Microsoft

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Locate the firm in terms of its market structure and provide a summary of its key economic indicators: employment; pricing strategy; product range; markets; profitability. The company that I am going to discuss in this case study is the IT firm ‘Microsoft’. Microsoft was originally founded by Bill Gates and Paul Allen in 1975. It is a public multinational corporation which is headquartered in Redmond, Washington in the USA. Its aims are to develop, manufacture, license and support a wide range of products and services that are related to computing through its various product divisions. Microsoft is an example of a well-known monopolistic power. A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity. There is a direct relationship between the proportion of people using a product and the demand for that product. A monopoly can play a crucial role in the development or acquisition of market power. Over the years, Microsoft began to dominate the home computer operating system market MS-DOS in the mid-1980s, which was then followed by the Microsoft Windows line of operating systems. Employment: Since 1998, Microsoft is one of only thirteen companies to be included on Fortune Magazine’s annual list of the ‘100 Best Companies to Work For’ every year since. Microsoft employs over 90,000 staff throughout the world. That is why Microsoft feels that they have a responsibility in creating a rewarding and enjoyable environment for them to work in. The health and well-being of their employees makes Microsoft different and unique. According to Microsoft, 83 percent of employees would recommend Microsoft as a great place to work. 92 percent feel they are treated with respect and dignity by their managers. 91 percent feel that Microsoft is a great corporate citizen around the world. Microsoft in Ireland employs around 1500 people. Pricing Strategy: As we know, Microsoft has enjoyed its monopoly power throughout history, and has used this power to keep high prices for its software even during tough times. With company facing competition from other software companies, such as Google, and with the economic downturn, Microsoft came to the realisation that they could not sustain these high prices. As a result, Microsoft reduced prices on its Office products and OS Windows. While Microsoft expects most customers to pay for the Office products the way they always have, less powerful, ad-supported versions will be available free on the Web. All of these moves amount to a risky experiment in price elasticity. The strategy of the company was to reduce prices and increase sales volume that would rejuvenate their low profit margins. The pricing strategy that has been employed by Microsoft also provides monopolistic power to the company. The company charges different prices in different geographic locations. For instance, office in India costs $100 and that in China costs $29. There is effectively a $71 in the prices of Office in both countries. This is a third degree price discrimination practiced by the company. Here Microsoft has divided the consumers of China and India depending on the demand curves and price elasticity of the consumer demands. [1]

Product Range: The segments within Microsoft that are responsible for the company’s products are known as Microsoft Product Divisions. Currently, there are eight product divisions according to the Microsoft website. These divisions include: Bing, Internet Explorer, Microsoft Advertising, all Office products, and all Windows products, Microsoft Security Essentials, Windows Live and Skype. Bing, Internet Explorer and Windows Live refer to web search engines implemented into its operating systems by Microsoft. Microsoft Advertising spans the globe with advertisements on media such as Windows Live, Xbox, and MSN etc. With these international advertising offerings by Microsoft Advertising, the needs of multinational and individual companies are served...
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