Rotterdam, March 31, Rotterdam, March 31, 20042004Group 8 - Section B

Oscar Bernaldez / Pablo Franzini / Masa KijimaAlessandro Piloni / Nikolaos Platis / Iris Tang

Microsoft Corporation is one of the Microsoft Corporation is one of the

most successful companies in the most successful companies in the

world. This is our analysis of its world. This is our analysis of its

present situation, its success factors, present situation, its success factors,

the threats that challenge it and our the threats that challenge it and our

recommendations for the futurerecommendations for the future

PRODUCTS CAN BE GROUPED IN PRODUCTS CAN BE GROUPED IN THREE CATEGORIESTHREE CATEGORIES

PC Experience : Desktop Software PC Experience : Desktop Software

Server and Business : Server Server and Business : Server

SoftwareSoftware

Consumer & DevicesConsumer & Devices

THE MAIN PRODUCTS AND SERVICES OF THE MAIN PRODUCTS AND SERVICES OF EACH CATEGORY ARE THE FOLLOWING, EACH CATEGORY ARE THE FOLLOWING,

ERP and CRMERP and CRM

Windows ServerWindows ServerDeveloper toolsDeveloper toolsConsultingConsultingTrainingTraining

XboxXbox

PC and Online gamesPC and Online games

TV Platform TV Platform

MSN NetworkMSN Network

MSN AccessMSN Access

PC Windows O/SPC Windows O/S

Pocket PCPocket PCSmart PhonesSmart PhonesMapPointMapPointWindows Device Windows Device O/SO/S

Office SystemOffice System

WINDOWS FOR PC, OFFICE AND WINDOWS FOR PC, OFFICE AND SERVERS O/S ARE THE MAIN REVENUE SERVERS O/S ARE THE MAIN REVENUE SOURCESSOURCES

Windows for ServerWindows for Server22% 22%

MS OfficeMS Office29%29%

ERP & ERP & CRMCRM6%6%

Windows for PCWindows for PC 32% 32%

Home & EntertainmentHome & Entertainment9%9%

MSNMSN2%2%

Mobile and Mobile and Embedded Embedded

DevicesDevices

Revenue Breakdown 2003Revenue Breakdown 2003

MICROSOFT IS DEFINITELY THE MARKET MICROSOFT IS DEFINITELY THE MARKET LEADER OF ITS MAIN PRODUCTSLEADER OF ITS MAIN PRODUCTS

0

10

20

30

40

50

60

70

80

90

100

2002 2003

Windows Linux Unix Others

Market Shares

69 %

Desktop O/SDesktop O/S

Source: IDC, 2004Source: IDC, 2004

93 %

58 % 58 %

Servers O/S Servers O/S

0

10

20

30

40

50

60

70

80

90

100

2002 2003

Windows Linux Unix others

58 % 60 %

MICROSOFT SUCCESS IS BASED ON MICROSOFT SUCCESS IS BASED ON VALUE, COST AND SPEEDVALUE, COST AND SPEED

Recognize a specific Recognize a specific needneed

Find Find the existing product that meets the the existing product that meets the

need and shape it with in-house need and shape it with in-house

developers developers

BundleBundle it with other products it with other products

MarketMarket the product or Service the product or Service

Open standardsOpen standards to ISVs to ISVs

UpgradeUpgrade the technology periodically the technology periodically

MOST HIGHLIGHTED EXAMPLES ARE: MOST HIGHLIGHTED EXAMPLES ARE: DOS, GUI, OFFICE AND EXPLORER DOS, GUI, OFFICE AND EXPLORER

DOS: purchased for $50k, developed and sold to IBM

GUI (Windows): copied Apple Macintosh and made it compatible

Office: Completed a package of software

Explorer: Bundle it with Windows

Business Solutions: Entered to the ERP-CRM market acquiring two companies two companies

MICROSOFT HAS A VERY SUCCESSFUL MICROSOFT HAS A VERY SUCCESSFUL MARKETING STRATEGYMARKETING STRATEGY

The Marketing MixThe Marketing Mix

PPricerice Build Bundles: Windows, OfficeBuild Bundles: Windows, Office Price differentiation: OEMs, RetailPrice differentiation: OEMs, Retail

PProduct:roduct: Understand the need, find the Understand the need, find the product, open standards, upgrade product, open standards, upgrade

PPlace:lace: Marketed mainly by OEMs, also Retail Marketed mainly by OEMs, also Retail

PPromotion:romotion: Not massive campaigns, PR Not massive campaigns, PR

MICROSOFT IS FACING SIGNIFICANT CHALLENGES TO ITS DOMINANT POSITION

Brand Recognition Flexibility despite of

size Customer driven

(needs) $49bn cash …

Favorable market position

Any device needs software

…

Narrow view of the software industry. i.e.: internetDependency on hardware manufacturersCustomer driven (technology weakness)Executing on multiple fronts…

SecurityLinux and non commercial softwareContinued legal risk…

S W

O T

MICROSOFT IS GOING TO THE FAST MICROSOFT IS GOING TO THE FAST GROWING CONSUMER AND DEVICES GROWING CONSUMER AND DEVICES BUSINESSBUSINESS

Industry AnalysisIndustry Analysis

1. Low bargain power of suppliers: Many Employees and ISVs

2. High bargain power of buyers: Hardware Vendor have many options

3. High barriers to entry: Requires Large investments

4. High threat of substitutes: Plenty of substitutes (Cell phone/PDA …)

5. Influence of complements: For example video games and digital music

6. High industry competition: based on technology, price and compatibility, big

players

MICROSOFT HAS TO DEAL WITH THE MICROSOFT HAS TO DEAL WITH THE RAPID GROWTH OF LINUX RAPID GROWTH OF LINUX

SummaryTechnological

superior productFreeMore complex to

manageSwitching costs from

Windows are lowAmazon.com and

Google run on LinuxSource: Cnet News 2004Source: Cnet News 2004

BUNDLING IS THE MAIN REASON OF BUNDLING IS THE MAIN REASON OF LEGAL DEMANDS IN THE UNITED LEGAL DEMANDS IN THE UNITED STATES AND EUROPESTATES AND EUROPE

Windows O/S

ExplorerOutlook

Media PlayerEuropean

Commission

Microsoft vs. Monti: Media PlayerDisclose software information

Fine: Euro 497.2m

Precedent for the future of the monopoly

HIGHLIGTH OF MICROSOFT HIGHLIGTH OF MICROSOFT STRATEGY THROUGH TIMESTRATEGY THROUGH TIME

Contingent Contingent

StrategyStrategy

ConstantConstant

StrategyStrategyDrive key Competitors out of business

Follower of new technologies, pragmatist approach

Form and exploit Key Alliances

DOS Era

Copy & Adapt Low Costs

Force MSStandardsCreate HighBarriers of entry

Windows Era Acquisitions

SpreeExpansion Across SectionsMonopolistic Tactics

Internet & Mobile Era

OUR RECOMMENDATIONS FOR THE OUR RECOMMENDATIONS FOR THE FUTUREFUTURE Reduce Dependency on Desktop OS

Expand to Mobile Telecommunications sector

Balance R&D investments and Acquisition technology

Create Alliances with key players in other industries

Keep Lobbying to face legal threats

Rotterdam, March 31, 2004Rotterdam, March 31, 2004

Provide Incentives for ISVs to develop on Microsoft OS