Microsoft’s evolution over the years show that the company knows how to deal with unsuccessful products and communicate with consumers to introduce new offers that will target customer’s needs. This became evident with the 2008 marketing campaign’s message “Windows. Life Without Walls” that promotes Windows’ affordability in times of a financial crisis. Kotler and Keller (2015) outline the case of Microsoft’s marketing successes and failures over the years, since 1975, when the company was established and until today. This case study will be used to evaluate Microsoft’s marketing strategy.
Microsoft did well in terms of listening to its consumers and developing new products that suited their needs. For example, although the business was initiated as an operating and software for PCs, both for companies and individual consumers, Microsoft succeeded in introducing products such as Xbox, Bing, Windowsphone, and its tablet. With the operating system remaining its core product and contributing to 80% of the revenue (Kotler & Keller, 2015). The executives of Microsoft are not afraid to explore other industries and niches, relevant to the consumers, which started back when Internet Explorer was introduced as a response to Netscape.
However, in several cases, Microsoft faltered as well, for example, when introducing its Vista operating system. Despite the marketing efforts, the product was faulty, resulting in consumer dissatisfaction and a bad reputation for Microsoft. Additionally, Kotler and Keller (2015) refer to the Microsoft versus Apple competition, where the latter successfully tarnished the brand image of Microsoft with its campaign. The marketing strategy was chosen successfully, highlighting the core issues of Microsoft in the eyes of the consumers – its products benign uneasy and uptight Windows.
Expansion
As noted, Microsoft recently expanded into different areas of operations, for example, search engines and smartphones. This is a good strategy because it allows addressing two factors – diversification and consumer needs. In terms of differentiation, it is evident that relying solely on the Windows and Office products can be dangerous because a sudden disruption in the industry of personal and business software can adversely impact 80% of Microsoft’s products (Kotler & Keller, 2015).
Therefore, by investing in products and services from different segments, Microsoft can differentiate its revenue sources and become less reliant on one product. In terms of consumers, this strategy allows Microsoft to attract different consumer segments by having a set of different products – smartphones, tablets, PCs, unified by a single system. The implication here is that a user familiar with Microsoft’s operating system is more likely to choose the company’s smartphone or tablet, because of compatibility and past familiarity with the brand.
Ethical Implications
In terms of ethical practice, Microsoft was accused of using unfair business strategies in the past, specifically when competing with Netscape and questions regarding the potential unethical approach due to the company’s market position emerge. Microsoft used its capabilities and financial situation to make its Internet Explorer browser free, unlike Netscape’s product, which meant that the latter became less attractive to the consumer (Kotler & Keller, 2015). In this example, the governmental regulators used antitrust laws to regulate the company’s behavior, raising the question of ethical business practices in the software industry.
Currently, Microsoft’s market position implies that there is little competition for its products and services, the Windows operating system, Office, Internet Explorer, and others, which means that Microsoft can use its market position to mitigate the possibility of a competitor emerging, for example through its pricing policy, similarly to the way its management addressed Netscape’s competition.
The executives of Microsoft may revise their strategies to align more with sound ethical practices. As Kotler and Keller (2015) state, because marketing affects society, it is essential for marketers to consider the moral context, among others, of their efforts. The focus should be on identifying the needs of the target consumer segment and developing a product that satisfies them better than the competitor’s offer.
Situational Analysis
PEST
Political
Microsoft is one of the largest software companies in the United States and globally, which puts it under the pressure of governmental organizations regarding antitrust regulations. Microsoft faced antitrust investigations in the past because of its Internet Explorer product that was offered to consumers free of charge and enabled Microsoft to control the majority of the industry’s market share (Kotler & Keller, 2015). Moreover, in countries with stricter political regulation, Microsoft can be subjected to censorship, for example, in China.
The trade war between the United States and China, in general, can have a negative impact on Microsoft’s position in the Asian market. Additionally, the internal politics of the United States, such as President Trump’s decision to restrict the inflow of immigrants, can affect the number of skilled professionals in the Information Technology (IT) market (MarketLine, 2020b). This can result in a need to increase labor costs, affecting the revenue of Microsoft.
Economic
Currently, it is unclear how the crisis connected to the global pandemic will affect the revenue and sales of Microsoft. Although the company has a successful case of effectively responding to the financial crisis of 2008 with a focus on the cost-efficiency of its products, the implications of COVID-19 job losses and industry recessions are difficult to predict at the current stage. According to (MarketLine, 2020a) “at the time of writing it is challenging to predict how the market will perform in the coming years due to the widespread outbreak of COVID-19” (p. 9).
Moreover, the nature of workflow has already changed, with an increasing application of remote work and social distancing, which will also affect the operational costs of Microsoft, directed at supporting the safety measures. The rising cost of labor is also a relevant factor for Microsoft because it employs thousands of people in the United States and internationally, and any changes in this expenditure can have an adverse impact on the revenue.
Sociocultural
In the context of the software industry, the sociocultural factors relate to customer expectations regarding the software, its performance, and Microsoft’s services. According to Microsoft’s executive Nadella, the main issue with the current technology is the lack of trust that consumers display. As Nadella explains – “a trillion dollars or so in the economy is lost because of cyberattacks, and small businesses and consumers felt most of the impact” (cited in Nusca, 2020, para. 5). Therefore, although the role of technology in people’s lives is becoming increasingly important, a significant issue is the general lack of trust due to security bridges and cybercrime cases.
Technology
Since Microsoft is a technological company, this element of the PEST analysis is one of the critical determinants of the evaluation. The technology industry, in general, is subjected to disruptions, with a threat of startups introducing a new solution that will be more effective and attractive to the consumer, as was demonstrated by the examples of Uber and Airbnb. On the other hand, sophisticated software, comparable to Windows, is not easy to develop and requires substantial financial investments that are difficult to obtain for a startup.
Microsoft competitors develop different types of technologies, and while currently, these innovations are costly and have limited applications, the market landscape will change in the following years. MarketLine (2020b) notes the increasing popularity of complex software technologies, such as Artificial Intelligence, where Microsoft, unlike one of its main competitors, IBM, appears to fall behind. IBM developed its IBM Watson platform to create and support AI-based applications, while Microsoft does not seem to have a solution that can be introduced in this segment.
SWOT
Microsoft has a definite advantage of an established brand name and trust from the consumers. However, technological disruptions can significantly affect the software market and Microsoft’s position in it. Table 1 is the assessment of SWOT factors for Microsoft based on MarketLine (2020a; 2020b) report and an interview from Nusca (2020) with Microsoft’s CEO. The main factor that can contribute to the future growth and development of Microsoft is the fact that the software market in the United States has shown “a compound annual growth rate (CAGR) of 8.9% between 2015 and 2019” and the analysts expect this trend to persist in the following years (MarketLine, 2020a, p. 8).
Table 1. Microsoft’s SWOT (created by the author).
Problem
Some problems that Microsoft may face in the future is the increasing popularity of portable devices as opposed to PCs and the consumers’ search for easy to use interfaces and cloud computing. Smartphones and other types of mobile technology, such as smartphones or tablets, will replace larger devices, such as PCs, which can cut Microsoft’s market share. As suggested by MarketLine (2020b), cloud computing is becoming more widely used because it is more accessible and less costly. While in the SWOT analysis, these two elements are presented as opportunities, it is unclear if Microsoft will be able to address the changing demand adequately. However, based on the predictions by MarketLine (2020a; 2020b), the COVID-19 consequences can have a negative impact on the technology industry, resulting in financial losses.
Alternatives
The alternatives are based on the assumption that Microsoft will focus on the development of affordable software and mobile applications because the company already has developments and products in this segment. The first option is to focus on portability and mobile devices and create a marketing strategy that provides a message of compatibility and ease of transition between different devices – PCs, laptops, smartphones, and others.
The second option is to invest in AI development and create intelligent products that will help users apply Microsoft’s services even more effectively. The marketing message, in this case, will emphasize the aid a user receives from AI. Cloud services, which enable cross-platform use, is another option, and Microsoft can offer more cloud-based services. The focus of the marketing, in this case, would be n portability and ability to access Microsoft’s products from ay device, even the one that does not have Windows.
Recommendations
Based on the analysis and review of alternatives, Microsoft should choose to develop mobile applications and software for portable devices. As Nadella notes, Microsoft is already developing a variety of products for portable devices, targeting maximum integration across different platforms. MarketLine (2020a) reports an increasing demand and use of mobile devices (cited in Nusca, 2020). Hence, the assumption is that this market segment will continue to grow, and Microsoft can leverage this by focusing on its main benefits – affordability and compatibility with Windows devices. Additionally, this alternative is better than the others because it would not require Microsoft to significantly change its current strategy and developments and invest in a new field, especially considering the uncertainty that businesses will face after the COVID-9 pandemic.
References
Kotler, P. & Keller, K. L. (2015). Marketing management (15th ed.). Pearson.
MarketLine. (2020a). Global software. Web.
MarketLine. (2020b). Software in the United States. Web.
Nusca, A. (2020). The Conversation: Microsoft CEO Satya Nadella on how the tech industry can win back public trust. Web.