The competitive forces that Microsoft faces in the future can be analyzed using Porter’s 5-forces model. The model is also useful in analyzing the industry in which Microsoft operates as well as the attractiveness of the company to external stakeholders. The information arising from analyzing the competitive forces can be utilized by Microsoft to make future strategic decisions.
The competitive rivalry force is strong because Microsoft operates in an industry in which there are a plethora of rivals. In particular, Microsoft faces stiff competition from Google, Amazon, Apple and Facebook (Wonglimpiyarat 94). Microsoft must endeavor to stay ahead of their competitors and constantly fulfill consumer needs to prevent the tendency of customers switching to rivals. In addition, the future bargaining power of buyers is moderate because it is unlikely for consumers to bargain yet there are alternative products in the market. For instance, a customer in need of cloud services with a more enterprise touch can choose Microsoft over Google. However, in the event that a consumer needs cloud services biased towards data analytics, the individual would prefer Google as the service provider. The relative ease with which consumers can access information online makes it possible for them to compare costs and select the best value among competitors.
The bargaining power of suppliers is low because Microsoft as well as its competitors are large enterprises that suppliers would not risk losing. Although suppliers are poised to hold low or moderate power in the computing industry, only the dominant suppliers like Samsung may have more power to bargain as it dominates the OLED display market. The smaller suppliers like Pegatron that manufactures surface line of personal computers for Microsoft may not jeopardize the relationship it has with Microsoft in the future (Wonglimpiyarat 92). In the same way, the threat from substitutes is relative low. Wonglimpiyarat suggests that for a force to be high, a substitute provider must offer a unique product or service (Wonglimpiyarat 97). Although there are numerous operating systems offered by Apple and Google, the cost of shifting from Microsoft is too high for customers to contend with. Finally, future threat arising from new entrants is moderate because it is difficult to enter an industry occupied by technology giants like Microsoft, Google, Apple, and Facebook. Threats are only posed by industry equals like Google. Even though Microsoft is likely to contend with new entrants, the force is low to moderate because of the company’s brand, users as well as enterprise experience.
The analysis of Microsoft’s competitive forces is essential for the company’s strategic planners to examine the future impacts and how each force discussed is likely to influence the industry’s profitability. From the analysis, a stronger force signifies lower profitability while a weaker force demonstrates high profitability. To this end, Microsoft’s future competitiveness relies on the company’s ability to come up with unique products that solve problems affecting people on a daily basis.
Wonglimpiyarat, Jaruneen. “Technology Strategies and Standard Competition — Comparative Innovation Cases Of Apple and Microsoft”. The Journal of High Technology Management Research, Vol. 33, Issue 2, 2012, Pages 90-102.