Microsoft holds a strong credit rating of AAA from Standard & Poor’s & Moody’s and is one of the strongest US companies with $41billion worth of assets and only $8.5 billion in unsecured debts. The Company has presence in over 100 countries of Asia, America, Europe ,Africa & Middle East. (Reuters,2011) The global software & service industry stood at $2,330 billion in 2009 and even though it experienced bit decelerating growth in the recent years, as per the forecast it will experience 50% growth and will reach $3,400 billion by 2014 (Datamonitor,2010).
The firms in the industries require varied inputs that includes employees, hardware & software tools. The employees with required technical know how & expertise is an essential input for the market and thus the success of the firms depend on the services of qualified employees to a large extent (Datamonitor, 2009). The Industry includes Companies of size Fortune 100 companies to specialized single service firms as well as open source community based project. Subsequent advancement in technology is made very frequently in the industry due to which the whole industry has changed and is changing time to time. To survive successfully in this industry it is essential to make rapid developments in the product & services by keeping track of the environment of the industry because adopting any strategy or strategic position not only will affect the company but the entire industry as well.
Market Based view:
Porter (1980) explained that the profitability of any organization depend on the competitive forces which it experience from the market and thus examining the five forces is essential for the formation of future strategies. Let us explore the five forces experienced by Microsoft: Power of Suppliers: The main supplies in the industry are of Hardware devices & software tools (Microsoft,2011). The hardware components are mainly obtained from a sole supplier which large companies are offering differentiated products resulting in substantial supplier power. The power of suppliers is strong because of high importance of inputs.
Bargaining power of buyers: The main buyers in the industry in the industry are businesses, individual consumers as well as government bodies. The buyers could be divided into two segments, one is the lower end buyers who are small businesses who are served by local or regional firms and upper end buyers that includes big corporates & large customers for whom a name reputation carries importance. The buying power of these customers is not very strong because there are very few companies catering services of required caliber and Micosoft being the most reputed brand in the Industry gains a competitive edge (Lecture Notes, 2011).
Rivalry among existing players: The industry consist of small firms operating along the large MNC’s , that boost rivalry. The large market players like the Microsoft is experiencing increased competition from the diversification from other fields. But the dominant players like Microsoft, IBM, Google, Apple etc continue to intensify competition in the high end market. The low switching cost and high exit barriers also add to the rivalry (Lecture Notes, 2011). Thus there...