Microsoft at Crossroads: Coping with the Changing Dynamics of the Industry

Microsoft at Crossroads: Coping with the Changing Dynamics of the Industry
Case Code: BSTR457
Case Length: 16 Pages
Period: 2010 - 2014
Pub Date: 2014
Teaching Note: Not Available		 Price: Rs.500
Organization: Microsoft Corporation
Industry: Information Technology
Countries: Global
Themes: Innovation, Market Agility
Microsoft at Crossroads: Coping with the Changing Dynamics of the Industry
Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

For several years, US-based computing giant, Microsoft Corporation (Microsoft), stood as the market leader in the software services market due to its Windows operating system (OS) and its Microsoft Office suite. Of late, the company's consumer segment reported declining sales attributable to the sluggish demand for Personal Computers (PCs). Industry experts opined that the advent of tablets and smartphones had resulted in PC sales reporting a decline worldwide as consumers preferred these tablets and smartphones to desktop PCs. Despite the changing industry dynamics, Microsoft did not roll out any product catering to these new age customers for a long time. On the other hand, its competitors such as Apple Inc. (Apple) and Google Inc. (Google) were emerging as dominant players in the consumer segment due to their innovative products such as tablet PCs and smartphones and services such as Apps and cloud computing services for the consumers. Some industry analysts felt that Microsoft had also failed to replicate its success in the gaming console market, which it once had with Xbox. To add to its troubles, the company also struggled in the changing mobile operating system (OS) space which was dominated by Google's Android and Apple's iOS.

Some analysts stated that Microsoft's weak presence in the consumer segment was attributable to its huge focus on the enterprise segment. Some analysts felt that Microsoft would have been on a par with Apple and Google had it been quick to read market signals and come out with innovative products for the consumers. In a bid to tackle the changing industry dynamics, Microsoft aimed to focus on the rapidly growing consumer segment by rolling out services for the consumers. The company also entered the hardware segment by launching Surface tablets in October 2012. In 2014, it acquired the Devices & Services segment of Finland-based communications company, Nokia. Analysts felt Microsoft's focus on the consumer segment would make the company a hardware and software services player and allow it to be in a better position to compete with global as well as local rivals.

Though Microsoft made several efforts to launch products and services catering to the consumer segment and did have some success in the process, some experts felt that the company should consider exiting the consumer segment and focus on the enterprise segment since Apple and Google had a huge presence in the consumer segment space. Moreover, with Apple launching products for the enterprise segment, industry experts opined that Microsoft should focus on its core business – the enterprise segment. On the other hand, some industry analysts opined that Microsoft's efforts to garner a presence in the consumer segment could help it capture a portion of the pie, especially when the software giant was experiencing some success in the consumer space.

Issues

The case is structured to achieve the following teaching objectives:

  • Understand the difficulties faced by an erstwhile giant in the global consumer market for software and services
  • Appreciate the importance of innovation in a dynamic industry
  • Analyze the effect of changing industry dynamics on companies
  • Examine future challenges faced by Microsoft since Apple was growing its presence in the enterprise segment after dominating the consumer segment

Contents

Keywords

Microsoft, Personal computers, Original Equipment Manufacturing, Market leader, Windows operating system, Microsoft Office suite, Tablets, Smartphones, Industry dynamics, Apple, Google, Cloud computing, Enterprise segment, Consumer segment, Online search, engine market, Gaming market, Web browser market, Social networking

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