Executive Summary
The aspect of organisational structures is quite important to illustrate the existing business strategies to allow the market absorb the fundamental competitiveness. It is hard to assess the ability of one organisation against the other in a sense an individual capacity while comparative understanding would eventually affirm the contrast and competitiveness of two organisations. Apple and Microsoft are rather complicated and technologically advance but interesting companies which would in absence of one the other dominate the technological aspect of the globe.
While elaborating on the above two companies in this report, the strategies of the companies will be compared contrasted. The analysis of their corporate strategies would be underpinned by theoretical concepts and theories like SWOT analysis,
Companies Background
Microsoft:
Microsoft was founded when Bill Gates and Paul Allen developed interpreter for computer language in 1975 for the first time. The company name Microsoft, came from the word ‘microcomputer’. Microsoft develops many products such as operating systems, server applications, business solution applications, software development tool etc. It also owns and runs MSN network of internet products and services. Microsoft has about 93,000 employees around the world. Their annual revenues for the financial year ended in 2009 were $58,437 million, and its net profit for the same year was $14,569 million (Source: Microsoft Annual Report FY 2008-09).
Mission/Vision/Objectives
The Microsoft mission is to enable people and business around the globe to realize them their full potential. The company mission statement is promise to the customers to develop technology which is accessible to all without discrimination. The company products are safer and user friendly (source: http://www.microsoft.com/enable/today.aspx).
Its vision is: “Our vision is to create innovative technology that is accessible to everyone and that adapt to each person’s needs. Accessible technology eliminates barrier for people with disabilities and it enable individual to take full advantage of their capabilities.”
Microsoft’s objective is to create value for all customers, shareholders, business, partners, for their employees and for the communities where they do business (source: http://www.microsoft.co/about/companyinforation/corporategovernance/default.mspx)
Apple
Apple, Inc was founded by Steven Wozniak and Steve Jobs in Santa Carla California. The company launched their first computer in 1976. The company launched their first mouse driven computer Macintosh in 1984. Apple has since then expanded from computer maker to include consumer electronics over the last 30 years. Its product offering include computers and laptops, servers, operating systems, phones, music players, internet tablets etc. Its revenue for the year ending 2009 was US$42.91 billion and its net income for the year 2009 was $ 8.24 billion (Source: http://www.apple.com/investor/).
Vision,
Apple’s vision statement is to have “An Apple computer on every desk”.
The company mission statement is: “Apple ignited the personal computer revolution 1970s with the apple II and reinvented the personal computer in 1980s Macintosh. Apple is committed to bringing the best personal computing experience to student, educator, creative professionals and consumer around the world through its innovative hardware, software and internet offerings” (Source: http://www.apple.com/investor/).
SWOT Analysis
| Apple | Microsoft |
| Strengths
| Strengths · A huge global brand. · Its rapid product development. · Microsoft has built its reputation on the successful development of its computer software such as Windows. |
| Weaknesses
| Weaknesses
|
| Opportunities
| Opportunities
|
| Threats · Global economic situation is likely to reduce demand for higher priced consumer items.
| Threats
|
PEST Analysis
| | Microsoft | Apple |
| Political | Changes in the taxation policies can significantly affect Microsoft International Trade Regulations is another important factor that affects Microsoft’s business Employment laws can also significant affect Microsoft as it employs a large number of people Competition regulations is also important for Microsoft as seen in the last few years | Apple is also dependent on its political environment. Being a global company changes in International Trade Regulations can significantly affect its business. Taxation, consumer protection and employment law are important for Apple as it can significantly affect its strategic development. |
| Economical | Changes in monetary policies and exchange rates can significantly affect Microsoft’s business Inflation levels and economic growth can also affect Microsoft as it can significantly affect demand of its products. | A similar environment operates for Apple. Changes in monetary policies, exchange rates, and inflation levels can significantly affect Apple’s business. |
| Social | Changes in Income distribution, demographics and lifestyle can significantly affect Microsoft. Education is also important factor that affects Microsoft. | Apple’s products are most high end products and therefore changes in income distribution, lifestyle and demographics can significant affect its revenue and profits. |
| Technological | Being a technological company, Microsoft is highly dependent on its technological environment as things like speed of technology transfer, rates of technological obsolescence can significantly affect its business. | Like Microsoft, Apple is also a technological environment and therefore is highly sensitive to its technological environment. Speed of technology transfer, rates of technological obsolescence, new discoveries and developments can significantly affect its business. |
Porter’s five forces analysis
Michael Porter’s Five Forces
Threat of New Entrants Bargaining Power of Buyers Bargaining of Power of Suppliers Threat of Substitute Product
Source: Porter, M. (2008) On competition, 1st ed. Harvard Business Press
Threats of New Entry
New entry in an industry force to focus on costs, prices and investment rate which is essential to contend. Apple is big threat for Microsoft in Software industry. Microsoft has to focus on windows prices. When new entrance switches from other markets, they can purchase existing competitive edges and capital to deal with the competitors. When Microsoft started to offer internet browser, Apple did the same thing. Apple also leverages existing capabilities and cash flows, before it entered into the distribution of music business.
The Power of Suppliers
Supplier in any industry takes an advantage of their power. Powerful Suppliers charge high prices and supply low quality products. Microsoft is having monopoly in software industry, so Microsoft was also charging higher prices for their Operating System for computer makers. When apple launched iphone, apple charged higher prices on that in beginning period.
Power of Buyers
Powerful customers are also taking considerable importance in Michael Porter’s five forces. Powerful Customers demand high quality by forcing down the prices. Microsoft is a globally successful brand. To attract the Microsoft customers, Apple has to keep their prices down.
The Threat of Substitutes
Threat of substitutes is always present. Microsoft also has substitutes within their operating system. Apple is big threat for Microsoft. Microsoft’s profitability suffered when Apple software came into the market. Microsoft has to reduce their prices to retain their position in the software market. Apple ipone is a successful phone brand. Apple iphone became the big threat for Nokia Phone Company, when it launched into the market.
Rivalry among Existing Competitors
Competition in already existed rivals is forcing to new product development, discounting, advertisement and services improvements. Microsoft is a leader in software industry. Microsoft launched new operating system such as Windows XP,
Schools of Strategy
Planning School: This school framed The Planning school framed parallel with the design school. In planning school of strategy senior managers play an important role towards objectives, budgets, programs and operating plans
Positioning School: This is an analytical process where strategy reduces the generic positions through analysis of industry situations. This process includes all ideas, value chains and strategic groups with analysis (Dekkers, 2005).
Power school: This strategy formulation focus on processes of persuasion, confrontation and bargaining among the people in an organisation. This school is also useful to negotiate in partners and joint venture.
BCG matrix
BCG matrix Microsoft Corporation
| | Products | ||
| Existing | New | ||
| Market Growth | High | Stars | Question Marks |
| · Xbox · Microsoft Associated accessories e.g. MS Office tools | · Specialized software | ||
| Low | Cash Cows | Dogs | |
| · Microsoft windows line of operating systems | · MP3 players and computer accessories | ||
| | High | Low | |
| Relative Market Share | |||
The Xbox gaming system and ‘Microsoft associated accessories’ product lines fall under the Star product category, having high market share and high growth rates. Microsoft specialized software product lines are under Question Mark category, i.e. they have potential move to Stars category or Dogs category. Microsoft Operating Systems product lines are in Cash Cows category, which means high market share, but low market growth rates.
BCG matrix Apple
BCG matrix helps companies with analyzing their business units or product lines. With Apple’s diversified product line, the BCG matrix becomes an invaluable analytical tool.
| | Products | ||
| Existing | New | ||
| Market Growth | High | Stars | Question Marks |
| · Iphone · Ipod | · Mac Software · Mac OS X | ||
| Low | Cash Cows | Dogs | |
| · iTunes online music store | · Apple TV | ||
| | High | Low | |
| Relative Market Share | |||
The iPod and iPhone product lines are under the Star product category, which means a strong consumption and cash generation. Mac software and the Mac OS X product lines fall under Question Mark category. This shows their potential to either gain market share, i.e. to move to the Star category, or degenerate to the Dog category. Apple’s digital downloading software iTunes are situated in Cash Cow category, which means lower growth rates and high market share. Nowadays in digital downloading industry iTunes leads with 82% of the market share. Apple has Apple TV in Dogs category with low market share and low growth rate. The BCG matrix shows that overall Apple has a strong portfolio (Lancaster & Massingham, 2002)
7S Model
Apple and Microsoft Corporation
| APPLE | MICROSOFT CORPORATION |
| Strategy | |
| Apple’s organizational strategy “think different” is to control the development and design of the hardware and software for all of its products. The Company is focused on providing innovative products and solutions to consumer. | The new strategy consists of launching tons of apps over the next 3-6 months that they hope will attract users in droves. The Company decided to use "rolling thunder" approach. They will release new services as they become available, upgrade existing services, and launch marketing efforts in global phases. |
| Structure | |
| To manage its products and marketing, Apple Computer had five product divisions responsible for the development, managing, manufacturing and evaluating of software, systems, and other devices that are peripheral (e.g., Macintosh). It also has 4 product divisions that support in handling post-sale product support, marketing and distribution. | Microsoft is a publicly owned company and its operations can be divided into seven segments: Client, Server and Tools, Information Worker, Microsoft Business Solutions, MSN, |
| Systems | |
| Apple has various systems in place that interrelate its parts and support its strategy implementation. | Microsoft’s systems have been popular for its implementation of strategy. |
| Staff | |
| Steve Jobs is the current CEO of Apple, which he co-founded in 1976. | A board of directors consisting of ten people runs the company. There is also an Executive Team that looks after the worldwide matters. Other key staff includes a council of Corporate Staff that looks after important staff functions such as corporate policies approval etc. |
| Style | |
| Apple is notorious for secrecy. | Company views excellence in customer care as a strategic advantage. |
| Skills | |
| Apple is well known for having skills in the production of operating systems, software for professionals, music players, phones | Microsoft’s main skills lie in the production of operating systems and applications for official uses. |
| Shared Values | |
| Extent human capability, make life and the world better from technology. The company care for products safety, employee behaviour, working conditions for employees. | Delivering superior customer satisfaction. |
After outlining the elements of the Seven S framework the companies are able to analyze the current state of each of these elements and start to ignite new ways of thinking about their strategic development process.
Accounting Data
Accounting data - Microsoft Corporation
2009 was a challenging year for Microsoft Corp. due to a worldwide economic recession that had a major impact on the financial performance of the company.
In 2008 Microsoft Corp. recorded a revenue of $ 60,420 million, in 2008 its revenue declined to $ 58,437 million which is 3% less than in 2008, while in 2008 Microsoft Corp. revenue had increased by almost 18% in comparison with 2007 when it was $ 51,122 million. Operating income decreased by 9% from $ 22,271 million in 2008 to $ 20,363 million in 2009. In 2007 it was $ 18,438 million which was 21% less than in 2008. Earnings per share in 2009 were $ 1.62 which is 13% less than $1.87 in 2008. In 2007 this figure was $1.42 that was 32% less than in 2008 (Microsoft Corporation Annual Report 2009).
Accounting data - Apple
In 2009 Apple’s revenue was $ 42,905 million which is almost 13% more than $ 37,491 million in 2008 and almost 43% more than in 2007. Apple’s operating income increased in 2009 and was $11,740 million which is almost 40% more than $8,327 million in 2008. In comparison to 2007 when this figure was $ 4,407 million in 2008 it increased by 88%. Apple’s earnings per share in 2009 were $9.08, $ 6.78 in 2008 and $ 3.93 in 2007. This means that earnings per share increased by 34% in 2009 in comparison with 2008 and by almost 72% in comparison with 2007 (Apple Annual Report 2009).
Strategic selection model: Ansoff, Porter’s Generic
The Ansoff matrix shows the company the possible ways to grow the business through new or existing products or markets.
Ansoff matrix for Apple
| | Products | ||
| Existing | New | ||
| Markets | Existing | Market Penetration | Product Development |
| | · iMac · MacBook · MacBook Pro · Mac Mini · iPod nano · iPod shuffle · G5 | ||
| New | Market Development | Diversification | |
| · Mac · iTunes online music store | · iPod | ||
Mac and iTunes online music store product lines are under Market Development category as they aim to expand their market share by developing new markets. MacBook, MacBook Pro, iMac, Mac Mini, iPod nano, iPod shuffle and G5 are under Product Development category as they are designed for the current market. These products aim to increase the company’s sales by offering the consumers modified technology.
IPod is located under Diversification category due to what it was very successful. The introduction of iPod allows the Company to remain competitive. When iPod was released there was nothing similar to it in the market.
Ansoff matrix for Microsoft
| | Products | ||
| Existing | New | ||
| Markets | Existing | Market Penetration | Product Development |
| | · Windows (95,98,2003, XP, · Xbox gaming system · Mobile Windows 7 | ||
| New | Market Development | Diversification | |
| | · MSDos | ||
Windows (95, 98, 2003, XP, Vista, 7), Xbox gaming system and Mobile Windows 7 product lines are situated under Product Development category. These products are designed for the existing market for increasing the sales. For example, Microsoft Corporation expects 9% sales growth from Mobile Windows 7.
MSDos was the first operating system. It is under Diversification category as it was a new product in a new market.
All the companies are using one of these 4 strategies to increase sales (Lancaster and Massingham, 2002)
Apple and Microsoft already have existing products and markets, but they still are using product development because of change of consumer needs and tastes.
Porter’s Generic Strategy
According to Michael Porter for the company there are 2 main strategies to achieve and maintain competitive advantage: to be a cost leader or product differentiator.
In the past Microsoft was under a Cost Leadership category as it was a monopoly and no other company could compete with Microsoft.
Apple in the past was under a Board Differentiator category as it was trying to develop new products. Apple had a strategy of gaining competitive advantage by offering unique products.
| | Cost | Differentiation | |||
| Broad Market Scope | Cost Leadership |
| |||
| Narrow Market Scope | Cost Focuser | Focused Differentiator |
Today strategies of both companies have changed.
Microsoft chooses a strategy of being under both cost leadership and broad differentiator categories. Apple chooses a strategy of focused and board differentiators.
| | Cost | Differentiation |
| Broad Market Scope |
| Broad Differentiator |
| Narrow Market Scope | Cost Focuser |
|
Michael Porter stated that if a firm wants to be successful long-term it should select just one of these generic strategies. However, a company can have two strategies if it creates two separate business units. Each business unit will apply just one strategy and the company will not be “stuck in the middle”.
Game theory
Strategic management involves decisions and actions designed by the managers of an organization in order to create a tool for competitive environment (Oden, 1997). Managers achieve organizational goals through asking questions such as, “Who are our customers? What should be offered next in terms of services and products? Are there any changes that must be made?” (Daft, 2006). The approach that the top executives chose for their organization depends on the competitive dynamics, nature of the future products, possible responses or actions taken by other firms. One of such theories is called the game. It has developed based on the study of interaction. Simply the theory consists of understanding companies and its competitor's strengths and weaknesses (http://www.gametheory.net/). For instance in February 2008 Microsoft introduced changes to how the company shared information about its products and technologies. The move was to innovate and be the first in the market. A number of firms competing against each other are differentiated by the actions that each firm can take. Microsoft could move ahead of other firms from the profits made due its wide geographical positioning. The type of game was simultaneous that used a principal of being the leading company in spite of of the rival's activities (Hilton, 2007). The company openly published protocols that were previously a trade secret license. To maintain a standard of high-volume product, Microsoft increased transparency on their manufacturing processes and any cooperation with other firms.
Apple is a multinational company best known for Macintosh computers, the iPod the iPhone and the iPad (O’Grady, 2009). By designing software for its products further increased its competitive advantage in the marketing field. When Apple made daring decisions by launching iPod, iPad, iTunes or iPhone it was criticised by many experts. Single decisions as those follow own path, a new one. It was a launch of new product line in a free market space. Apple worked on the perfection of that merchandise after release, providing return for the company. The design of the products had been positively recognised by the international consumers (O’Grady, 2009). This led to products used for daily as well as business purposes.
Global strategic decision models: Goshal’s Framework of Global Strategy and Gupta & Govindrajan model
Goshal’s Framework of Global Strategy
According to Ghoshal (2003), where to globalize and how to go about globalizing are the two most important strategy issue that strategists had to face in multinational firms. Apple and Microsoft were facing the same in the beginning when they began to participate in international trade. Apple and Microsoft initially started globalizing by integrating their worldwide strategy, the product, design, services, production were all contrast to the multinational model (also described as Multidomestic strategy ) which explained only the local country needs and perspective, whereas the globalize strategy of Apple and Microsoft was the demand from the people of other country what they want and when. Multidomestic strategy states that to stay in one market was too expensive for any organisation due to the technological and market conditions which leads the importance of globalisation.
Porter states that global product in the same country are more competitive. Apple and Microsoft are an example. Now lets see briefly how both the organizations competed this many years and they made their stay in the market. Following is the ‘Framework of the Global Strategy’ by Ghoshal,. This framework developed by Ghoshal is partially based on Michael Porter’s (1986) work on global strategy.
Framework of Global Strategy in today’s market:-
| Total Worldwide Strategy | |
| Development of core strategy Apple Product: Competitive Factors The iPad is a tablet computer developed by Apple, Inc. Announced on January 27, 2010, it is similar in functionality to the iPod touch, running the same operating system (phone OS) and almost all of the same applications. | Development of core strategy Microsoft Product: Competitive Factors Windows 7 is the latest public release version of Microsoft Windows, a series of operating systems produced by Microsoft for use on personal computers, including home and business desktops, laptops, net books, tablet PCs, and media center PCs |
| Internationalizing the core strategy The Apple Store is a chain of retail stores owned and operated by Apple Inc. As of December 2009 Apple has opened 294 stores; | Internationalizing the core strategy Microsoft opened it’s first-ever retail store. Designed to give shoppers a chance to experience the best of Microsoft and its partners, the store offers customers a select line of laptops, netbooks, all-in-one PCs, Xbox consoles, Windows Mobile phones and one of the largest selections of third-party software titles in any store. A second store was then open |
| Globalising the international strategy Globalisation of the goods and services in demand and expectation of the people from different countries is the strategy used to expand the business in international market. I-phone was first introduced in the home country and then later it was nationalised globally. The upcoming product is I-pad moreover the same features as I pod touch have been advertised over many countries. | Globalising the international strategy Microsoft balances it stay Internationally by developing international products (world-readiness) single binary application ready for use in different markets, or high-quality, foreign-language editions of a product. Localization of a product involves translating and customizing a product for a specific market. Giving an example is the National Language Support (NLS) supplied by Microsoft Win32 application programming interface (API) is a world-readiness step, whereas modifying the user interface (UI) elements, translating text, and standardizing terminology are localization steps. |
‘Total Global Strategy’
| Core business Strategy |
Developed core
business strategy
Internationalize
the strategy
Globalize
the strategy Country A <--> Country B <--> Country C <--> Country D
Gupta and Govindrajan’s Model
Turning global presence into global competitive advantage: Gupta stated that just having a global presence does not guarantee that company will enjoy competitive success. It had to exploit the opportunities for value creation that its global presence offers. Vijay Govindrajan and Anil Gupta detailed the four main opportunities that the global presence offers and explains how managers can best exploit them. They conclude by offering for how a company can create the best global network for its value chain,
Aping the optimal location: Microsoft and Apple both have different strategy of marketing that’s where Apple is opening a store each week and Microsoft is targeting optimal location e.g. Microsoft decision to establish a research lab in Cambridgeshire UK is a good example of location decision guided almost exclusively by the goal of building world class excellence in the selected activity.
Four Mastering Global Business:
- Adapting to local market differences,
- Exploiting Economies of global scale,
- Tapping the optimal locations,
- Maximisation knowledge transfer.
By this explanation Gupta and Govindrajan explains the strategy for Microsoft expansion and globalisation compared to its competitor.
Conclusion
Above abstract conclude the role of strategic planning of Apple and Microsoft Incorporation in the organisation’s future. New technologies and innovation help in keeping the place at the higher level in the market. New products and globalize reach of the products is important for both the organisations to be in a dominating competition, as seen above. If one organisation did not exist the other would have totally dominated the market and its place at the top level. Having seen the competitive factors in the Ghoshal strategy and global decision, Apple and Microsoft strategically compete with each other while implementing new strategies and innovation. Comparing the different schools of strategy with Microsoft and Apple concludes that to be competitive in towards market an organization needs to be more innovative and globalise. Apple’s strategy to open a store each day gives the opportunity to any customer or consumer to get any knowledge in the market easily. As Microsoft have now started to spread its stores but with limited openings.
In the above abstract, it is also seen how its mission, vision and objective contributes towards the development of the organisations.
It can be seen that Microsoft and Apple have a capability of being continued with long-term effect in the global market with its strategic planning in a specific sector.
To meet the objective to be globalised strategy used both the organisation was to globalise in its own country and then target the needs of the people from other country.
The long term objective of both the organisation is to be dominating in the current market which is unlikely because the strategies used to compete and be globalise is makes a perfect place for both of the them to stay in the market.
Currently both the organisation are using global strategies to be in the market like adapting to the local markets, (fulfilling the basic and expected requirements by the costumers in different countries) making the product available globally, importantly tapping on the best location to get a better outcome from the location, Apple and Microsoft are currently using the sources like internet, television to spread across where any one and everyone can view the services and facilities provided by both the organisations. Even in each store that Apple has opened, all the staff in there are trained and well informed about the current changes about the services and products.
References
Books and Journals:
- Oden, H.W. (1997), Managing Corporate Culture innovation and intraprenuership, Quorum Books.
- Daft, R.L. (2006), Organization theory and design, 9th ed., South-Western Thomson.
- Hilton, R.W., Maher, M.W. and Selto, F. (2007) Cost Management: Strategies for Business Decisions, 4th ed., McGraw-Hill.
- Stonehouse, G. and
- O'Grady, J.D. (2008) Apple Inc.,
- Lancaster, G. & Massingham, L. (1998) Marketing Management, McGraw-Hill
- Dekkers, R. (2005) Evolution: organizations and the dynamics of the environment, 1st ed. Springer.
- Niven, P. (2003) Balanced scorecard step-by-step for government and nonprofit agencies, 1st ed. John Wiley and Sons.
- Betz, F. (2002) Executive Strategy: Strategic management and information technology, 1st ed. John Wiley and Sons.
- Mintzberg, H., Lampel, J., Quinn, B., Ghoshal, S. (2003) The Strategy Process: concepts, contexts and cases, 4th ed. Pearson Education.
- Porter, M. (2008) On competition, 1st ed., Harvard Business Press.
- Pauleen, D. (2007) Cross-cultural perspectives on knowledge management, 1st ed., Libraries Unlimited
- Ghoshal (1987) ‘Global Strategy: An Organising Framework, Strategic Management Journal, John Wiley & Sons.
- Gupta, A.K., Govindrajan, V. and Wang, H (2008) The Quest for Global Dominance, 2nd ed., John Wiley and Sons.
Websites:
1. Microsoft Vision and
2. Microsoft Objective accessed on 13.02.10 from <http://www.microsoft.co/about/companyinforation/corporategovernance/default.mspx>
3. Apple Mission, Vision and Financial Data accessed on 13.02.10 from <http://www.apple.com/investor/>
4. Game theory accessed on 14.02.10 from <http://www.gametheory.net/ >
5. Anil K Gupta (Financial Times) accessed on 16.02.10 from <http://anilkgupta.com/media/printmedia/FT_turning_Global_Presence_Into_Global_Competitive_Advantage_Financial_Times_27_Feb_1998.pdf>
