Microsoft Report MKT 521

THE MARKETING STRATEGIES OF

a collaborative project by:

emily atteberry | amanda johnson
jennifer quartemont | summer stone

spring 2019

marketing management: mkt 521

1

TABLE OF CONTENTS

Page 3 Executive Summary
page 5 introduction
page 6 company overview
page 9 market opportunity overview
page 10 situation analysis
page 15 marketing mix
page 16 competitive analysis
page 19 recommendations for growth
page 21 references

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executive summary

Microsoft is a world leader in the computer technology market, providing production and
support of their own software and computing devices. Since its founding by Bill Gates and Paul
Allen in 1975, Microsoft has launched a number of successful products, including interpreters
for Altair 8800, Disk Operating System (DOS), Microsoft Windows, Microsoft Office (including
Word, PowerPoint, and Excel), Office 365, Microsoft 3.0, Windows 95, Internet Explorer, Microsoft
Network (MSN), Windows CE 1.0, Windows 98, Windows Vista, Windows 7, Lenovo, Acer, and
Surface, leading to Microsoft becoming the most preferred computer platform in the world (New
World Encyclopedia contributors, 2018). Microsoft has managed to infiltrate new markets as
well with its products such as Xbox and Outlook.com (New World Encyclopedia contributors,
2018). Along the way, Microsoft has also experienced some less successful products, such as their
Windows Phone (New World Encyclopedia contributors, 2018).

In order to have better success when introducing new services and products in the future,
Microsoft must explore new market opportunities. These include implementing facial recognition
capability in order to remain competitive with Apple products, providing support software in the
growing market for drones, and utilizing virtual reality (VR) technology in new product lines
(Bohn, 2018; Corrigan, 2019; Warren, 2018).

Through situation analysis, it is determined that Microsoft’s strengths are being an
established company, cultivating brand loyalty by listening to their customers, providing a world
leading operating system that is compatible with nearly any personal computing device, managing
successful company acquisitions (for example, Skype and LinkedIn), and providing a number of
valuable products and software (Microsoft, Inc., 2016; Zigu, n.d.). Microsoft’s weaknesses are its
programs’ rampant vulnerabilities to viruses and other threats surpassing those of its competitors,
a lack of more recent product updates and innovations compared to its competitors, and the
overall decline in the personal computer (PC) market (Grimes & deAgonia, 2018). However,
Microsoft has opportunities for growth in today’s market such as investing in development of
mobile devices to increase their market share in a growing market, improving their Azure
cloud-based services, promoting their partnerships with other established companies (for instance,

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executive summary

Walgreens), and creating a successful advertising campaign to interest new customers (Koons &
Bass, 2019; Microsoft, Inc. 2019). Threats to Microsoft’s business include the growing competitive
market for innovative technology, social influences, and detrimental lawsuits that consume
valuable company resources (Technology News, 2019).

Overall, Microsoft’s marketing mix can be described using the 4 P’s of marketing. Products
include the Windows Operating System, Surface Tablet, Xbox Gaming System, Azure cloud-
based system, VR, and Office Suite. Price concerns are remaining competitive in the technology
market, offering “freemium” options, and providing market-oriented type products. Promotions
are occurring mostly online, targeting bookstores at colleges and universities, as well as targeting
children with disabilities. The place is on Microsoft’s website, the Xbox online store, authorized
sellers, and national Microsoft stores.

In a competitive analysis, Microsoft’s top competitors are Apple and Google. Apple and
Google each have similar products to Microsoft’s, including operating systems, hardware products,
and technology-based services. Apple’s prices are premium/freemium as well, although Google’s
prices include freemium, market-oriented, penetration, and value-based pricing strategies as well.
When it comes to promotion, Apple has strong advertising while Google opts for minimal-online
advertisements. Place of selling for Apple and Google both include online and in major retailers;
however, Apple also sells at their own store location and strategically chooses their authorized
sellers.

As large as Microsoft is, there is still some room for growth. Some recommendations
for growing Microsoft’s market share are to increase their product innovation, decrease their
cybersecurity vulnerabilities, enhance their advertising and continue partnership efforts (Bashar
& Sg, 2019; Campbell, 2018; Microsoft Investor Relations, n.d.). With these marketing strategies,
Microsoft should maintain a competitive advantage over Apple and Google.

4

introduction

In today’s fast-paced technology-based environment, breaking into the technology business
can be a difficult endeavor. Fortunately for Microsoft, the company began at the forefront of the
development of personal computing devices. Although being one of the first innovators at the
beginning of this technological era, Microsoft has managed to acquire some fierce competition
over the years. Apple and Google have quickly developed their fair share of the market space and
are proving to be worthy competitors. For this reason, it is important to take a thorough look at
Microsoft’s marketing strategies and determine what are Microsoft’s marketing strategies, and what
opportunities are there in the market to obtain a competitive advantage? This analysis will include
a discussion of the Strengths, Weaknesses, Opportunities, and Threats (SWOT) that Microsoft
faces, their marketing mix, and an analysis of their competition. Lastly, recommendations for
company growth will be presented describing strategies for product and market development.

5

COMPANY OVERVIEW

Microsoft is a worldwide computer technology company that establishes, supports, and
manufactures software and computing devices. Some examples of the most popular products sold
at Microsoft are Windows Server, Office 365, and Microsoft Office Suite. In April of 1975, Bill
Gates and Paul Allen established Microsoft. Headquartered in Redmond, Washington, Microsoft’s
original function was to establish and sell interpreters for Altair 8800 (the first personal computer)
(New World Encyclopedia contributors, 2018). Gates and Allen presented BASIC interpreter for
the Altair 8800 to Micro Instrumentation and Telemetry Systems (MITS), the founding company
of Altair 8800. Disk Operating System (DOS) is the first product that brought Microsoft its big
success. IBM offered Microsoft a contract to make an operating system for IBM’s new personal
computer (New World Encyclopedia contributors, 2018).
By the 1980s, Microsoft led the home computer operating system industry market. The
company also joined other industries such as computer accessories (mice and keyboards) and
publishing (Microsoft Press).
In 1985, Microsoft unveiled the first retail version of Microsoft Windows, the operating
system for personal computers (New World Encyclopedia contributors, 2018). The first Initial
Public Offering (IPO) for Microsoft was sold for $21 and closed at $27.75 in 1986. Closing at
$27.75 valued Microsoft at $519,777,778. Bill Gates owned 45 percent of the company’s shares,
which made Gates’ stake in the company worth $233.9 million (New World Encyclopedia
contributors, 2018).
In 1989, Microsoft developed Microsoft Office, applications used for office productivity.
The applications included Word, PowerPoint, and Excel. Microsoft 3.0, a newer boosting version of
Microsoft’s operating system, was developed in 1990. Microsoft 3.0 sold about 100,000 units in less
than two weeks (New World Encyclopedia contributors, 2018). Windows created the most revenue
for Microsoft; therefore, the company moved its efforts to Windows instead of their operating
systems. Quickly after, Windows became the most preferred personal computer platform (New
World Encyclopedia contributors, 2018). During the rise of Windows, Microsoft Office was also
picking up popularity and outshined the competition. Microsoft Office beat out other applications,

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company overview

such as Corel’s WordPerfect and Lotus Software’s Lotus 1-2-3. Office’s market share by far outpaced
the other applications (New World Encyclopedia contributors, 2018).
In 1995, Microsoft launched Windows 95, another new version of Microsoft’s operating
system; however, this one introduced a new user interface, for example, the famous “start menu.”
Windows 95 sold over a million units in the first four days after it was released. In addition, the
company released Windows 95 and Internet Explorer as a package deal, named Windows 95 Plus
Pack (New World Encyclopedia contributors, 2018).
In order to compete with AOL, Microsoft launched a major online service, Microsoft
Network (MSN). MSN was used to branch out into other markets as well. For example, in 1996,
Microsoft teamed up with NBC to create a cable news station, MSNBC (New World Encyclopedia
contributors, 2018). In 1996, Microsoft developed Windows CE 1.0, a personal digital assistant
(PDA); this was another market Microsoft entered. Windows CE 1.0 was a version of their
operating system that was designed to run on low memory and low-performance devices, for
example, small computers and PDAs (New World Encyclopedia contributors, 2018). Next, the
company released Windows 98, which was an update to Windows 95 that introduced support for
new and upcoming devices.
In 2000, a judge ruled that Microsoft was an “abusive monopoly” and ordered Microsoft
to split into two components (New World Encyclopedia contributors, 2018). In 2001, the federal
appeals court ruled that part of the ruling was overturned and a settlement was reached.
In late 2001, Xbox was released, meaning Microsoft entered the multi-billion dollar
gaming system market, which was controlled by Sony and Nintendo (New World Encyclopedia
contributors, 2018). Windows Vista, the newest operating system in 2007 was released. By mid-
2008, 140 million copies were sold of Windows Vista. Another version of Microsoft Office 2007
was launched at the same time as Windows Vista (New World Encyclopedia contributors, 2018).
The release and sales of Microsoft Office and Windows Vista led to a record profit for Microsoft.
In 2010, Microsoft created Windows Phone to compete with Apple and Google in
the smartphone industry. After the release of the Windows Phone, Microsoft went through a

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company overview

rebranding process, changing the company’s logo, products, and more (New World Encyclopedia
contributors, 2018). In 2012, the Surface was released; this was Microsoft’s first computer to have
in-house hardware. After Surface’s release, Microsoft launched Outlook.com to challenge Gmail,
Google’s webmail (New World Encyclopedia contributors, 2018).

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MARKET OPPORTUNITY overview

One possible market that Microsoft could improve on is the web camera industry (War-
ren, 2018). For example, Apple has facial recognition on their iPhone, this way users do not have
to type in a password when accessing the phone. Microsoft does not currently have technology
that unlocks devices with a camera. Microsoft could incorporate this on their laptops and tablets
(Warren, 2018). The web cameras could be used for access to the devices or used for businesses
to add security to desktop computers. In addition, the web cameras could be added to Xbox One.
The technology could allow for a user to immediately log in with minimal effort, such as, slightly
moving in front of the camera (Warren, 2018). This would add extra security and would also work
for multiple user game consoles.

Another opportunity for Microsoft is introducing software that can be used in drones.
Drones are a massive and growing market right now (Corrigan, 2019). Drones are known as un-
manned aircraft (Corrigan, 2019). Popular uses are real estate (taking pictures of the entire prop-
erty), police and rescue crews (drones can be helpful in finding missing people even at night), and
marketing (many companies use drones to achieve visually pleasing videos to use in marketing the
companies or products) (Corrigan, 2019). Microsoft could make software that is compatible with
drones. Microsoft could add the technology for the video caught by the drone to be loaded straight
to a Windows supported laptop or tablet.

Lastly, another possible market is virtual reality (VR). VR is defined as a simulated environ-
ment that uses sensory elements produced by a computer and the user’s actions determine the out-
come in the environment (Bohn, 2018). Microsoft could create software to support VR either on
the Xbox or develop a separate VR headset. Establishing VR with the Xbox would be the best route
for the company. Microsoft can develop a video game with VR elements that require the players to
use a VR headset when playing (Bohn, 2018).
Microsoft’s current CEO, Satya Nadella, is looking to create Microsoft outside of Windows
(Bohn, 2018). These market opportunities: drone software, VR, and web cameras, will help pull
Microsoft out of the spotlight of Windows.

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SITUATION ANALYSIS - STRENGTHS

Microsoft has many strengths in today’s
market, including their overall establishment,
brand loyalty from consumers, world-leading
operating system, acquisitions of other
successful companies, and a suite of valuable
products and software that consumers enjoy.
To begin, Microsoft has become a very
established international company since its
conception in the late 1970s. Through the years,
the organization has grown to become one of the largest companies in the world. Forbes.com lists
them as the 3rd most valuable brand in the world for 2018. (Forbes.com, 2018) Their sales topped
over $103 billion, and their number of employees has grown to approximately 124,000 across the
world. These facts, in addition to their ongoing positive reputation, have allowed stability and a
firm foundation in the market.
Microsoft has also created brand loyalty with its consumers by listening to their concerns
and desires and creating or modifying products to ensure customer satisfaction is met. When
Windows Vista came out, there were several issues that users did not enjoy and expressed
vividly to Microsoft. Just two years after its initial release in 2007, “Microsoft released Windows
7. Windows 7 is what Vista should have been and fixed the majority of the problems it had.”
(Stegner, 2016.) Consumers also remain loyal to Microsoft products including HP, Xbox, Lenovo,
and Acer. Each of these devices and brands has positive attributes that continue to drive repeat
sales from consumers around the world. For example, just as there is a Pepsi/Coke divide,
there is an Xbox/Playstation divide. Those who have owned an Xbox for gaming, movies, or
online communities have remained faithful to the Xbox brand through all stages of product
redevelopment.
Microsoft has also been successful in creating and maintaining a world leading operating
system that can be applied to almost any device. Think about this: when you have purchased a

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SITUATION ANALYSIS - STRENGTHS

new computer (no matter what brand), they usually all come with the latest Windows operating
system pre-loaded on the device. With the exception of Apple products, consumers are used to
turning on a new laptop or personal computer and automatically seeing Windows, a Microsoft the
system.
In recent years, Microsoft has been strategic in acquiring other successful businesses to
add to their portfolio of products and services. Microsoft acquired Skype in 2011 and instantly
became a leader in video chat. The acquisition allowed Microsoft to obtain over 124 million users,
and also brought on very innovative employees to help grow the many ways co-workers and the
general population communicates to one another. Then in 2016, Microsoft acquired LinkedIn, the
world’s largest and most valuable professional network (Microsoft, Inc., 2016). LinkedIn allows
users to network in a more professional setting, rather than Facebook or Twitter. Users can even
upload their resume and credentials if they are actively searching for a new career or position.
This acquisition has shown to be a success, especially after LinkedIn acquired the services of
Lynda, a platform for high-quality training videos and tutorials.
Finally, Microsoft’s suite of products and software continue to prove successful for the
organization. For example, this paper was generated utilizing Microsoft Word, a program inside
the Microsoft Office Suite of products. Most consumers use Word, Excel, PowerPoint, and
Outlook on a daily basis as a means of creating, maintaining, presenting, or sharing information
at work, school, or with family and friends. These products still remain superior to any other
services, especially now with Office365, which allows for instantaneous data sharing in the same
way as Google Sheets, Docs, and Slides.

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SITUATION ANALYSIS - WEAKNESSES

In every organization, there are
weaknesses that become apparent
when examining their place in today’s
market. Microsoft is no different; they
see weaknesses in their vulnerability to
viruses and other threats, lack of product
updates and innovation, and the overall
decline in the personal computer market.
Historically, Microsoft Windows operating systems have been notoriously attacked more
than Apple operating systems due to the level of ease in getting into the software. However, in
2002, Bill Gates vowed to invest more resources into security and implemented their security
development lifecycle (SDL) across Microsoft. This implementation puts secure coding and
practices at the forefront and beginning of every software development project (Grimes &
deAgonia, 2018).
Microsoft also often falls behind in producing innovative products or services in
comparison to other companies in this very competitive market. In a world where the Internet
is slowly becoming the only medium that matters, Microsoft continues to fall short to Google’s
constant innovation. In the last five years, Google has managed to create a large portfolio of tools
that many consumers have been craving (or did not even know they needed.) For example, when
working on a statistical group project, it is extremely convenient to use Google Sheets and be
able to make changes instantaneously instead of passing an Excel sheet back and forth. These
types of innovative tools are what can really set Google apart from traditional Microsoft Windows
products and platforms.
Finally, with the market constantly moving to a more mobile platform, traditional PCs are
becoming less in demand than ever. Consumers want to be able to work on-the-go, and Microsoft
has not become a “big dog” in the smartphone and tablet market yet. By investing more resources
in these products, Microsoft could soon see a very drastic shift in the market in their favor.

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SITUATION ANALYSIS - OPPORTUNITIES

In order for an organization to be
successful, there must be opportunities
present to encourage growth. Microsoft’s
major opportunities in today’s market
are developing more mobile devices to
compete in a very competitive market,
embracing and improving their Azure
cloud-based services, acknowledging and
partnering with other established companies (such as Walgreens) to compete with other large
organizations, and creating a successful advertising campaign to reach new consumers.
While Microsoft does have a presence in the mobile device market, their share does
not come close to that of Apple and Google. By investing time and money into research and
development to create more products similar to their Surface Pro, Microsoft could really see a
shift in their favor.
Microsoft Azure is a public cloud platform that enables users to build, deploy, scale and
manage servers, services and applications across a global network of data centers (Microsoft, Inc.
2019). By promoting this service to other corporations, Microsoft has the ability to transform and
dominate the corporate market. This service will allow employees to work from beyond a desk
by enabling them to create and save information in a protected, central location that can be shared
among employees and updated in real time.
In January 2019, Walgreens announced they were teaming up with Microsoft to create
and design new “digital health corners” for its stores in a way to compete with Amazon.com, Inc.
(Koons & Bass, 2019). These machines will be designed to promote the sale of health-related
devices and help patients manage chronic diseases. The machines will use the Azure cloud
platform to move applications and data to the tech giant’s data centers.
Finally, Microsoft’s opportunity to create a successful advertising campaign could
ultimately set them apart from all other technology companies. In years past, we have seen the

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SITUATION ANALYSIS - opportunities

evolution of Google’s advertising strategies (most recently with Google Home and “Alexa”)
and Apple’s advertising strategies (portraying sleek updates to products and new features), but
Microsoft has been disconnected in the world of advertising. By hiring an influential celebrity or
creating a strong and memorable campaign, Microsoft has the potential to generate more buzz
around their products and services.

SITUATION ANALYSIS - THREATS

As society evolves, the competition in the
technological market will only continue to become
more fierce. In the 1980s, Microsoft’s competition
was very slim. However, with more companies
creating innovative products, the technological
market has grown, and Microsoft must now become
aware of all competitors and the value they bring to
the market.
Social influences can also threaten the success of Microsoft in the market. For example,
Apple products are on average more expensive than the Microsoft comparatives. Society often
links price to quality, and social influences could affect Microsoft sales simply because of their
differences in price. Some may view Microsoft products as inferior to Apple.
Finally, ongoing lawsuits can always threaten the success of an organization, and
Microsoft is no different. In a most recent lawsuit, Microsoft filed a complaint against a Foxconn
subsidiary for unpaid royalties for patents used in devices for clients (Technology News, 2019).
These types of lawsuits can be very expensive, create bad press, and take time and attention away
from creating or improving products that will increase sales and revenue.

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MARKETING MIX

Microsoft’s marketing mix can be summarized using the 4 P’s of marketing: product,
price, promotion, and place. Please refer to the graphic for a list of each of these elements.

15

COMPETITIVE ANALYSIS

Two of Microsoft’s strongest competitors are Apple and Google. Apple and Google have
similar strengths and weaknesses to Microsoft’s own; however, they also possess differences that
Microsoft needs to be aware of in order to efficiently compete.

16

COMPETITIVE ANALYSIS

Strengths that Microsoft and Apple share, include brand loyal customers, they are world/
globally known in the network and operating leadership, and they produce valued products (Zigu,
n.d.). Though there are many similarities, Apple thrives in other significant areas that can be
of threat to Microsoft. Apple has strong leadership in constant innovation and updates, yet this
is a weakness of Microsoft’s (Zigu, n.d.). Apple steadily develops products on a regular basis,
keeping them updated as well. Whereas Microsoft lags behind in creating new inventions, and
the inventions they do have to get outdated overtime without advancements to fix them. Another
strength of Apple’s is their use of advertising. Their brand is solidly placed in numerous formats,
TV, print, media, online, billboards, etc. (Zigu, n.d.). Though this is not a strength of Microsoft, it
is an opportunity. Microsoft already has strong brand loyalty; it has the chance to strengthen that
bond by developing its image.
Google, on the other hand, has strengths in a few varying areas that make it a lead
competitor. They do have a strong brand image and large organization size (as do Microsoft
and Apple), but they also own many patented products, and they are a diversified business
(Thompson, 2017). Google’s access and use of online advertising has contributed to its success
in image branding. Also, one thing that gives Google’s products a competitive edge is its major
use of patents. In 2012, Google held 21st place worldwide by owning 1,151 patents. (Google
SWOT Analysis, n.d.). And just within 5 years, in 2017, Google held more than 52,000 patents,
expecting that number to grow yearly (Patent Law, 2018).
Strengths of competing companies must be watched carefully. However, competitor
weaknesses are where Microsoft may have opportunities to challenge, given they are able to
handle their own weaknesses as well. Without proper analysis and observation, competing threats
that are already strong could become overwhelming. As mentioned earlier, Microsoft’s own
weaknesses include virus and software vulnerability, lack of product updates and innovation (a
contrasting strength of Apple’s), and an impact of the PC market declining.
Though Apple and Google do not possess many weaknesses, there are a few listed that
make them vulnerable. Apple has a “small” audience where an opportunity is missed, as it tends

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COMPETITIVE ANALYSIS

to focus mainly on B2C (Businesses to Consumer) markets, and not as much B2B (Business to
Business) (Zigu, n.d.). In comparison, Apple’s own competitors Dell and HP do not struggle in
this area; instead, they are the ones providing business for B2C markets, not Apple (Zigu, n.d.).
A second weakness is that of Apple’s ecosystem, as it is considered “to be more rigid when
compared with other mobile ecosystems” (Zigu, n.d.). An ecosystem such as this is defined as
“a group of devices with software to create one collaborative network” (The Apple Ecosystem,
2018). Overall, Apple has a significantly strong presence with its ecosystem. Since its products
work seamlessly with one another, it is a trait that draws consumer interest (Villas-Boas, 2016).
However, if a consumer owns a mix of Apple products with another competitor like Microsoft,
those products do not contain an ecosystem together. Third-party products and companies are
simply not compatible with the network Apple has created (The Apple Ecosystem, 2018).
Google’s couple of weaknesses go hand in hand. First, Google’s services are very dependent on
the Internet (Google SWOT Analysis, n.d.). Lack of service or access to the web prevents the
ability to use Google’s search engine. A second weakness is Google’s lack of physical presence
(Google SWOT Analysis, n.d.). Though, in recent years this weakness has developed. The
addition of products like Chromecast, Pixel, Chromebook, and Google Assistant has slowly
transitioned into Google’s physical offerings (Our products, n.d.).



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RECOMMENDATIONS FOR GROWTH

Microsoft has room to grow when it comes to product development. Since the company
lags behind the competition in innovation, this is an opportunity for it to mature. A suggested
strategy for Microsoft would be to increase diversity in its products, and it must do so with an
ambitious mentality (Bashar & Sg, 2019). In the past, Microsoft has dabbled in the smartphone
industry. More recently, the company has begun selling Samsung Galaxy phones at its physical
stores (Foley, 2019). This partnership will allow Microsoft to place its own software and apps on
the phones.

Another suggestion related to products is the necessity of cybercrime and illegal download
prevention. In the past Microsoft has been easily accessible for hackers and viruses, often making
it less attractive (Ferguson, 2017). However, the company has since begun combating this issue.
Microsoft has developed a Digital Crimes Unit (DCU), which began in 2008 and, in 2013, was
upgraded to more high-tech facilities (Campbell, 2018). The DCU’s goal is to fight cybercrime,
ranging from “viruses, malware, hackings, and counterfeit software” (Campbell, 2018).
Regarding marketing development, Microsoft has many opportunities. For one, Microsoft
already has a strong brand image, and increasing that image through promotion would benefit the
company. Enhancing its advertising efforts is one suggested area for promotion that Microsoft
could pursue. Another market suggestion already mentioned regularly is that of partnerships.
Microsoft is strong when it comes to partnership acquisitions and continuing to do so will allow
it a competitive edge. Since 1994, Microsoft has acquired 188 companies (Microsoft Investor
Relations, n.d.). The diversity of partnerships will allow consumers access to Microsoft products
and services.
A third suggestion that contributes to both marketing and product development strategies
involves price. Prices for Microsoft are already low in comparison to Apple products, but
considering illegal downloads and cybercrime as discussed earlier, price could have an impact.
If prices were decreased even more than they already are, this might reduce the amount of illegal
activity that goes into acquiring Microsoft products without paying for them (Bashar & Sg, 2019).
As it would give those willing to steal Microsoft products less reason to do so, if the software is

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REcommendations for growth

cheap enough for even them to afford.
Although Microsoft is already a strong competitor in the computer-based product and
services market, there is still room for the company to grow by being more innovative, decreasing
their vulnerabilities, and fostering their advertising and partnerships. These marketing strategies
will likely give Microsoft a competitive advantage over Apple and Google.

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REFERENCES

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