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A PROJECT REPORT ON INTERNATIONAL STARATEGY OF MICROSOFT CORPORATION FOR MODULE 5 (IB)

SUBMITTED TO: MRS CHETNA MAKWANA MRS NILAM PANCHAL

PREPARED BY: SAMSHA VIRANI (1026) BHUMIKA SURTI (1055)

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Introduction 1.1 Profile 1.2 Products: 1.3 Business Division 1.4 Entertainment And Devices Division 1.5 History Of Software Industries Porter Five Force Analysis SWOT Analysis Of Microsoft Corporation Strategies Followed (1975 – 2009) 4.1 Microsoft's International Strategy Entry Mode 4.2 Changes In Microsoft's International Strategy Entry Mode 4.3 Stages In The Industry Life Cycle International Business-Level Strategy 5.1competing With Products And Standards 5.2 Defining Products And Development Processes 5.3 Developing And Shipping Products International Corporate-Level Strategies 6.1 Global Strategy 6.2 Diversification Strategy: Related Diversification Conclusion

CHP-1 INTRODUCTION
Microsoft Corporation (NASDAQ: MSFT and NYSE: MSFT) is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions. Established on April 4, 1975 to develop and sell BASIC interpreters for the Altair 8800, Microsoft rose to dominate the home computer operating system market with MS-DOS in the mid-1980s, followed by the Microsoft Windows line of operating systems. Microsoft would also come to dominate the office suite market with Microsoft Office. The company has diversified in recent years into the video game industry with the Xbox and its successor, the Xbox 360 as well as into the consumer electronics and digital services market with Zune, MSN and the Windows Phone OS. The ensuing rise of stock in the company's 1986 initial public offering (IPO) made an estimated three billionaires and 12,000 millionaires from Microsoft employees (Forbes 400 list revealed that in March 2011 both Jon Shipley and Nathan Myhrvold lost their billionaire status). In May 2011, Microsoft Corporation acquired Skype Communications for $8.5 billion dollars. Primarily in the 1990s, critics contend Microsoft used monopolistic business practices and anticompetitive strategies including refusal to deal and tying, put unreasonable restrictions in the use of its software, and used misrepresentative marketing tactics; both the U.S. Department of Justice and European Commission found the company in violation of antitrust laws. Known for its interviewing process with obscure questions, various studies and ratings were generally favorable to Microsoft's diversity within the company as well as its overall environmental impact with the exception of the electronics portion of the business.

1.1 Profile of microsoft
Type: Traded as: Public NASDAQ: MSFT, NYSE: MSFT, Dow Jones Industrial Average Component, NASDAQ100 Component, S&P 500 Components, OTC Markets Group: MSFT Industry: Computer software, Consumer electronics, Digital distribution, Computer hardware, Video games, IT consulting, online advertising, Retail stores, automotive software Founded: Albuquerque, New Mexico (April 4, 1975) Founder(s): Bill Gates, Paul Allen Headquarters: One Microsoft Way Redmond, Washington, United States Area served: Worldwide Key people: Steve Ballmer (CEO), Bill Gates (Chairman)

1.2 Products:
For the 2010 fiscal year, Microsoft had five product divisions: Windows & Windows Live Division, Server and Tools, Online Services Division, Microsoft Business Division, and Entertainment and Devices Division. Windows & Windows Live Division, Server and Tools, Online Services Division  The company's Client division produces the flagship Windows OS line such as Windows 7; it also produces the Windows Live family of products and services. Server and Tools produces the server versions of Windows, such as Windows Server 2008 R2 as well as a set of development tools called Microsoft Visual Studio, Microsoft Silverlight, a web application framework, and System Center Configuration Manager, a collection of tools providing remote-control abilities, patch management, software distribution and a hardware/software inventory. Other server products include: Microsoft SQL Server, a relational database management system, Microsoft Exchange Server, for certain businessoriented e-mail and scheduling features, Small Business Server, for messaging and other small business-oriented features; and Microsoft BizTalk Server, for business process management.  Microsoft provides IT consulting ("Microsoft Consulting Services") and produces a set of certification programs handled by the Server and Tools division designed to recognize individuals who have a minimal set of proficiencies in a specific role; this includes developers ("Microsoft Certified Solution Developer"), system/network analysts ("Microsoft Certified Systems Engineer"), trainers ("Microsoft Certified Trainers") and administrators ("Microsoft Certified Systems Administrator" and "Microsoft Certified Database Administrator"). Microsoft Press, which publishes books, is also managed by the division. The Online Services Business division handles the online service MSN and the search engine Bing. As of December 2009, the company also possesses an 18% ownership of the cable news channel MSNBC without any editorial control; however, the division develops the channel's website, msnbc.com, in a joint venture with the channel's co-owner, NBC Universal.

1.3 Business Division
Front entrance to building 17 on the main campus of the company's Redmond campus.  The Microsoft Business Division produces Microsoft Office including Microsoft Office 2010, the company's line of office software. The software product includes Word (a word processor), Access (a relational database program), Excel (a spreadsheet program), Outlook (Groupware, frequently used with Exchange Server), PowerPoint (presentation software), and Publisher (desktop publishing software). A number of other products were added later with the release of Office 2003 including Visio, Project, MapPoint, InfoPath and OneNote. The division also develops enterprise resource planning (ERP) software for

companies under the Microsoft Dynamics brand. These include: Microsoft Dynamics AX, Microsoft Dynamics NAV, Microsoft Dynamics GP, and Microsoft Dynamics SL. They are targeted at varying company types and countries, and limited to organizations with under 7,500 employees.[57] Also included under the Dynamics brand is the customer relationship management software Microsoft Dynamics CRM, part of the Azure Services Platform.

1.4 Entertainment and Devices Division
The Entertainment and Devices Division produces the Windows CE OS for embedded systems and Windows Phone for smartphones.[58] Microsoft initially entered the mobile market through Windows CE for handheld devices, eventually developing into the Windows Mobile OS and now, Windows Phone. Windows CE is designed for devices where the OS may not directly be visible to the end user, in particular, appliances and cars. The division also produces computer games that run on Windows PCs and other systems including titles such as Age of Empires, Halo and the Microsoft Flight Simulator series, and houses the Macintosh Business Unit which produces Mac OS software including Microsoft Office 2011 for Mac. Microsoft's Entertainment and Devices Division designs, markets, and manufactures consumer electronics including the Xbox 360 game console, the handheld Zune media player, and the television-based Internet appliance MSN TV. Microsoft also markets personal computer hardware including mice, keyboards, and various game controllers such as joysticks and gamepads.

Vision of Microsoft: Mission of Microsoft:

“A personal computer in every home running Microsoft software.”

“At Microsoft, our vision and values are to help people and businesses throughout the world realize their true potential.”

Values at Microsoft: As a company, and as individuals, we value integrity, honesty,
openness, personal excellence, constructive self-criticism, continual self-improvement, and mutual respect. We are committed to our customers and partners and have a passion for technology. We take on big challenges, and pride ourselves on seeing them through. We hold ourselves accountable to our customers, shareholders, partners, and employees by honoring our commitments, providing results, and striving for the highest quality.

1.5 History of software industries
The software industries started in the early 1960s when university and businesses first began to use computer to do certain computing task. The software programs were written in-house by full-time staff programmers. Some were distributed freely for no charge. But there are some done on commercial basis. The first standard software firms started in the United States in 1959-1960. In the mid 1970s the software industries start expanding with the rise of personal computer market. This has lead to the growing market for games, applications, and utilities. Gradually the concept that software should be brought and paid for took hold. In the early years of the 21st century, another business model has arisen for hosted software, called software as service (SaaS). This reduces the concern about the software piracy, since it can only be accessed through the web, and by definition no client software is loaded onto the end user’s system

CHP -2 Porter five force analysis

1. High Potential competitor
In software industry people are less concerned about the brand name associated with the product. What really matter is the quality of the product. So whether it is an existing brand or a new brand, the product sells because of its content, usability and cost. There is very little customer brand loyalty in software industry. Any new firm with potential human capital and innovative technology can give a thread to existing firms. As per the government rule there is no preventive rule for the new entry into the market. So, it is easier to make an entry into the market. Currently there is a threat from the mobile manufacturing companies like Nokia to enter into software industry. Such threats are notable because in future people want more flexible and portable forms of gadgets.

2. High competition from established firms
Software industry is a highly competitive industry. Microsoft has many competitors in different product divisions: Business, client, entertainment & devices, online services and server& tools. Linux remains the chief Microsoft competitor in the Desktop and Server division. Linux operating system, which is derived from the UNIX and is available without payment under a general public license, has gained some acceptance as competitive pressures to Microsoft PC division. Recent Linux desktop offers from Dell and Lenovo have also led to the effort to “reduce costs”. Server and tools Microsoft is much more concerned about Linux on the server industry. Nearly all computer manufacturers offer server hardware for the Linux operating system.Linux’s competitive position has also benefited from the large number of compatible application now produced by many leading commercial software developers and non-commercial software developers. Business Microsoft identified its major desktop competitors as: Apple, Corel, Google, IBM, Novell, Oracle, Red Hat, Sun, and local application developer in Europe and Asia. Apple announced its revamped and more competitive productivity suit. Microsoft sees freely downloadable cross platform, OpenOffice.org as competitor. Corel’s suite and many local software suites around the world are worrisome for OEMs to preinstall on low priced PCs.

Online Services This division competes with: AOL, Google, Yahoo and a wide ray of Web sites and portals that provide content and online offerings of all types to end users. Microsoft compete these organization to provide advertising opportunities for merchants. Entertainment & Devices Microsoft Xbox hardware business competes with console platforms from Nintendo and Sony, both of which have large, established base customers. The life cycle for video game consoles averages five to seven years.

3. Low bargaining power of customer
Microsoft has a huge consumer base and product ranges. Each customer contributes very less amount to the whole market share. Even though a corporate customer who purchases Microsoft products in bulk, it is still very small as compared to the whole Microsoft customer-base. So there is very low bargaining power of the Microsoft customer. Buyers have to buy the product from the Microsoft which is very difficult to be produced by them. Entering into the industries by the buyers is very difficult. Microsoft does not depend on few customers. Their products are focused on mass production. They are less concerned when few customers object about prices or services.

4. Low bargaining power of supplier
Microsoft has no suppliers as such. In software industries, requirement for raw material in almost nil and other Microsoft products need less material and there are a number of supplier in the market for its equipments. What actually important in the software firm is the human capital. Microsoft has a large potential for hiring employees and it can get many more from the market. Microsoft has made its employees more sophisticated by its culture to learn and different training programs. People there simply love to be a part of a company like Microsoft.

5. Low threat of substitute
There is usually no substitute product for any software product. Each software is mainly designed for some specific purposes and once it is made, there is less concern about getting a substitute product. Hence, there is very low threat of substitute products.

CHP-3 SWOT Analysis of Microsoft Corporation
STRENGTHS:

Microsoft is a huge global brand. It is recognizable for two main reasons. It was one of the largest software developers it has developed a customer base of around 30 million people. It has built its reputation on the successful development of its computer softwares namely the Windows line of products. Brand is all-important. Microsoft is one of the most established and healthy IT brands in the World, and has a very loyal set of enthusiastic customers that advocates and uses the brand. With loyal customers, it means that Microsoft does not only recruits new customers but retains old ones. The company is composed of different main offices inside the United States and around the globe making the distribution and development of its products easily accessible to the consumers. It has its offices in Germany, United Kingdom and Europe and sub offices in countries such as China, France and Korea.
WEAKNESSES:

Microsoft lacks a solid client and service support center on the internet. This is important since problems and bugs with regards to their products must be fix rapidly to attain efficiency. The lack of a customer service center would erode the integrity and quality perceived by costumers on Microsoft products. Microsoft products have compatibility issues with other hardwares and softwares manufactured by other companies. This compatibility issue would then limit the ability of the customer to buy all products made by Microsoft since it would affect the stability and performance of a computer. Microsoft does not share the programming codes of its softwares making modification difficult if bugs and other malfunctions are detected by programmers not affiliated to the company.
OPPORTUNITIES:

Microsoft moved into the Chinese market by producing computer programs based on the Chinese language and giving discretionary authority to the Chinese government to censure and to eaves drop on emails, documents and webpage. Microsoft has also diversified its products. During the past years the company has ventured into fields such as game design, game developing and publishing and the production of game consoles such as the Xbox.

The company has also branched out to provide free email and news services to its costumers. It has also developed software’s and computer programs that is vital in organizing business spreadsheets and data.
THREATS:

The success of Microsoft in software development has spawned other competitors to follow the footsteps of the company towards success. The primary competitor of the company in the operating systems industry is the Linux program developed by independent programmers. This program is easy to use and can be obtain free of charge. Since the company is diversifying in other fields it competes its products with the products being made by companies who have been experts in their chosen industry. The company might eventually lost its battles in making its products competitive when put side by side with products made by corporations which has established their name and reputation to the customers. Another threat that is being faced by Microsoft is the different lawsuits and indictments against the company being made by independent companies, programmers and software developers. These lawsuits do not only exhaust the financial resources of the company but it also promotes negative publicity and bad public image.

CHP-4 Strategies followed (1975 – 2009)
Their aim is always to Became a leader in the market in which they compete. For which they followed strategies like the following when they were just a Start-up Company,     Partnerships with or acquiring other market leaders Entry in new markets, where there is a need Business level strategy Find out needs of customer, form customer groups according to market Location and take an advantage through distinctive strategies, as in case of Seattle Product differentiation as in 1980’s they developed QDOS, Windows (GUI)  After Microsoft established its feet, it changed its strategies as, They use their resources and achieve growth with maximizing shareholders wealthWith a continuous development and entry in new markets they maintained their competitive advantage. In reaction to the actions from US justice department, MICROSOFT signs some settlement agreements with other players in market. As bigger in size MICROSOFT’s growth rate is slower compared to other small companies in the industry, complex nature of windows was also one of the reason.

4.1 Microsoft's international strategy entry mode The reason why Microsoft wanted to go international was, they were leaders in domestic market and they want to increase their market size. They wanted to take advantage of other growing markets around the world. Being a leader in OS business, they wanted to take first mover advantage by entering in new markets before competitors, and maintain their competitive advantage. Initially they followed licensing and strategic agreements as an entry mode International Strategy. There are many reasons why they go for this kind of strategy, some of these are • Involves low cost to expand internationally, as there is low cost of development. • Allows licensee to absorb risks, less amount of risks because of risk sharing approach. But there are some disadvantages also, as • This strategy has low control over manufacturing and marketing • It offers lower potential returns, as they are shared with licensee and because of inability to realize location and experience curve economies. • Involves risk of licensee imitating technology and product for own use, i.e. lack of control over technology. • Again there more restrictions on the licensing from US government and from Customer approach. • Also because of antitrust regulation in the US, EU and because of the competition in the desktop software industry, they decided to change their strategy.

4.2 Changes in Microsoft's international strategy entry mode Companies’ both International Business level strategies and international corporate level strategies depends on its entry mode strategy. There industry life cycle shows they are now in shakeout zone of industry life cycle.

4.3 Stages in the Industry Life Cycle
They are searching for growth in both demand and capacity, and hence they go for International Diversification and Innovation. With the help of International Diversification strategy, a firm can expand sales of its goods or services across the borders of global regions and countries into different geographic locations or markets. They get benefits in terms of returns and large market; they choose International Diversification and Innovation, because it gives • Exposure to new products and markets • Sustain innovation and use opportunity to integrate new knowledge into operations In view of the antitrust regulation in the US, EU and because of the competition in the desktop software industry, Microsoft decided to move beyond PC Software Market. This can be achieved through their International Diversification and Innovation type of entry mode i.e. They can enter in new market segments and also can use this knowledge to integrate into Microsoft’s core operations. Its basic strategy was to extend its software services into Web-based Services for business and consumers. By transforming from

a traditional software provider to a broader technology services and media company, Microsoft tried to position its OS, Software's and Services as a de facto standard for accessing, communicating, and doing business over the internet. This helps them to enter in new market segments while maintaining current operational excellence. Hence they go for related diversification strategy and by the end of year 2005 they have three main divisions under their OS division.

CHP-5 International business-level strategy
Microsoft had seven-pronged strategy for its business levels. 5.1Competing with Products and Standards Interoperability standards have been a critical factor in the sustained growth of Microsoft in the information technology industry. Microsoft contributes to, and collaborates with, more than 150 standards organizations on an annual basis. It also participates in a wide variety of other specification development initiatives with groups of industry leaders, or publishes Microsoft specifications in order to enhance interoperability of its products and services. Its standards work embraces innovations in PC hardware, software and associated devices, the Internet and its infrastructure, Consumer Electronics devices, Telecommunications systems and products, and a wide variety of industry specific products and services. This work is made possible through development of core interoperability technologies, without which these products and services would not be able to deliver the value they do to customers. 5.2 Defining Products and Development Processes Microsoft’s process of software componentization allows it to capture and embed intellectual property in a flexible and easily accessible form. The component “libraries” that result from this process and the architectural frameworks that specify how these components interact represent critical resources that can provide a source of competitive advantage in dynamic environments. The benefits from these resources manifest themselves internally, in terms of enhanced development productivity, and externally, through their role in attracting third-party developers to build upon Microsoft’s platforms. 5.3 Developing and Shipping Products To manage the process of developing and shipping products, Microsoft follows another strategy described as doing everything in parallel with frequent synchronization. Teams implement this strategy by working in parallel teams but “synch up” and debug daily, always have a product you can ship, with versions for every major

platform and market, speak a “common language” on a single development site, continuously test the product as you build it, use metric data to determine milestone completion and product release. Building a Learning Organization Microsoft in its early years was not known for self-critique. The firm today has so clearly accepted a new position on this point that critique has become one of their key strategies. Information-sharing is now important - both as between the marketplace and the firm, and as between various functions within the firm. . Organizing and Managing the Company The firm, from the beginning, has continuously sought, and employed, such people and can thus immediately spot (and grasp) opportunities when they appear. It has hired managers who are competent in technology as well as understanding the business situation, and hence they are highly effective in implementing solutions for their customers. These people have constituted the managers at different levels in the organization. Managing Creative People and Technical Skills Microsoft usually formed small teams to handle projects, with cross-functional specialists, who could easily switch from one function to another, giving them a wider range of reach and productivity and creativity. Go To Market To compensate for less-frequent product launches and to focus on integrated solutions rather than specific products, Microsoft organized its marketing efforts around annual "go-to-market" (GTM) campaigns. GTMs focused Microsoft and its partners on short-term strategic challenges and provided consistent marketing approaches for most of its business products. Partners could align their products or services with Microsoft’s GTMs to benefit from these campaigns. However, while GTMs were intended to make Microsoft’s message to the marketplace more focused and coherent, their short-term focus and vagueness meant partners would take time to understand their benefits.

CHP-6 INTERNATIONAL CORPORATE-LEVEL STRATEGIES
Microsoft went over expanding mostly by the way of acquisitions, both of products as well as companies, and then added on their own features and specifications and brought it to the market. Microsoft has acquired 147 companies, purchased stakes in 60 companies, and made 27 divestments by 2008. Of the companies that Microsoft has acquired, 99 were based in the United States. Microsoft has not released the financial details for most of these mergers and acquisitions. But estimates say that the figure reaches to several billions of dollars. At the same time, research and development was given lesser priority over acquisitions, in the process of organizational and business growth. 6.1 Global Strategy Microsoft focused on increasing profitability by reaping cost reductions that come from experience curve effects and location economies. Also it pursued a low-cost strategy on a global scale. By formally recognizing the emerging business opportunities introduced by the new era of technological change via Internet, Microsoft had to reinvent itself. It restructured its key business units, streamlined decision-making processes, and realigned itself to become more nimble in producing and marketing its software. 6.2 Diversification Strategy: Related diversification The first unit was the platform products and services division, which oversaw Windows Client, Sever and Tools, and MSN groups and aimed to leverage MSN’s success in the development of Windows-based products. The second unit was the business division, which oversaw the Information Worker, and Microsoft Business Solutions. The third group was Entertainment and Devices division, which oversaw the Home and Entertainment group, and the Mobile and Embedded Devices group, aimed to compete with other players.

CONCLUSION
Microsoft with its apparent success in the present must face problems that will be evident in the near future. Although Microsoft is a leading company in its chosen field of software industry, the dominance and the monopoly that it enjoys can be erased and its dominance in the market can be eclipsed by other new companies in the industry. The paper has identified several problems inherent to the company and have highlighted the effects that these negatives factors will bring on the over all stability of the company in the future. Problems such as poor designs, the challenge of other competitors like Linux and tightening government control are some of the hindrances that will eventually obstruct Microsoft in its road to progress. To eliminate and to diminish the impact of these problems and difficulties, the company must undertake needed reforms and initiate policies that will improve certain aspects of the company.

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