Microsoft Strategy Analysis Essay Example

Microsoft and Yahoo! are the top leaders in terms of total number of subscribers, holding the majority market share for web-based email globally at 62.4% and in the US at 58.4%.

Instant messaging is used by 74.9% of people in the U.S. and 75.5% worldwide.

An anonymous source reports that Microsoft has a 57.6% share in the online business industry, while Yahoo! concentrates on internet search and media portals. By working together and utilizing each other's strengths, they can improve their competitive position and effectively compete against Google [2][3].

To fully grasp the background, advancements in technology, and business importance of the purchase, it is necessary to briefly examine the histories of Microsoft and Yahoo!. This analysis will shed light on how they reached their current standings. In 1975, Bill Gates and Paul Allen established Microsoft with the main goal of creating a BASIC interpreter for the Altair 8800 system. This led to the development of Microsoft.

In the 1990s, Microsoft gained widespread recognition for their Windows operating system, which became their most popular product. Nonetheless, prior to this accomplishment, they had already supplied IBM with platforms through their DOS system after winning a contract in 1981. Through partnerships with hardware manufacturers like Intel, Microsoft consolidated its position as a leading provider of platforms. [4]

As per sources [5], by 1993, Windows had become the most frequently used GUI operating system worldwide and is currently estimated to operate on more than 90% of all PCs globally [6]. In the 1990s, Microsoft ventured into various areas of the IT industry, engaging in competitive conflicts with companies such as Netscape in the "Browser War," Lotus in Spreadsheet, and WordPerfect in

document editing. Microsoft emerged victorious in each of these battles and became a dominating power in their respective sectors [6].

Despite not always being the leading technology provider or having the best solutions, Microsoft has achieved success in several areas. They won the "Browser War" by offering Internet Explorer for free on Windows and had satisfactory and user-friendly products on their dominant operating system. Furthermore, Microsoft has established a significant presence in various fields including web-based services, server software, enterprise database management systems, software development tools, and game consoles.

Since 2003, Microsoft has been striving to establish itself as a noteworthy rival in the internet search engine market. However, Google has maintained its dominance in this field since the early 2000s, surpassing both Microsoft's Live Search and Yahoo!. Despite Microsoft's endeavors, it achieved limited success.

To bridge the gap in this industry, Microsoft acquired Yahoo! in 2008.

The IT industry dominance strategies of Microsoft are a common concern for governments, especially the U.S. and E.U.

Microsoft was subjected to extensive and persistent government anti-trust lawsuits, alleging that the company had exploited its monopoly position in operating systems sales and bundled complementary software. In consequence of these legal actions, Microsoft was compelled to disclose technical information to third-party firms for enabling the production of compatible competing software for Windows [31] [32]. What's more, a substantial penalty was imposed on Microsoft by the E.U. court [32].

In 2007, Microsoft was the top software corporation in terms of profitability and dominance worldwide, earning $51.12 billion annually [9]. Despite facing criticism, their mission to empower individuals and organizations globally remains steadfast [10]. Microsoft's continuous efforts towards innovation in various IT industries have cemented

their position as a leader in the industry.

In 1994, Jerry Yang and David Filo established a directory to manage their personal online interests. This directory, called Yahoo!, became popular among internet users as a go-to source for useful websites. Yahoo! was officially incorporated in 1995 and became a major player in internet search and web portals by the late 90s [11][12]. Although Yahoo! suffered during the dot-com bubble burst in 2001, it survived and partnered with telecommunications and internet providers to offer content-rich services.

Although Yahoo! provides rich content, its primary focus, internet searching, failed to show progress which resulted in Google taking over its position[12][13]. Yahoo!'s objective is to link individuals with their passions, communities, and the world's knowledge. Prior to being acquired by Microsoft, Yahoo! held the second position as the most frequented search engine and furnished various services such as web-based email, instant messaging, video/photo sharing, and online communities. Search advertising is a substantial factor in Yahoo!'s business strategy.

The majority of Yahoo!'s revenue in 2006, around 88%, was generated from marketing services, with search advertising being the main source [11]. However, Yahoo! has been considered as underperforming in recent years due to its inability to keep up with Google's success in internet searching. The upcoming sections will explore the online advertising business model and include a competitive analysis and an examination of the online advertising game. In 1998, when Larry Page and Sergey Brin founded Google and created the PageRank algorithm, they acknowledged that advertising is the primary business model for commercial search engines [25].The current worth of the digital advertising industry is $40 billion and this amount is projected to double

within two to three years [26]. Google's first quarter revenue in 2008 was $5.1 billion, with 99% derived from advertising [27], while Microsoft's online services generated only $671 million but experienced a loss of $264 million during the same period [28]. There are various types of online advertising including search ads on internet search results, banner and video ads on web pages, email advertising (including spam), and advertisements through online communities. Among these markets, search advertising has undergone the most advancement.

Google, which dominates 77% of the search engine market [29], recognizes that display advertising presents a greater potential for growth. This is anticipated to be fueled by developments in internet video and is projected to rise to $15.1 billion. Moreover, search revenue is expected to reach $17.6 billion [29].

Although Google currently dominates the search market, experts believe that internet search is still in its early stages of development [8]. At present, only a fraction of online content can be searched and search engines are just starting to take user context into account. The future improvements in search algorithms and integration with other applications will have a major impact. Microsoft has the means and chance to catch up with Google by investing in research and development for their search technology. Additionally, they should investigate ways to merge existing Microsoft Office products with search for valuable opportunities.

Historically, Yahoo! has established itself as a hub for informative content pertaining to finance, news, and entertainment in the realm of display advertising. MSN has also garnered popularity in web-based messaging, email service, and internet-based communities. Through acquisition, Microsoft can now presume a leading position in terms of subscriber services and

a substantial online following. Should display advertising continue to expand, Microsoft stands to benefit significantly in this market segment.

Microsoft aims to assist individuals and businesses worldwide in reaching their full potential by offering valuable software solutions. Despite the rapid expansion of the online advertising market, Microsoft prioritizes developing software that supports customer growth. Consequently, comprehending how the internet affects the software industry is crucial for effective strategic planning.

In the 1990s, internet applications emerged alongside the dot-com bubble burst in the early 2000s. The computer industry underwent a significant change called "Web 2.0" due to advancements in broadband technology, network protocol, network security and more powerful machines on both server and client sides. This shift towards using the internet as a platform has resulted in new rules for success [18]. The upcoming introduction of the internet as a software platform presents challenges and opportunities for Microsoft's dominance in the PC operating system market that lasted over two decades.

Microsoft gained a significant edge in nearly every software market it pursued, thanks to its ability to consistently provide effortlessly operable solutions that served as the default option on Windows. Consequently, the operating system successfully established itself as the dominant system, with the technology locking-in effect further cementing its status. Furthermore, the growing number of users on Windows led to developers creating more applications for the platform, and this in turn attracted even more users.

Microsoft achieved unparalleled success by developing software solutions based on operating systems. However, the rise of the internet as an independent platform has altered this landscape. Now, software providers can offer their solutions via the web, without creating them specifically for one operating system.

This shift has eliminated the technology locked-in effect and enabled software providers to move away from the PC platform.

The decrease in demand for Microsoft's Windows system may lead to significant consequences. Additionally, the demand for their other software solutions may suffer due to the emergence of more online alternatives. Word and spreadsheet processors, as well as enterprise-level management software, are now accessible in web-based formats. As an illustration, Google provides word processing, spreadsheet, and presentation tools through Google Doc for no cost. Moreover, companies like Zoho offer a broader range of applications such as CRM and project management tools at an enterprise level [19]. Currently, these online solutions are not as competent as the desktop solutions.

Despite current issues such as slow performance, uncertain data security and restricted access to an application server while working on a network, the advancement of technology will eventually bring online applications up to the same level as desktop solutions. Microsoft should be prepared for this shift towards online solutions and take advantage of the opportunities presented by the growth of the internet. With its acquisition of Yahoo!, Microsoft can expand its software business into new high-growth markets and reach a larger audience in the online market due to its strong brand recognition.

A potential solution could be offering lightweight versions of MS Office that are easily accessible through Microsoft's web mail, instant messengers, and online community, similar to how Google includes Google Docs with Gmail.

2Open Source: The growing strength of Open Source software can be compared to its state a decade ago, when Entry barriers into the software market were much higher. With development tools available online,

software can now be created in a ubiquitous and collaborative way, both by developers and users across the globe. This situation led to the emergence of the Open Source Movement, which defines software as freely distributable with open source code that can be modified by anyone [20]. Open source software has already made impressive strides across several sectors, with Apache leading at 73%.

According to a recent survey by Securityspace [21], the web server market is divided among Microsoft with 18.22%, Securityspace with 18%, and Mozilla Firefox with 18.41% of the market share. Linux has been gaining popularity in the operating system sector, and Microsoft Office has alternatives such as OpenOffice available.

Open source software presents an alternative to Microsoft's licensed products, similar to online applications. The impact of open source goes beyond distribution and lies in the collaborative development philosophy, where software is shared freely within the community. This contradicts the development paradigm of proprietary companies like Microsoft [23], who own and copyright every code. If open source dominates in the future, Microsoft may need to change its operations to remain competitive. Microsoft's chief software architect, Ray Ozzie, believes that open source is a more disruptive competitor than Google [24].

Despite the ongoing debates about open source development's performance, security, and robustness compared to close source, it is evident that its usage has increased. Collaboration with open source vendors or developer communities can enhance Microsoft's competitive advantage while also carrying potential risks. A viable strategy could be for Microsoft to motivate open source vendors to produce Windows-compatible software by making a portion of Windows' code open source.

Should Microsoft choose to enter the realm of open source,

it has the potential to utilize its prevalent standing in PC platforms for a range of services such as consultation and installation by unveiling Windows. Nevertheless, substantial modifications will be necessary for the corporation to uphold its triumph in the virtual marketplace. As Microsoft maintains its primary position in software business for personal computers, it faces a considerable risk as it transitions into the online domain.

3. 3. 1The Software Development and Deployment Model of Microsoft has historically centered around closed-source, high-specification operating systems that are fully functional. For instance, with Windows as an illustration, a new version of the program frequently cannot operate on hardware that is older than three to four years. Nevertheless, it provides a comprehensive range of features that cater to the requirements of most users. This technique is now beginning to expose flaws due to the rapid expansion of the Windows code base, which requires additional time to produce new versions with significant modifications [33].

The delay of Windows Vista is a notable example, which has made it difficult to convince users to switch to newer versions. Statistics have shown slow uptakes of both Windows Vista and IE7 [34]. With the increased usage of the internet and the growing importance of pervasive computing, where people use various devices to access the network on-the-go, Microsoft should reconsider their core product's makeup. They should move away from an all-powerful, bulky operating system and towards alternatives that are lighter, more flexible, and offer greater mobility.

Microsoft needs to alter their development strategy by embracing open-source possibilities instead of solely increasing their team of developers for creating proprietary products. Although it may not be practical for

Microsoft to completely open-source Windows due to their reliance on licensing fees, they can still benefit greatly from offering specific peripheral features as open-source projects. This approach would reduce both the expenses and potential risks associated with development while simultaneously enhancing Microsoft's reputation within the online community.

Microsoft's business model for PC software may not translate to the internet software market, which presents a significant risk to the company. Unlike Microsoft's approach of selling software licenses, online applications are generally available for free on the internet. This makes it difficult to sell software at high prices. In contrast, Google uses its substantial advertising revenue to finance the creation of web-based applications and offers them for free in order to enhance brand recognition and search volume.

Microsoft is believed to want to compete with Google in the internet search and online advertising sectors [2] [3] [8] due to various reasons. Microsoft can develop its display advertising capability and capitalize on the expected growth of this market, along with competing in the search market, as discussed in section 3.1. While Google has solely relied on online advertising, Microsoft has its massive PC software business as its backbone and is positioned well to explore other potential business models in the internet age. One of these possibilities is transforming its high-profit product business model to lower profit but more sustainable service and software rental models.

Opportunities will arise in offering consultancy services to both enterprises and individuals during the shift from PC computing to internet computing. Additionally, renting online applications at a low cost can serve as a viable alternative to high-profit license fees. Microsoft has utilized a highly aggressive competition strategy

in the past to maintain their position against competitors.

During the "browser war," Microsoft bundled Internet Explorer with Windows to directly challenge Netscape's business model. Although this allowed Microsoft to quickly respond to competition, it ultimately resulted in a long-term antitrust lawsuit, leading to heavy fines and negative publicity. In the current internet computing market, this same strategy is unlikely to succeed due to potential political risks. Despite being ordered to split up at one point, Microsoft successfully appealed.

The primary cause for this transition is that Microsoft is no longer the predominant leader in the internet platform field. As a result, it has become increasingly challenging to establish their software as the standard that other developers follow. To move forward, Microsoft should adjust its approach and focus on improving its own capabilities. This may involve prioritizing technology research and development, acquiring superior technology, and forming strategic business partnerships. In terms of the SWOT Matrix, Microsoft's strengths can be summarized as follows:
1.

Strengths of the company include brand recognition, a successful business in PC software, improved online search share due to the acquisition of Yahoo!, a leading position in display advertising, a leading position in web-service subscribers and online audience, and the potential for Windows to attract the open source community. On the other hand, one weakness exists.

The development of new versions of Windows is faced with numerous challenges. The code base is expanding at a rapid pace, which poses obstacles in creating updates. Moreover, the Windows product composition is not ideal for pervasive computing during the internet era. In addition, aggressive competition strategies in the past have led to anti-trust issues and harmed

the company's reputation. The traditional business model for PC software is no longer fitting for internet computing; nevertheless, there are still prospects in this market area. Specifically, internet search presents an opportunity that remains largely untapped and has substantial potential for enhancement.

2. A 100% increase in display advertising is expected soon, while the shift from PC computing to web-based computing creates opportunities in the IT service industry (3). Collaborating with the open-source community presents prospects in the service sector (4), and joint efforts with them ease development pressure on Windows systems (5).

With the emergence of pervasive computing, there is a new demand for operating systems that are lighter, more flexible, and have greater mobility. To meet this demand, there are several SO strategies to consider:

1. S3 O1: Focus on research and development of search technology.
2. S2 S3 O1: Explore opportunities to integrate search with existing products like Microsoft Office.
3. S4 S5 O2: Develop display advertising capability with an eye on market growth.

The text suggests the development of an IT service as a business model, which can be achieved through three WO strategies. The first strategy involves partially open-sourcing Windows and promoting collaboration between closed-source corporate development and the open-source community. The second strategy involves allocating resources towards investing in a lighter, simpler, and more flexible operating system. Finally, the third strategy is unclear from the given text. The entire text is enclosed in HTML paragraph tags.

The internet age provides new business opportunities, including IT services. To adapt, exploring new business models is crucial. However, there are also threats to consider, such as Microsoft's lag in the search market compared to Google. Additionally, online applications and open-source software

have emerged as alternatives to Microsoft's offerings. Furthermore, the internet has become a platform alternative to Windows.

Microsoft's new product versions are being adopted slowly by customers, while the risk of ongoing political implications due to anti-trust lawsuits persists. The strategy to address these issues is to focus on research and development of search technology in S3 T1.

WT Strategies:
1. W1 W3 T5: Encourage cooperation between close-sourced corporate development and open-sourced community by allowing Windows to be partly open-sourced.
2. S2 S3 T2 T4: Provide an online equivalent of the current product for web-service subscribers and the online audience.
3. S6, T3: Promote the development of software compatible with Windows by the open source community.

2. According to W3 T6, it is suggested that Microsoft should implement strategies that prioritize enhancing technology capability rather than attacking competitors. Instead, they should focus on forming business alliances. After analyzing the SWOT matrix, it is recommended that Microsoft adopt the following strategies: 1. Promote a culture of collaboration rather than aggressive competition.

Microsoft's plan to target the internet computing market involves a revamp of its business model, with an emphasis on the IT service sector. This will entail providing consulting services to aid clients in transitioning from PC computing to internet computing. The company also plans to offer consultancy and installation services for open source software. Furthermore, Microsoft intends to integrate the concept of open source development into its own software development endeavors.

Collaborate with the open source community to enhance the utilization of open-source software on Windows, while restructuring products to better suit the needs of pervasive computing users. Prioritize research and development in advanced search technology, integrating search features into existing

products and enhancing digital advertising capabilities.

The Media Advisory from ComScore, located at http://www, indicates that both web service subscribers and online users will be given identical products.

In 2008, comscore.com conducted a study which revealed a clash in the cloud computing market between Microsoft and Google. The Economist also covered this study on their website at http://www.economist.com/.

In February 2008, the BBC News website reported on the search for the next big thing. They included a hyperlink to their article at http://news.bbc.co.uk/1/hi/technology/7226100.

For information on Microsoft's history, you can check out the "History of Microsoft" page on Wikipedia. This page was last updated in 2008. Alternatively, the History of Computing Project offers further insights into Microsoft, including its founding date of September 15th, 1975.

Marketshare.hitslink.com's 2008 report on Operating System Market Share highlights Microsoft as a leading company in this industry. Additionally, Michael A. Cusumano's book, The Business of Software, published in 2004, offers further analysis of the sector.

The text discusses two sources: an article titled "Gates VS. Google: Search and Destroy" by Fred Vogelstein from Fortune in 2005, and Microsoft's fourth quarter FY 2007 earnings release which revealed annual revenue exceeding $50 billion. Additionally, the source "About Microsoft" from the Microsoft website is mentioned. The text is enclosed in a paragraph element.The allow access to various sources of information, such as Microsoft.com/about 11, Yahoo!'s Wikipedia page available at http://en.wikipedia.org/wiki/Yahoo, and The History of Yahoo! – How It All Started found on the Yahoo! website at http://docs.The BBC News article titled "Can Yahoo revive its digital dream?" is available at http://news.bbc.co.uk/yahoo.com/info/misc/history.html.The HTML text has a BBC News website hyperlink (http://news.bbc.co.uk/2/hi/business/6765997.stm) from 2008 related to UK business news. Additionally,

there are two other hyperlinks within HTML paragraph tags that direct to Wikipedia pages on Google (http://en.wikipedia.org/wiki/Google).The following information about Google is provided: an article titled "Is Google good for you?" from BBC News with a URL of http://news.bbc.co.uk/2/hi/technology/3334531.stm that was published in 2003, and Google Milestones from the Corporate Information section of the Google website at http://www.google.com. This information is enclosed in a

HTML tag.

Within this paragraph, we find a website link for a corporate history page, a reference to Fortune Magazine's 100 Best Companies to Work For in 2007, and information on Tim O'Reilly's definition of Web 2.0 from 2006.

The website URL http://www.zoho.com/ is followed by a reference to the Open Source Definition, provided by the Open Source Initiative at www.opensource.org/docs/osd.The Securityspace website offers the 2008 Web Server Survey, which was performed on May 22, 2008. The survey's data can be accessed at http://www.securityspace.com/s_survey/data/200805/index.html.

Information on browser market share can be found at http://marketshare.hitslink.com for the year 2008. Asif Khalak from the Massachusetts Institute of Technology has created an economic model to measure the impact of open source software, which is referenced as number 23. Mary-Jo Foley from ZDNet reports on a statement made by Ozzie claiming that open source software is a more disruptive competitor than Google; this article can be found at http://blogs.

On zdnet.com/microsoft/?=1418 25, the article "The anatomy of a large-scale hypertextual web search engine" by Sergey Brin and Lawrence Page from 1998 and "How will Microsoft snare digital ads?" from BusinessWeek can be found.

The first quarter 2008 results for Google and the first quarter 2008 earnings for Microsoft can be found respectively at http://investor.google.com/releases and http://www.businessweek.com, according to

businessweek.com in 2008.

microsoft.com, 2008 29. Inside Microsoft's War Against Google, an article by Jay Greene from Business Week at http://www.businessweek.com, published in 2008 30. Anmuth's thoughts on EconAds: Search is solid, but the real activity is in Display, available at paycontent.

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contains information regarding the United States Microsoft antitrust case on the website Wikipedia, as well as a link to the website http://www.paidcontent.org and the year 2008.Below are three sources related to Microsoft, including:

• The United States Microsoft antitrust case
• The European Union Microsoft competition case
• 'Windows is 'collapsing,' Gartner analysts warn.'

In 2008, Gregg Keizer wrote an article on computerworld.com reporting that Forrester had found enterprises were disregarding Internet Explorer 7 and Windows Vista. The original source of the article can be accessed at http://www.computerworld.com/article/9076698.The article entitled "Computerworld.com - Action Article" published in 2008 can be viewed by using the following :

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