Microsoft Diversification Strategy Final
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Microsoft has diversified its business across various industries including software, hardware, online services and more. It reorganized into three divisions focused on platforms and services, business solutions, and entertainment/devices. This diversification strategy was in response to market changes and helped Microsoft expand beyond its core desktop software business into new growth areas as the IT industry evolved. Continued diversification will be important for Microsoft to adapt to future industry shifts.
Microsoft Diversification Strategy Final
- 1. DiversificationStrategyPresented By:Rahul Kumar (10/PMB/075)
- 2. Company ProfileIndustry : Computer software, Consumer electronics Computer hardware, Video games IT consulting, Online advertising, Automotive softwareFounded: April 4, 1975 , Albuquerque, New Mexico Founder(s) Bill Gates Paul AllenHeadquarters One Microsoft Way Redmond, Washington, United StatesKey people Steve Ballmer (CEO) Brian Kevin Turner (COO) Bill Gates (Chairman) Ray Ozzie (CSA) Craig Mundie (CRSO) Revenue $62.484 billion (2010)Operating income $24.098 billion (2010)Profit $18.760 billion (2010)Employees 89,000 (2010) Website www.microsoft.com
- 3. HistoryFounded By Bill Gates with Paul AllenStarted selling a version of BASIC (a programming language) with Altair1980, IBM selected Microsoft to develop a OS for its PCsPaul Allen left Microsoft in mid 1983sMicrosoft introduced Windows in mid 1980s1993, it introduced Windows NT to competed with UNIX
- 4. History cont.1998, US Justice department filed antitrust charge that Microsoft had stifled Internet Browser competition and limited consumer choice1995, Founded Microsoft Network (MSN)Experienced toughest economic downturn due to burst of dot-com bubbleAimed to position its OS and to diversify in the other software, IT services and other web based serives
- 5. Development factors in Emerging IT IndustryCustomers were expecting to get more out of their technology investmentsProcurement department became more involved in the IT purchasing processIn Addition, CEOs became more demanding of the return on Investment (ROI) on new technology spendings
- 6. IT Spendings of companiesFirst annual decline after 1958
- 7. Trailing 3 calendar year revenue and operating profit CAGR** based on three year growth figures for operating income, excluding certain items and stock based compensation expense for calendar year 2003. A reconciliation of the non-GAAP measures presented above to to reported GAAP operating income for the relevant periods can be found in slide #13.
- 8. Towards the next big thingAlthough the IT industry looked rather gloomy in 2006, analysts predicted, based on previous cycles, that industry would take off again in 2007 or 2008. In particular a number of factor would drive the next growth cycle for the technology. Some foresaw that software spending would reach US$325 billion by 2008, and the growth rate of the market was expected to be in the range of 3% to 7% annually.
- 9. FactorsService Oriented Architecture and Web ServicesEnterprise Software
- 13. Bridge between desktop and Internet computing
- 14. Web based Enterprise Applications
- 16. Embedded devices
- 17. RFID
- 18. Biometrics
- 19. Social Computing
- 20. Gaming and Internet TV, Entertainment , IM, Blogging, streaming, Marketing and MediaWhat does Microsoft’s business model look like today?Diversified Business ModelCustomer type data based on fiscal year to date information.
- 22. Strategic RepositioningIt followed low level of Diversification as its main focus of business was centric i.e. in Software and Web based Services. The Desktop software market was MaturedContinued to diversify in Non-PC Markets and expanded into enterprise software, Consumer product and Service market.Re-Organized the company into three unitsPlatform Product and Service DivisionBusiness DivisionEntertainment and Device Division
- 23. Platform Products and ServicesVentured into service market through MSNInformation search, Email (Hotmail), IM, Online shopping and GamesPurchased WebTV Networks for MSN TVHotmail plus, MSN Music, Radio PlusAdopted Lego-Like development Approach
- 24. In 2005, acquired Groove Networks (a software maker), Sybary Software (an antivirus security provider) and Front Bridge (a email security developer)Business DivisionThe second most money-generating divisionProviding similar software as free online services like Google and other playersAggressively pursued opportunities with small and midsized enterprises instead of competing with SAP and OracleAcquired Great Plains Software and formed Microsoft Business Solutions.Offered wide range of software applications including accounting, CRM, SCM, E-Commerce etc.
- 25. Entertainment Device DivisionEntered into video gaming in 2001Launched Xbox ConsoleGave tough competition to Sony’s Play station 2Launched Xbox 360 against Play station 3Ventured into Mobile Communication market
- 26. Persuaded operators to develop windows based phones
- 27. Established as a leading IPTV technology provider
- 28. Formed a partnership with NBC Universal Cable and formed MSNBCKey Competitors
- 29. Looking Ahead…..Bill Gates knows how to compete with anyone who charges money for products… but his head explodes whenever he has to go up against anyone who gives away products for free - George Colony Chairman & CEO, Forrester ResearchBy pursuing diversification strategy Microsoft continued to move beyond its comfort zone.Continued to hold monopoly in OS market, the only product that could challenge Microsoft’s dominant position would be LinuxMSN Services were another critical component in its diversification strategy.
- 30. Microsoft, Google, and Yahoo! Had been fighting fiercely to become the primary gateway to the internet or the leading Web PortalSAP and Microsoft had been in partnership to jointly develop a product.Microsoft would be competing with playersSony, Apple, iMac, iPod, & Electronics Segment
- 31. ConclusionWith it Diversification Strategy, Microsoft had entered various new market in which it had no proprietary advantage.To Sustain in a fast changing competitive landscape, It had to significantly leverage existing and new partners with established players in the newly targeted industries Need to monitor the dynamic changes in the relevant ecosystems and adjust it alliance in markets