Started in 1975 by childhood friends Bill Gates, who is a pre-law, Harvard University dropout and Paul Allen; Microsoft is an American multinational company that is synonymous to technology-based products and software. Microsoft’s core business revolves around the development, licensing, and supporting of software products, devices, and services.
Vision of Microsoft
The Microsoft Corporation’s vision is built on the foundations of developing new technology that is affordable, available and appropriate for the needs of each customer.
The cornerstone of Microsoft Corporation is the development of technology that empowers even those with disabilities to explore and fully utilize their potential – Bill Gates, President, Microsoft Corporation
Mission of Microsoft
The company’s mission is to empower people and businesses to achieve their full potential. The company values both its mission statement and the commitment to the users of its products.
Microsoft Corporation is committed to the development of software solutions that are considerate of all users irrespective of their age, ability or status.
Microsoft is deeply rooted in the belief of developing technology that is affordable and easily accessible for people in all spheres of life.
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Microsoft Organizational Structure and Culture
Microsoft’s organizational structure constitutes of the founder and president of the firm, Mr. Bill Gates, as well as some executive vice presidents belonging to various divisions of the company such as marketing, corporate strategy and planning, legal and departmental affairs, Finance, HR, business development and research and technology.
The Board of Directors for Microsoft is a critical pillar in the firm’s organizational structure since it is tasked with the role of ensuring that the long-term interests of the shareholders are satisfied by working in liaison with management.
There are also middle-level managers who make reports and are answerable to top level management. Middle-level management performs the function of controlling the implementation of policies and strategies that have been devised by the top level management.
Microsoft’s organizational culture is inspired by the inspirational leadership and the audacity to trust and delegate authority. In essence, the culture is built around the values of trust, openness and liberty that nurture talent and encourage creativity.
The SWOT analysis is a useful management tool that evaluates the strengths, weaknesses, opportunities and threats involved in ventures that corporations and enterprises embark on (West, Ford and Ibrahim 200). The essence of the SWOT analysis can never be fully estimated since it facilitates an in-depth understanding of various risks and rewards of the investment projects that Microsoft intends to venture into and exploit.
Strong financial performance
With a US $63 billion of cash and cash equivalent to their name, there is no doubt that Microsoft is one of the best performing corporations around the world as far as financial performance is concerned. The monetary robustness enables the firm to invest in research and development (R&D) and acquire new investments that provide the potential for growth.
The Microsoft brand reputation is considered by many to be one of its most powerful and influential tools. Owing its innovation, the company is valued at the whooping US $58 billion and at number 5 as the most reputable corporation in the world, according to Inter-brand. Such reputation accelerates the growth of Microsoft sales and share in the market (Donnelly and Harrison 128). Forbes also listed Microsoft at number 7 in its list of most reputable companies in the world.
Robust channels of distribution
Microsoft product delivery systems and channels are not only effective but also efficient as well. Its partnerships with large computer hardware manufacturers including Lenovo, Samsung, Dell, Toshiba to mention a few have catapulted the firm to great heights over the years. The company has also significantly invested in Nokia and is known to partner with governments throughout the world.
Due to the unique products and solutions that Microsoft has developed over the years, the company has been able to build a brand name for itself. Thus, it has gained the trust and loyalty that the customers or rather Microsoft users have placed on the products (solutions) that the Microsoft Company continues to deliver despite the existence of another substitute open source OS in the market.
User-friendly solutions and products
The Windows OS together with the Microsoft Office have long earned a name for itself among computer software users for its friendly and easy to use interface. The usability of this product has contributed to its wide availability and accessibility all over the globe (Bright).
Acquisition of Skype
Microsoft’s purchase of the online messaging and calls application, Skype that has 300 million users across the world, was aimed at propelling the growth of Microsoft’s revenue and amplifying Microsoft’s presence on the internet.
Dependence on hardware manufacturers
Microsoft heavily relies on computer hardware manufacturers such as Dell, Lenovo, Samsung and Toshiba to manufacture products that are compatible with the Windows Operating System. This situation places Microsoft between a rock and a hard place as computer hardware manufacturers can opt for an affordable and accessible substitute operating systems that come along leaving out the OS provided by Microsoft.
Poor investments and acquisitions
Microsoft has had some poor judgment decisions in regard to investments and acquisitions. Despite the company had acquired and pumped in a considerable amount of investments into Link Exchange, Web Tv, Danger and Massive to mention a few, these multi-million acquisitions failed to see the light of day and were eventually shut down.
Mature PC market
Despite the recent move by Microsoft to penetrate the mobile technology sector after the acquisition of the Nokia handset division, the firm still relies strongly on the sales of its software for laptops and standalone desktop computers. Growth and maturity of the market for the aforementioned Microsoft products will make it difficult for the firm to achieve revenue growth or make improvements in these sectors.
Slow rate of innovation
Despite the availability of tremendous research and development (R&D) resources, Microsoft has failed to capitalize on them and seize the opportunity to enter and tap into the newly emerging markets (Radinsky 2). With all these resources at their reach, the company was better placed to be the pioneer player of the online advertising sector but failed to seize the opportunity, allowing Google and Apple to take the spot and grab the lion’s share of the market segment and instead entering the market when it is too late.
Security flaws criticism
Microsoft’s core product, the Windows Operating System has for a long time been on the receiving end of sharp criticism concerning its high vulnerability to worms and virus attacks due to its weak protection features against cyber crimes. The Windows OS is at a high risk of a virus attack in comparison to other operating systems in the market.
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Cloud based services
Cloud-based services are still an emerging market whose full potential is yet to be fully utilized. Due to the ever rising demand for cloud-based services, Microsoft could as well take advantage and expand the range of cloud-based services that is currently in their portfolio.
Because the mobile advertising sector is projected to grow rapidly, Microsoft has a chance to seize the opportunity and capitalize on it. In fact, recently conducted studies and research indicate a double digit growth of the mobile advertising market.
Mobile device industry
The mobile device industry is yet another industry that has been rapidly growing, and the trend is expected to continue with forecasts pointing to a long-term steady growth of this market in particular and industry as a whole (Hout, Porter, and Rudden 107). Therefore, Microsoft can use this opportunity to implement cutting-edge technology into smartphones and tablets.
Growth via acquisition
With a reserve of more than US $ 63 billion of cash and equivalent, Microsoft enjoys the advantage of getting the upper hand in acquiring start-up tech companies with the potential and ability to bring on board new skills, competencies and technology innovations to the Microsoft portfolio.
Cut-throat competition in the software business
The competition regarding the software products is so intense that Microsoft is under pressure to develop Windows Operating System not only for the personal computers but also for the mobile devices as well, especially with the introduction of such products by fellow competitors Apple and Google.
Change in preference from consumers
The change of consumer needs and habits also leads to a change in their tastes and preferences in regard to software and technology (Hout, Porter, and Rudden 107). Even though Microsoft is known for its quality software products, consumer needs and habits have changed making more and more consumers prefer buying smartphones and tablets to desktop personal computers.
Open source projects
There are new open source projects that have recently found their way into the market, and they are receiving a positive feedback from consumers. As consumers accept and acknowledge the open source projects such as the Linux operating system, Microsoft faces a threat of being replaced with a more affordable substitute software product.
The threat of lawsuits is real for Microsoft since the company has already spent great sums of money and much time to fight legal battles in both the distant and recent past some of which the firm has lost.
Article Analysis Report
- Name: For the Course Project, I have chosen Microsoft.
- Article: In the News: Lee, Aaron. (2016, February 1). “Microsoft Considers Building Underwater Datacenters.” CloudPro. Dennis Publishing Limited, 2016. Web. 17 Apr. 2016.
CloudPro publishes insightful articles and offers cloud-computing resources providing technical support and expertise. The company assumes that cloud computing is the next big move in computing and information technology. Lee writes that Microsoft is running trials on the possible use of underwater data centers in a bid to cut costs. These data centers will specifically support cloud computing. The company has realized that almost half of the humanity (its customers) lives near coastlines. The lumpy cross-country networking to and from the existing data centers negatively affects the company’s profits: an average cloud-computing server lasts five years, and the cooling of data centers costs $15 billion annually. Microsoft has embarked on Project Natick that aims at significantly reducing the cooling costs in its data centers. Servers and other peripheral IT tools produce massive heat. Cooling them requires substantial air conditioning or heat extraction, which must be done at all times. Project Natick kicked off in late 2014. The company has assembled its in-house personnel to operate it. Norm Whitaker, an expert and managing director of Microsoft Research, is the head of the project. The rationale behind the move is that natural power of water (sea) if harnessed can provide adequate cooling while at the same time being near to where most Microsoft customers live. The result is twofold: low costs of running data centers and low latency coupled with close proximity to users. The company is mulling over the idea of harnessing tidal waves to power the underwater data centers, which is a valuable idea that can drastically reduce costs. A steel capsule, fitted with servers and connected with fiber optic cables and power, placed 30 feet deep in the Pacific Ocean, withstood the demands and exceeded expectations. More ambitious trials are underway as the company seeks a partner that could provide ocean-based energy systems.
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Why and how the news material is necessary
This piece of information is related to the course concept of competitive advantage, specifically the Porter’s Generic Strategies on page 162. Microsoft intends to come out all guns blazing and outplay its rivals by effectively managing the organization’s focus, differentiation and cost leadership.
- Taking overall cost leadership is about ‘creating a low-cost position’, which means cutting costs across the value chain. Microsoft plans to reduce its energy costs of $15 billion by innovating the data center’s cooling, and using nature (sea) to cool and power the systems.
- Differentiation is about providing unique and valued products and/or services. Microsoft is a leader in the computer industry and is always looking for solutions in tandem with its mission. This time, it is looking for internal solutions to the cost problem. Project Natick will not only reduce costs but also offer unique and valuable service to the company’s cloud computing users. People would want to associate with Microsoft because of its use of renewable energy to carry out its operations, including cooling the data centers using seawater and powering them with tidal energy.
- The focus strategy is about directing the attention to particular products or service lines, user segments, and geographical areas. If commercialized, the project will help Microsoft become a leader in cloud computing. It will get more attention as the next frontier in the industry. It will serve the cloud computing users well, and those around the coastlines will benefit the most.
Lessons from the article
Aaron Lee’s article, “Microsoft considers building underwater data centers” is full of lessons that are critical for the improvement and growth of any business seeking to improve the quality of service delivery as highlighted below.
Innovation is the cornerstone of growth
The article provides proof beyond reasonable doubt that the key to the company’s growth is innovation because the recent initiative by Microsoft that is being developed is well articulated and devised since it aligns with the company’s business and innovation strategies. In essence, this approach goes a long way to reinforce and commit upon the implementation and execution of policies with the principal aim and/or objective of gaining a competitive edge or advantage for the company in the given field.
It is a good practice for companies to keep tabs of their overall business and innovation strategies. A business strategy is however as good as its alignment with the different departments or divisions that will contribute towards the execution of the plan including innovation, which will eventually help the company to achieve competitive advantage (Rothschild 76).
The importance of value creation
The article provides an invaluable lesson on the importance of making attempts to regularly create value by businesses. A company that builds or improves its current quality and value of service delivery or products gets the bargaining power and most importantly the competitive advantage.
A good illustration is the innovation that was achieved through the Intel and Microsoft partnership that gave the company domination and bargaining power to fully utilize its potential and capitalize on the novelty.
The building of underwater data centers that is aimed at cutting the energy costs of the business is yet another innovation that creates value to Microsoft and even more importantly to the customers.
Innovation is good, but routine innovation is best
Aaron Lee’s article provides a classic lesson on innovation. While innovation can help the company to reach heights in the industry and give it a competitive advantage, it is routine innovation that will keep the company at the top and help it maintain and sustain the competitive advantage.
Microsoft is synonymous to routinely innovating company as evidenced by consistent innovation in its powerful microprocessors that have earned the company billions of dollars in returns. While there are such scholars and experts on innovation, who deprecate regular novelty (Donnelly and Harrison 139), it would be justified to disagree with those who hold this opinion and instead try to prove that such views are myopic, simplistic and suicidal at its worst. What is especially important is that the innovation strategy should be exact or rather precise regarding its suitability in terms of the resources required for its efficient execution.
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Based on Aaron Lee’s article, the construction of Microsoft’s marine data centers will undoubtedly have some positive effects on the company’s operations in one way or another. Below are the implications of this initiative.
Microsoft’s underwater data centers will have a direct and friendly effect on the environment. With land-based data centers contributing to the emission of elements that are agents of global warming, the underwater data centers can be viewed as a solution to the global warming challenge currently faced by the world. Besides, it is also a green energy alternative since the innovation is supposed to be powered by the tidal wave energy of the ocean and not the traditional hydro-electric powered data centers.
With the world facing these two environmental challenges, Microsoft’s initiative is likely to give the business a competitive advantage as it offers solutions and creates value at the same time.
Operating costs implications
Another implication directly linked to Microsoft’s initiative with the code name Project Natick is the reduction of the cooling and air conditioning costs that usually compel data center service providers to dig deeper into their pockets in order to cut these costs. However, water is suggested to be a better cooling agent. Therefore, the deployment of underwater data centers will rapidly bring down the costs for Microsoft, thus, positioning the business at a competitive advantage with significant bargaining power.
Practical managerial implications
Microsoft’s innovation continues to set it apart from its rivals and strengthen its market position. One of the areas that are likely to help the company to remain competitive is to build up the competitive advantage. Michael Porter outlined the generic strategies of overall cost leadership, differentiation, and focus. Microsoft will apply these strategies if it is able to use offshore data centers. This will reduce operation costs, set its cloud-computing services apart, and provide the unique user experience.
Even more critical is the resource and funding allocation implications that this initiative will have on the senior management of Microsoft. Akin to most of the strategy implementation methods or procedures, some of the factors must be taken into account. Key considerations are related to the size of technological opportunity at hand, the growth rate of core markets, the rate of technological advancement, the competition intensity, the financial robustness of the organization and the degree to which the needs of the clients are addressed (Rothschild 67).
The implementation of the underwater data centers will go a long way in strengthening the already renowned and highly innovative culture of Microsoft. The successful implementation of project Natick is aimed at boosting and accelerating Microsoft’s innovative culture. This can be explained by the company’s old tradition of upgrading and making significant technological improvements in the already existing innovation. Besides, by speeding up the innovative culture, Project Natick will also facilitate the exploration of other spheres of life in which this change can be applied.