on it and everyone understand what is needed and what is being done. Using cloud computing Microsoft can manage its resources far better, allow for Microsoft consumers to have access to more of their Microsoft products all at once and be able to constantly update and improve themselves. Cloud computing will allow Microsoft to be able to have multiple devices and programs all manageable from one device for the consumer.

Apple has done it with its own IPhone’s. You can take a picture on your phone and due to cloud computing it will be able to show up on your Mac book. Microsoft already has a wide range of products from their phones to computers to their gaming systems. Microsoft currently has 82.88% of the global desktop market share with windows and sold over 6.23 million Xbox ones in 2016 alone (statista.com). This means that they own a large amount of the desktop market shares and millions of people have an Xbox. With so many people owning multiple Microsoft products it would be a great value if they could be connected. Microsoft currently uses cloud computing to monitor corporate graphs such as Office 365 and Azure portfolio services and this has allowed the company to “gain valuable insight into the corporate trends.”(Forbes.com) Using cloud computing can allow people to stay connected through all their devices and I believe that Microsoft has not yet penetrated that kind of market.

Works Cited:

1. Gordon, Kyle. “Topic: Microsoft.” Statista, www.statista.com/topics/823/microsoft/.
2. Lutz, Ashley. “See Which Major Restaurants Serve Coca-Cola Vs. Pepsi.” Business Insider, Business Insider, 17 Dec. 2013, www.businessinsider.com/restaurants-that-serve-coke-vs-pepsi-2013-12.
3. Gordon, Kyle. “Topic: Google.” Statista, www.statista.com/topics/1001/google/.“
4. Coca Cola: Beverage Market Share 2015.” Statista, www.statista.com/statistics/387318/market-share-of-leading-carbonated-beverage-companies-worldwide/.
5. “Microsoft's Search.” Harvard Business Publishing, hbsp.harvard.edu/download?url=/courses/541540/items/709461-PDF-ENG/content&metadata=e30=.
6. Lopez, Maribel. “7 Reasons to Give Microsoft's Strategy Another Look.” Forbes, Forbes Magazine, 19 Apr. 2016, www.forbes.com/sites/maribellopez/2016/04/19/7-reasons-to-give-microsofts-strategy-another-look/#39f072ec7dd0.
7. Mcgraw Hill online text book .