Microsoft Porter’s Five Forces Analysis

Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. Microsoft Porter’s Five Forces are represented in figure below:

Microsoft Porter's Five Forces Analysis

Microsoft Porter’s Five Forces

Threat of substitute products or services is low. Range of products offered by Microsoft include operating systems for computing devices, servers, phones, and other intelligent devices; server applications for distributed computing environments; productivity applications; business solution applications; desktop and server management tools; software development tools; video games; and online advertising. The company also designs and sells hardware including PCs, tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories.

Additionally, Microsoft offers a wide range of software applications and cloud-based computing services such as Bing, Microsoft Azure, Microsoft Dynamics CRM Online, Microsoft Office 365, OneDrive, Skype, Xbox Live, and Yammer. There is no direct substitution for these products and services, however, indirect substitution exists.

Indirect substitution for Microsoft products and services belonging to productivity and business processes segment include a wide range of stationary products, planners and organizers. Indirect substitution for Microsoft gaming and recreation products, on the other hand, include but not limited to music, movies, sports, spending time with friends and family members etc.

Rivalry among existing firms is fierce in technology and consumer electronics industry. Microsoft products and services compete with a set other well-known brands in global marketplace. In Productivity and Business Processes operating segment Microsoft competes with software and global application vendors such as Adobe Systems, Apple, Cisco Systems, Facebook, Google, IBM, Oracle, SAP. Major Microsoft competitors in Intelligent Cloud segment include CA Technologies, Hewlett-Packard, IBM, and VMware. In More Personal Computing segment alternative platforms and devices, mainly from Apple and Google, providers of entertainment services such as Sony and Nintendo represent competition for Microsoft.

The market share of Microsoft products and services in the global scale varies depending on the types of products and services. Nevertheless, as illustrated in figure below, the company retains a global leadership position for its core product, Windows operating system.

Microsoft Porter’s Five Forces Analysis

Global market share of desktop operating system as of April 2017[2]

Threat of new entrants to the industry is insubstantial. This is due to significant industry barriers relating to massive financial investments and technological know-how. Moreover, due to its global scale of operations, Microsoft derives tremendous cost advantages out of the economics of scale and this advantage is not available to new entrants, at least during the initial stages of operations. At the same time, there are certain risks that new competitors with disruptive innovation ideas for technology products and services can secure necessary funding from angel investors and venture capitalists to enter the industry. Furthermore, increasing popularity of digitalization and internet of things among consumers in the global scale increases business attractiveness of the industry for new market entrants.

Microsoft Corporation Report contains a full analysis of Microsoft Porter’s Five Forces Analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Value Chain analysis and McKinsey 7S Model on Microsoft. Moreover, the report contains analyses of Microsoft leadership, business strategy, organizational structure and organizational culture. The report also comprises discussions of Microsoft marketing strategy and addresses issues of corporate social responsibility.

Microsoft Corporation Report

 

[1] Porter, M. (1979) “How Competitive Forces Shape Strategy” Harvard Business Review

[2] Net Market Share (2017) Available at: https://www.netmarketshare.com/operating-system-market-share.aspx?qprid=10&qpcustomd=0