Microsoft Sources of Competitive Advantage

What are Microsoft’s sources of competitive advantage?

Microsoft

Microsoft is a world famous brand of computing hardware and software. Bill Gates founded it in 1975.  Microsoft is among the leading technology companies of the world. Its current CEO is Satya Nadella.It is a global brand known best for its Windows Operating System and Microsoft Office Productivity software. The company has brought a large range of products that millions around the world use.  The growth of Microsoft is a result of its competitive advantage. Its strong position in the computing industry comes from several sources. Several key strengths have helped it achieve a competitive edge. Its strongest rivals include Apple, Google and Amazon. Microsoft has always focused on innovation to bring products that help people be productive. There is intense competition in the tech industry. It is why every tech brand is investing more and more in R&D to retain its competitive edge. Microsoft is also a leading cloud services provider. It provides an entire range of cloud based services called Microsoft Azure. Some years ago, it acquired Linked In. It is also investing in CSR through the ‘Bill and Melinda Gates’ foundation.  Microsoft has retained a strong position in industry based on several sources of competitive advantage. Main sources of its competitive advantage are the following :

Brand equity:

Strong brand equity is a major source of competitive advantage for Microsoft. It is a more than 40 years old business. The company has brought a large suite of hardware and software products to the market. The focus of its products is on increasing the productivity of millions around the world. Brand Equity of Microsoft rests on the trust it has created and the efficiency of its products. It has also created a strong and reliable image as a technology brand. Microsoft’s brand equity rests on a few other factors too including its pricing strategy, marketing and CSR. The company has managed strong relationships with customers. Focus on CRM and innovation has also resulted in strong goodwill.

Global presence:

Microsoft is a global business with offices around the world in several countries. The corporate headquarters of Microsoft are located at Redmond, Washington. Microsoft also owns other significant large facilities throughout the globe. Most significant properties include R&D centres in India and China and DATA centres in Ireland, Singapore and Netherlands. It also has offices in major countries like India, Australia, Canada, UK, Germany, China and France. Microsoft has a global distribution channel for sales and distribution of its products and services. It sells and distributes its products through OEMs (Other Equipment Manufacturers), direct channels, distributors and resellers. Its global salesforce performs various tasks. They connect with the major customers in the public and private sectors. The company salesforce studies the technology requirements of the customers and manages relationships with the OEMs. Microsoft has managed its global presence smartly through a large sales and distribution network. It is a source of sustainable competitive advantage. The global network of Microsoft has helped it achieve an edge. It has helped it understand its customers and manage its customer relationships better.

Leadership:

Leadership can be a source of competitive advantage. This has been proved in the case of several companies from Apple to Microsoft, Alphabet, Amazon, Starbucks and many more. Microsoft has also flourished under the visionary leadership of Bill Gates. Current CEO, Satya Nadella is an able leader who has helped Microsoft find new direction in an era of difficult challenges.  Microsoft had remained caught in an innovation gap for several years. Its acquisitions were unable to bring desired results including Nokia. The situation has changed a lot with Nadella. Microsoft has acquired Linked In. It has helped it reach a larger and new customer segment. Microsoft’s product range has also expanded a lot.

Financial performance of Microsoft has also improved under Nadella’s leadership. It has managed to strengthen its position in several areas including Cloud industry, gaming and software. Several more things have changed about Microsoft in the recent years including its HR management, culture and brand image. Leadership is like a central pillar for any business and very critical to its success. Their strategy and guidance are important for any brand to help it emerge from challenges. Microsoft is one of its kind business; outstanding in several areas. Its credit goes to the vision of Bill Gates and smart leadership of Satya Nadella. 

Product range:

Microsoft has expanded its product range a lot in the recent years. It bought Linked In some years ago. The large product portfolio of Microsoft includes hardware, software, gaming products, web based services and cloud services. By purchasing Linked In, Microsoft added a social media site to its product range. Microsoft is a leading name in the global IT industry. It has brought several best selling products including Windows OS and MS Office productivity suite.  Windows OS is a leading operating system used on millions of computing devices throughout the world. MS office is a productivity suite including software like MS Word, MS Power point, MS excel, and several more software that help professionals and businesses around the world at increasing their productivity. Microsoft Azure is an entire range of cloud based services.

Marketing:

In the recent years, Microsoft has also focused a lot on marketing to strengthen its competitive advantage. Linked In is an important marketing channel for the brand. Acquisition of Linked In has helped it in several areas apart from customer connection. For the fiscal year 2018, advertising expenses of Microsoft were 1.8 Billion dollars. It uses several channels for marketing that are a mix of traditional and digital. Its website, social media channels and its retail and distribution network are important pillars of its marketing strategy. Another important pilar of its marketing strategy is its social connection. Philanthropic activities of Bill Gates have also helped the leader build a lot of goodwill around the world. Bill & Melinda Gates foundation has helped millions on this earth. Investment in philanthropic activities generates goodwill and creates trust. This is good for the brand image of Microsoft.

Innovation:

Another important source of competitive advantage for Microsoft is its focus on innovation. Each year, the company invests a large sum in research and development. Technology industry has several major players. Microsoft is facing intense competition from its rivals. It is also why the brand has maintained heavy focus on research and development. Focus on research and innovation has helped the company bring great results. Microsoft has expanded its product portfolio and is touching a larger customer segment.  Being a leading technology company, its investment in R&D is also among the highest. Its 2018 expenditure on R&D was $14.7 Billion. Microsoft has improved the quality of its hardware, software and other products and services a lot over time. People and businesses around the world need to be more productive than ever. Needs have changed in this era. Powerful computing and higher efficiency is the need of the time. Microsoft is reaching many more people than it once did. It may be easy to generate a source of competitive advantage in the tech industry but to retain it is a difficult task. This is why all the leading technology brands have to invest billions so that they can retain their competitive edge and leading position.

 

Financial performance:

Microsoft is in a financially strong position with Market Cap. above 800 billion dollars. Its financial performance over the past three years has continued to grow stronger each year. 2018 revenue of Microsoft climbed past 100 Billions to reach 110 billions. Growth in financial performance is a result of strengthening product portfolio and expanding customer base. Microsoft’s position in the cloud industry is strong. However, its performance has improved across some other categories too. Its cloud business is divided into three main segments, Microsoft Office 365 commercial, Microsoft Azure, and Microsoft Dynamics 365. Revenue from these three segments and other cloud properties, increased 56% over previous year in 2018 to $23.2 billion. Server products, gaming services and search advertising also saw significant growth in revenue.

HR Management:

Microsoft is among the leading tech employers of USA🇺🇸. As a CEO, Satya  Nadella enjoys very high approval rate. Glassdoor is a leading employment website where thousands of existing and ex-employees have rated the company and its leaders. Satya Nadella enjoys an approval rating of 96%. Microsoft is a place for people with passion and talent. Tech employers are making larger investments in HRM. It is because human resources and their management are a critical source of competitive advantage. Microsoft focuses on bringing the best talent onboard. Apart from large salaries, it has arranged several attractive privileges for its employees. Retaining the best talent is important. You cannot have an outstanding company without outstanding people. However, it all depends on the kind of culture and work environment you have created. Bill Gates is a passionate leader. Satya Nadella is also a smart leader who looks for some specific qualities in his people apart from passion, energy and an ability to find success in stormy situations.

Tech world has grown full of challenges and people need to have skills which can help them sail through storms. Passion and creativity work at Microsoft but you should also have sincerity and enthusiasm. There are enough opportunities for such people to find career growth and  a satisfactory work life at Microsoft. Nadella had joined the company back in 1992 when he was just 25. Then an engineering graduate, he is now Microsoft CEO.  You can understand his loyalty for his company. Himself a hardworking leader, Nadella likes hiring people who are not afraid of challenges. Microsoft has been through a long journey since its foundation. The company and its current CEO together have seen several challenging seasons together. Now, they are working to help others realise their dreams and find a successful career at one of the most respected workplaces on this earth.

Customer Loyalty:

Customer loyalty in 21st century is difficult to obtain. Customers have several options before them and   you have to retain them using every means. It is a critical source of competitive advantage. You want to retain your customers for longer, you must manage several things apart from product quality and pricing. You need to have a strong marketing strategy, great packages, global reach and you must be able to engage your customers. Microsoft regularly updates its software. Their usability and availability have made them very popular. Moreover, Microsoft offers a wide range of computing products including hardware and software. These products address the needs of a wide range of customers including private businesses, public organizations and individual professionals. It offers some products that do not have many substitutes. This is a unique advantage and a critical strength of Microsoft.

Pricing strategy:

Microsoft’s pricing strategy is a critical point of differentiation and also a source of advantage. Its both a business strategy and a unique advantage that Microsoft has achieved. Prices are a critical part of your business strategy. Managing prices well helps you expand your customer base and grow your customer loyalty. Microsoft has enjoyed heavy growth in the recent years. Its fast growth is fuelled by its product quality as well as its pricing strategy. Microsoft has created a large range of packages to meet the needs of several different groups of customers. Overall, its pricing strategy has helped it acquire a significant competitive advantage.

Sources:

Microsoft Anual Report 2018

https://www.glassdoor.co.in/Overview/Working-at-Microsoft-EI_IE1651.11,20.htm?countryRedirect=true

https://qz.com/work/1452282/microsoft-ceo-satya-nadella-looks-for-three-traits-in-leaders/