Microsofts Core Competencies - Case Study Example

? Microsoft Case Study Table of Contents Table of Contents 2 Microsoft’s Core Competences 3 Recommendation 5 Appendices 7 Microsoft’s Core Competences Prahalad and Hamel (1990) defined core competencies as the skill bundles that cannot be easily copied by competitors and these skill bundles can be used by organizations to achieve sustainable competitive advantage. By virtue of the definition of the term “Core Competency”, one may think that any specialized skill be classified as core competencies for organizations. However, that is not the case rather only those specialized skill which are being developed very long period of time by companies can only be considered as core competencies. For example, Gupta et al. (2009) gave example of intellectual capital in research & development division of pharmaceutical companies as the core competency which can not only be copied easily by competitors but also being developed over the course of long period. In such context, core competencies of Microsoft Corp can also be understood in context to core competency model proposed by Prahalad and Hamel (1990). According to the Microsoft case presented by Hitt, Ireland and Hoskisson (2012), from the foundation of the company in 1975, Microsoft Corp always strive for getting the “first mover” advantage by continuously innovating with product application and design. It is evident from the research works of Gupta and Dwivedi (2012) and Edgar and Lockwood (2012) that core competence is a customer driven approach and providing value to customers should be integrated with core competency models. Now, the question may arise that is it possible for all products of Microsoft Corp to have at least one core competency? For answering this question, study of the product portfolio performance of Microsoft Corp will be conducted. However, there is not much scope to do, the limitations being the lack of time and resource. To overcome such difficulties, the report will use case study of Hitt, Ireland and Hoskisson (2012) in order to understand key core competencies of Microsoft. Product portfolio of Microsoft Corp can be segregated into seven segments such as Windows, Business Solutions, Xbox Game Console and Entertainment, Developer Tools, MSN, web browser and Servers, mobile solutions (Hitt, Ireland and Hoskisson, 2012). For example, Windows and windows live segment accompanies by Windows Operating System (OS), Internet Explorer etc are highest revenue earner for the company. On the other hand, business division segments of Microsoft accompanied by Dynamics ERP, Microsoft Office, CRM, Office Web etc are second largest revenue earner for the company (Hitt, Ireland and Hoskisson, 2012). Interesting fact is that, Microsoft has acquired more than 80% of market share in the field of operating system and business division which show that the company has successfully integrated its technological core competencies in order to achieve market leadership. Microsoft is even performing well in the field of Entertainment & Gaming Solution with the help of its product portfolios like Xbox, Zune digital music platform, Windows phone and successfully defending its market share (Hitt, Ireland and Hoskisson, 2012). However, same cannot be said for online service division of Microsoft such as Bing search engines which has incurred consecutive operational profit loss due to unequal revenue distribution right agreement with Yahoo. Drejer (2002) and Clulow, Gerstman and Barry (2003) stated that core competencies can be achieved by deploying internal resources such strong intellectual capital, financial resources, technological capabilities, efficient human resource, marketing expertise, strong supplier relationship etc. In such context, Prahalad and Hamel (1990) stated that core competence gets enhanced with the use and sharing while other capabilities might get reduced with extensive use. Microsoft is still struggling to compete with Smartphone and technology companies like Samsung, Apple and existing competency of Microsoft is not helping them to evolve in modern technological world. Liquori (2011) pointed out that Microsoft has developed core competency by strengthening its IT services, developing supportive set of services, inefficient processes, establishing joint & venture with competitors in order to achieve resources that are not being originated from Microsoft research hub, acquiring small companies in order to achieve new skill sets etc. In the last 35 years, Microsoft Corp has upgraded its products in regular fashion in order to meet demand of customers in responsive manner. Core competencies of Microsoft Corp can be defined in the following manner; Strong intellectual capital accompanied by capable engineers, research scientist and product support team. Strong financial position of the company in terms of revenue and operating profit which help Microsoft to finance its new product development, merger & acquisition and marketing activities. Although, recently the company has lost some of its key employees but over the course of several years, Human resource competence of Microsoft has helped them to attract top talents and encourage them to give their 100% to achieve performance objectives. Code writers of Microsoft Corp such Bill Gates and Steve Ballmer have successfully implemented their competitive vision to employees through the support of human resource division and that is the key reason why the technology giant (market valuation of $219.18 billion) retained its leadership position for so many years (Hitt, Ireland and Hoskisson, 2012). Microsoft maintains strong supplier relationship with third part technology vendor, mobile manufacturers, online support service providers, research institutes, and electronics companies in order to not only develop new products but also create entry barriers for other competitors. Despite such core competencies, Microsoft Corp is facing competition from companies like Google, Samsung and Apple in the field of product innovation and capturing market opportunities in the field of Smart devices and in the next section, the report will recommend some suitable recommendation to the company. Recommendation 1. As part of generic strategy, Microsoft should think about taking focused differentiation strategy in its business division segment. The company should try to develop new business solution in order to attract potential business customers. . 2. As part of Business level strategy, the company should think about entering in the modern technology world of tablets, mobile gaming, Smartphone (already established partnership with Nokia to launch Windows Smartphone in order to rub shoulder with key competitor Apple. 3. Microsoft should establish equal search generated revenue sharing agreement with Yahoo in order to increase its operating income from Bing search engine. Reference List Clulow, V., Gerstman, J. and Barry, C., 2003. The resource-based view and sustainable competitive advantage: the case of a financial services firm. Journal of European Industrial Training, 27(5), pp.220-232. Drejer, A., 2002. Strategic management & core competencies: Theory and applications. Westport, CT: Quorum Books. Edgar, W. B. and Lockwood, C. A., 2012. Understanding, Finding, and Conceptualizing Core Competence Depth: A Framework, Guide, and Generalization for Corporate Managers and Research Professionals. Academy of Strategic Management Journal, 11(2), pp. 72-85. Gupta, R. K. and Dwivedi, H., 2012. A Customer Driven Business Excellence Model. Asian Journal of Research in Business Economics and Management, 2(XII), pp. 18-24. Gupta, S., Woodside, A., Dubelaar, C. and Bradmore, D., 2009. Diffusing knowledge-based core competencies for leveraging innovation strategies: Modelling outsourcing to knowledge process organizations (KPOs) in pharmaceutical networks. Industrial Marketing Management, 38(2), pp.219–227. Hitt, M. A., Ireland, R. D. and Hoskisson, R. E., 2012. Strategic management cases: Competitiveness and globalization. Stamford, Connecticut: Cengage Learning. Liquori, T., 2011. Microsoft Corporation. [pdf] Available at: [Accessed 17 October 2013]. Prahalad C. K. and Hamel, G., 1990. The Core Competence of the Corporation. Harvard Business Review, 68(3), pp. 79-91. Appendices Figure 1: Operating Income by Business Segment in Microsoft (Source: Hitt, Ireland and Hoskisson, 2012, p. 254) Figure 2: Financial Revenue of Microsoft from 2006-2010 (Source: Hitt, Ireland and Hoskisson, 2012, p. 261) Figure 3: Business Segments of Microsoft (Source: Hitt, Ireland and Hoskisson, 2012, p. 253) Read More