Microsoft at Crossroads: Coping with the Changing Dynamics of the Industry
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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 |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
In April 2014, US-based computing giant, Microsoft Corporation (Microsoft) reported that for the third quarter (Q3) ended 2014, it had recorded revenues of US$ 20.4 billion. The software giant's cloud platform, Windows Azure, posted a 150 percent revenue growth while its commercial cloud services recorded a growth of 100 percent. Despite weak sales of Personal Computers (PCs), the company's Windows Original Equipment Manufacturing (OEM) segment reported a growth of 19 percent. In addition to this, the market share of the company's search engine, Bing, in the US grew to 18.6 percent and Office 356 Home recorded 4.4 million subscribers for the same quarter. Commenting on the results, Microsoft CEO, Satya Nadella (Nadella), said, “This quarter's results demonstrate the strength of our business, as well as the opportunities we see in a mobile-first, cloud-first world. We are making good progress in our consumer services like Bing and Office 365 Home, and our commercial customers continue to embrace our cloud solutions. Both position us well for long-term growth. We are focused on executing rapidly and delivering bold, innovative products that people love to use."
Founded in 1975, Microsoft began as a software services company. The company stood as the market leader in the 1990s and early 2000s 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 PCs. Industry experts opined that PC sales had reported a decline worldwide due to the advent of tablets and smartphones, which consumers preferred. Despite the changing industry dynamics, Microsoft did not roll out any product that would cater to these new age customers. On the other hand, its competitors such as Apple Inc. (Apple) and Google Inc. (Google) were coming out with innovative products such as Apps and cloud computing services for consumers. Some industry analysts felt that Microsoft had also failed to replicate the success it had once enjoyed in the gaming console market with the Xbox. To add to its woes, the company was struggling in the changing mobile operating system (OS) space too. This was dominated by Android and iOS.
Microsoft was often criticized by industry observers for focusing only on the enterprise segment while remaining complacent about the consumer segment. Some analysts felt that the company would have been on a par with Apple and Google had it quicker to read the market signals and come out with innovative products for consumers. Some analysts pointed out that Microsoft did launch some products for the consumer segment such as its Bing search engine and Zune – a digital media product and service – in the early 2000s. However, these did not prove successful. This led to Microsoft reporting declining sales for its consumer segment....
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