Microsoft defends its Empire

Microsoft defends its Empire

Microsoft Corporation is an American multinational corporation headquartered in Redmond, Washington, that develops, manufactures, licenses, supports and sells computer software, consumer electronics and personal computers and services. It is one of the most profitable companies with estimated earnings of 15.2 billion as on 2008. Much of the software that Microsoft sells is loaded into the servers of Pcs and is used by individual users. But with the growth of the internet over the past decade it has become essential for the company to make its software more internet friendly. Customers were using programs and software from various devices like mobile, laptop, desktop, netbooks, kindles etc. and they want a cloud computing scenario from which they can access their files on any device. Furthermore the company is also feeling the heat from the competitors that sell cheap or free web alternatives.

Looking into the customer demand and also the dwindling profits, CEO, Steve Blammer has come to the conclusion that the company should overhaul its business model by moving towards renting the software rather than selling it. This was because there were lot of companies that were renting the applications to end users at nominal price and Microsoft was losing the market share.  Moreover, he wants more internet based features to be incorporated into the office suite applications (word, excel, power point and the outlook)

With this vision, Blammer recruited Stephen Elope, a veteran of Adobe system and Juniper Networks. HE joined the company in 2008 and was assigned to overhaul the business group by using internet more aggressively as a way to deliver and improve Office’s capabilities.

As soon as Elop joined Microsoft he began showing off a flashy video of how Office could enhance customer’s productivity. HE created a concept of “looking-glass wall” that will enable people located miles and continent apart to communicate and that too with real time translation if needed. He doubled the workforce in the Research and Development lab and also prioritized the investments made on products. He doubled the investment into “Sharepoint”, the application that can be used to share documents and collaborate on “wikies”. He turned the “Sharepoint” business into one of the highest revenue generating stream for Microsoft. Elop also invested into the ‘cloud’ which enabled customers to access Microsoft software from giant data centers in the internet rather that storing it in their own servers.

In the latest version of Office, users can move cursor over the name of a college and can check of the person is online. In addition to that it also offers the option of calling, emailing or setting up a meeting and also has features for social networking for tracking co-workers with specific skills. These recent features have had positive impact on the corporate customers of Microsoft (Pearce & Robinson, 2011).

Steve Blammer’s Futuristic Vision

Steve Ballmer joined Microsoft in 1980 and was the company’s first business manager and became CEO in 2000, He was the most successful CEO for the company because Microsoft tripled its revenue and doubled its profits, under his leadership. He wanted Microsoft to shift its primary focus from traditional, perpetual licenses to a yearly subscription model. He knew that the key to success was customer freedom and so Microsoft have to customize its product offering for individual users’ with different usage models Blammer believed that, Microsoft needs to stand for something unique and he envisioned that Microsoft as a front runner in innovation with its web and platform products which was a huge departure from their traditional product types.

Blammer had a vision to build one of the most robust cloud infrastructures in the world and he concluded thatlaunching successful online services and platformswas the best way to maintain profitability and fend off threats from cheaper competitors such as Linux and other open-source operating systems like Google Docs. He wanted Microsoft to deliver its software through the browser to thousands of customers. He thought that cloud computing will be a big hit among customers as it means no upfront investment in servers or software licensing and low maintenance costs compared to conventional hosting. Blammer knew that in order to fend of the competitors, Microsoft office needs to have better features for internet users. He believed in continuous change and had dream of bringing radical innovation to most of the products of Microsoft.

Microsoft Subscription Model

Microsoft has adopted subscription model with its cloud service product which enabled customers to access, edit and store their files on the servers in Internet. This means that the Office user do not need to store the application their personal servers but rather pays a monthly or yearly fee in return for access to the software. The customer cannot use the program if subscription lapses but the documents are kept safe for future use. This model allows customer to increase productivity, including staying up-to-date with productivity features.

There are many benefits for customers due to this subscription Model. It requires a smaller investment up front and subscribers are always up-to-date with latest and most complete applications. Furthermore they can also access their files from different devices as the files are stored in “Cloud”.

Risk associated with Subscription model

The cloud-based computing model presents execution and competitive risks. One of the major risk that Microsoft faces with its subscription model is the fact that customers will more likely prefer to use the free and open source applications that are provided by other companies. Microsoft’s competitors are rapidly developing and deploying cloud-based services for consumers and business customers. Pricing and delivery models are evolving. Devices and form factors influence how users access services in the cloud. Microsoft needs to devote significant resources to develop own competing cloud-based software plus services strategies. It is also uncertain whether these strategies will attract the users or generate the revenue required to be successful. In addition to software development costs, the company is also incurring costs to build and maintain infrastructure to support cloud computing services (Microsoft, n.d.).

Furthermore to this, Customer satisfaction is the key and if the customers are not satisfied with the product then the customer will simply stop paying money to Microsoft. This subscription model gives more freedom to customer as they can simply choose to stop using the products of Microsoft. Microsoft now needs to invest more into call centers as this concept is new and many users will need support. It is also important to reduce the number of bugs in its programs.  Microsoft may experience outages, data loss if they fail to maintain an adequate operations infrastructure. Similarly, since the operation is based on internet services, the low speed and reliability of internet is also an external factor that might hamper the use of this subscription model. It is also vastly more difficult and costly to negotiate, integrate, and manage multiple payment processor relationships to remain compliant globally (Vodnik, 2013).

Stephen Elop’s role at Microsoft

From January 2008 to September 2010, Elop worked for Microsoft as the head of the Business Division responsible for the Microsoft Office and  MicrosoftDynamics line of products, and had a role as a member of the company's senior leadership team He headed Microsoft's Business Division that released Office 2010. He also aggressively pushed the mandate he got from Blammer to overhaul the business strategy by using the internet more aggressively as a way to deliver and improve office’s capabilities.

Elope put the big idea into action and devoted his time to develop the cloud computing system. He led the business division to develop giant data centers which was necessary for the Microsoft subscription model. He was also champion of the co-authoring which enabled users from various geographical locations to create and work on power point presentations simultaneously. Elope also prioritize investment for different projects and invested into projects that were the most profitable. He turned the Sharepoint into the highest revenue generator for Microsoft by doubling investment into it.

References:

Microsoft (n.d.).Risks and Uncertainity. Retrieved on 29^th March, 2014 from: http://www.microsoft.com/investor/EarningsAndFinancials/Earnings/RisksAndUncertainities/FY10/Q4/RisksAndUncertainties.aspx

Pearce, John A., & Robinson, Richard B. Jr., (2011). Strategic Management: Formulation, Implementation and Control (12^th ed.). New York, NY: McGraw-Hill Companies Inc.

Vodnik, C. (2013). Top 6 challenges with a subscription model.Retrieved on 29^th March, 2014 from:http://venturebeat.com/2013/11/04/subscription-model-challenges/

McDonald’s and Its Critics, 1973-2009

Summary of the case

MacDonald’s started from a traditional type restaurant to a global fast food chain. The corporation embarked into a journey of gradual expansion and became the 1^st fast food chain in the world. MacDonald’s used various strategies to achieve success in the domestic as well as the global market.The case is about the ups and downs that MacDonald’s faced after 21^st century.  This case gives the snapshot of the strategy, the corporation has undertaken to radically change and improve its image after a lull period of criticism and loss in business. The corporation adopted various strategies under different CEOs and these different strategies and each of the strategy is critically evaluated in this case.

McDonald faced a lot of criticism from the beginning of the 21 century and the corporation hadto change its brand image by instilling confidence and goodwill among the consumers. Furthermore the corporation also needed remain profitable. MacDonald’s improved the marketing of its healthier menu, refocused on its core product offering, modernizing the restaurant and introduced uniformity by developing QSC concept i.e.quality, service&cleanliness (QSC) in all of its outlets.Despite much criticism from groups like Greenpeace, dwindling profits and an increasingly health conscious public, the company has been able to use an improved and expanded product range to attract customers.

McDonald's has attempted to address critics of the fast food format by providing a healthier menu. In response, thecompany has implemented a strategy to enhance the publicity of its healthier menu, while at the sametime funding research into kids' obesity and forming the Moms' Panel to gain the opinion of mothers from around the world. McDonald's has gone back to basics in promoting its core food offering, burgers, creating a larger BigMac in defiance of critics on junk food.

Achievement of Fred Turner

Fred Turnerwas one of the earliest employees of McDonalds. He succeeded founder Ray Kroc as chief executive officer. He was a college drop-out and started working in the company at early age. During his tenure the company made highest achievement because of his strategic mindset. He took McDonald’s to new heights of profitability.He is credited with helping to massively expand McDonald's, introducing new meals and setting service standards for the company and its employees.

Turner changed the art of restaurant to science. He introduced the company’s 1st operation manual and developed time and motion study that defines operating techniques in detail. The manual specified cooking time for all food items, the precise temperature setting for each cooking equipment and standard portion of all products. In addition to this he also developed the quality control checklists and also developed guidelines into the optimal size of the crew needed for each shift of operations.He was the 1^st man to study time and motion strategy in the food chain industry. He was an architect of the company’s emphasis on quality, service and cleanliness, known as QSC.One of the biggest elements of McDonald's success has been its consistency that the customer knows what to expect in terms of food, service and speed.

Turneremphasized on uniformity in training for McDonald’s employees and establishedHamburgerUniversitywhich offered training program for managers, franchisees and employees. Hamburger University has been critical to establishing consistency in food preparation and service delivery across the vast network of McDonald’s.

Turner believed in the philosophy of Introduction, Expansion and Consolidation. He was the pioneer of management by regional organizational structure.He introduced the policy of close supervision of the franchisee to maintain uniformity.He appointed flying squads to monitor the different outlets to see if the uniformity and quality is being maintained at the franchisee network.

Turner is also credited with not allowing any union to form in the fast food chain. He didn’t givepriority tounionization and discouraged employees to form unions.  He was able to reduce the employee cost due to non-unionization. It wasan unprecedented achievement of turner that 14000 outlets of McDonald’s were operating and none of them were unionized during his tenure.

Jack Greenburg’s Mistakes

Jack Greenberg held the top post in McDonald during a difficult period for the company. He was made CEO of the corporation in 1998. Green berg was a very ambitious man and was hired from outside the corporation due to his past achievements in various companies.  He was looked upon as an agent of change and commanded so much goodwill that when he was appointed CEO, Wall Street jumped and stocks rose by 4%.  Despite being applauded from all sectors, Greenberg made some strategic mistakes which resulted in the corporation’s stock going down roughly by60% during his tenure.

MacDonald’s human resource strategy was based on hiring homegrown talents for the top executive posts but Greenberg decided to hire outside executives. This was one of the mistakes done by Greensburg because now people who did not have the insight into the MacDonald’s culture were drastically changing the business strategy in the corporation. Greenberg also moved away from the strategy of promoting uniformity across all outlets. He did not confer to the Kroc’s model of uniformity and made drastic changes to greater extent. In addition to this Green berg went aggressively with mergers and acquisitions which violated the rule of focusing on the McDonald’s brand only.

Greenberg's one of the biggest mistakes was spending rashly by procuring too many new storesGreen burg was focusing in creating monopolyin the industry by acquiring the other chains.He bought Aroma café, the 23 coffee and sandwich shop, 150 units Donatos Pizza and 850 outlets Boston Market to name a few. This added to the financial burden for the corporation and it was becoming hard for the company to manage the new outlets. Due to this the new outlets were having poor performance in terms of quality and service.The delivery time of the chain dropped to 46% and customers complained of harsh behavior and unfriendly staffs.

Greensburg is also credited with floating too many expensive innovations that didn't pay off. He developed “Made for you” system with an investment of $180M which he hoped will have significant improvements both in food quality and service speed but it turned out to be too labor intensive and it increased implementation cost and service delivery time.He promoted the food in the menu like “Salad”and but the changes he made didn’t come cheap and added to financial burden for the company. During his tenure the corporations stocks were trading at a seven year low and he resigned from the company in 2002 amid these financial difficulty.

Jim skinner’s leadership and MacDonald’s comeback

Jim Skinner restructured McDonald’s, redesigned the restaurants, and revolutionized the menu. Skinner also earns high marks for offering better value and improved marketing.His winning strategy, named ‘Plan to Win’, focused all team members’ attention on improving service, food, and ambience in the existing stores and not necessarily on opening new stores.His entire strategy was just the opposite of Greenberg.  He focused in remodeling the stores and improved the workflow in the restaurants. His plan was to make the outletsmore happening by installing new soft lights, repaint the walls and add internet facility. Some of the premium outlets of MacDonald’s were also placing stationarybicycles and video screens in the new play area within the restaurant.

He gave emphasis to customer satisfaction and developed high standard ofcustomer service as part of sustainability plan. He extended the store hours to attract new customers. Skinner also diversified the business to accommodate the premium coffee drinks. He installed coffee bars with baristas preparing espressos, cappuccinos and lattes within the restaurant.

Skinners response to the attack of the critics was also a import factor that sustained MacDonald’s.  He promoted fruit and milk as substitutes of French fries and soda drinks in kids menu. He added bottle of water and pedometer to adult meals. Sandwiches were offered with premium salads and apple slices.  Skinner launched balanced lifestyle and fitness program and refocused its marketing strategy on exercising.

Skinner also pioneered talent management and leadership development. High-potential employees were put through a leadership institute to nurture their talents. He was also a very down to earth person and also promoted consensus among managersbefore taking final decisions. He was also liked by peers and subordinates because he used to give time to employees and always motivated them.

How should Mc Donald respond to its competitors?

For MacDonald’s becoming and staying the market leader is a huge task, especially when competition is getting more intense. Keeping ahead involves continuous hard work to enhance the reputation of the brand, coupled with product innovation based on detailed market research that indicates how to please customers. McDonald's should focus on the vision shown by Fred Turner in providing a standardized delivery through quality, service and cleanliness across its vast chain.

McDonald’s should take the 'Customer focus' strategy by understanding what customers want and fulfilling their expectations with innovative products and quality services. They should differentiate themselves by focusing on a specific type of customer, in a specific type of location, with a limited product line, minimizing their costs, and competing on the bases of price and fast service.McDonald's should also adapt itself to changing consumer attitudes by offering healthier alternatives such as wraps and salads. McDonald's should revolutionize its menu, offering healthier options to woo health-conscious consumers.

McDonald's also has a great opportunity in the emerging markets. McDonald's still has not fully penetrated emerging economies. McDonald’s can stay ahead of the competition by opening new restaurants in the emerging markets like Indian sub-continent as well as Africa.

Dell Direct

Summary of the case

This case is about how Dell changed the personal computer industry through its business model. The company’s sales grew at an annual rate of 49%, jumping from $3.5 billion in 1994 to over $25 billion in 1999, while profits increased at the rate of 62% per year. Dell was able to grow into a largest player in the personal computer industry due to its innovative distribution strategy as well as lean supply chain and manufacturing strategy.   Dell used Direct Model to sell its personal computers. Dell Direct Model was so successful to create value for the company and well as for its customers.   Dell was able to analyze the computer industry and made strategic changes in the personal computer value chain. This enabled the company to cater according to changing market trend and Dell was able to dominate the PC market in United States and other markets.

Since Dell was selling directly to customers it offered customers the choice in system configuration and was offering customized products according to customer choice.  It also established 24-hour hotline support services and also gave guaranteed shipment of replacement part to customers. It was also possible for the company to sell the personal computers at cheaper price, as the company was saving the distribution cost by cutting out the retail middleman. This Direct selling strategy was also giving the company a wealth of market data which it used to forecast demand trends and allowed it to segment the market according profitability and focus the efforts on the lucrative segment.

Dell’s success is also a result of the far-reachingmanufacturing and supply chain strategy. The company adopted virtual integration strategy by developing long-term relationships with selected component manufacturers and made it mandatory for them to establish inventory hubs near Dell’s assembly plants. This just-in-time inventory model reduced the time it took for Dell to bring new PC models to market and resulted in significant first mover advantage as well as cost advantages over the competitors like Hitachi, Sony and Fujitsu who used traditional stored-inventory method. Dell was able to use scientific approach into manufacturing and was able to produce custom-built PCs in a matter of hours. It used information technology to directly control its value chain, set quality measures and monitor in real time how material is flowing throughout the chain.

Dell started out selling direct to customers and used mail-order system in the beginning. With the emergence of internet, the company developed online sales platform which made it possible for the company to reach wider audience and increase sales volume. The company developed www.dell.com for its transactional customers and www.premire.dell.com for its corporate customers. It also developed an extranet, valuechain.dell.com for its suppliers in which both parties share real-time information about Capacity, quality metrics, costs customer demand, product quality and technical customer requirements Dell’s direct model, lean manufacturing, Just-in-time inventory and use of internet was imitated by companies like Compaq, IBM, HP, NEC etc., but they were overpowered by complexity and conflicts between its traditional indirect sales channels versus direct sales. Moreover, it was difficult for Dell’s competitors to put together an entirely new delivery system. This resulted in Dell to have competitive superiority over its competitors.

Reasons for the failure of Japanese companies in US

The Japanese companies like Hitachi, Sony and Fujitsu saw a rosy picture in the US market and were confident that they will be able to capture the market due to strong brand name in consumer electronics. They thought that since they build many of the components used in PC like monitors, audio equipment, CD-ROM, DRAM etc. themselves, they have tremendous advantage over American competitors who have to buy everything from outside. But the Japanese companies learned a hard lesson and were selling far less PCs than they have anticipated.  They spent huge money trying to capture the US PC market but the gain was marginal. The main reason why Japanese companies failed in US market was due fact that local competitors like Dell had far superior business model. Moreover Japanese companies failed to understand the dynamics of the US market.

The Japanese PC manufacturers were selling products were based on proprietary architectures as they make much of the components themselves. When they develop an architect they produce it in bulk. But the same types of components were being made by more than 20 companies.  The PC industry was moving rapidly with frequent innovations and this made the product life cycle of personal PC very short.  Local competitors like Dell were now using vertical integration strategy and purchasing best quality components from the new innovator and were supplying the computers with new technology much faster in the US market.  Due to this fact Japanese companies were stuck with the old technology and were taking more time to launch new technology in the market.  Geographical constraint between the manufacturing plant and the US market also added to the problem.Local competitors like Dell were using the direct sales approach and this resulted in minimal cost whereas Japanese companies were using indirect approach by selling through intermediaries. This gave the local companies cost leadership advantage and they offered Personal computers at 15% lower price than Japanese brands. 

Local Companies were also far superior to Japanesecompanies in terms of business model and management style. Local companies were competitive due to high-velocity production, low-cost distribution, direct customer relationships, Just-In-Time manufacturing, and products and services aimed at specific market segments. Japanese style of management, production technology, product made for mass simplyetc.couldn’t close the gap.

Spartan Approach of Dell in PC selling

Dell and his company maintained their Spartan approach in doing business. The Spartan approach is to have simplicity, efficiency and agility in business process and to pursue goals rigorously but in disciplined manner. Dell had a simple selling function in which customers can order their PC through the website and can also ask for customization as per their need.  The company also kept 24/7 service stations for the ease of the customers. Dell increased efficiency by using direct model which made it possible for the company to interact directly with customers to figure out exactly what they want before the product is made. Listening to the customer at the time of taking order takes the guesswork and wasted resources out of the equation altogether. It showed that the company has pragmatic approach and values customer-focused philosophy. It sees every sales order as a personal quest.

In addition to this of Dell used specific and innovative strategies on improving customer service, cultivating supplier relationships, and achieving vertical integration. This made the company more agile as it was able to capitalize the new technology much faster that the competitors. Similarly the company’s lean manufacturing and Just in time inventory ensured that the customer orders are met in short time span. Thinking strategically about the business helped the company cut cost and increase profits, all the while improving on the Spartan approach.

Dell’s Direct Model as an effective approach to gain competitive advantage in distribution and manufacturing process

Competitive advantage can be gained through two processes a) cost leadership and b) product differentiation. Dell succeeded in doing the both through its Direct Model. Dell’s Direct Model was the outcome of the company’s search for a customer centric approach to offer customers better quality at a bargain price.

The company focused on cutting operation costs by eliminating the intermediaries allows the company to sell products at cheaper price than competitors i.e. to have cost leadership and to provide customers with customized PCs as per their needs. This made Dell competitive than others with indirect model as they were selling in higher prices than Dell. Dell’s direct model also ensured that it did not have massive inventory like other competitors, Inventory costs were kept at a minimum and obsolete products were minimized. They had their supplier open inventory house close to their factories. Furthermore, Dell also had scientific approach of manufacturing and was focusing on productivity through space utilization and Just-In-Time manufacturing. This significantly added to the ability of keeping the costs lower than competitors.

Direct model also helped the company differentiate its product. Customers were dealing with the company directly and this instilled the sense of belief to the customers who wouldn’t have trusted the intermediaries. Customers were also able to customize their order according to their need.   Due to lack of intermediaries, Dell has shorter delivery time. In addition to this the company was providing 24/7 customer service. This was hugely different for the competitors who were making the products on bulk and selling for the mass. Dell's adoptation of the direct model has huge competitive advantage to the company to become successful in both the US and overseas markets.

Benefits to Dell from the efficiency of internet

Before the emergence of internet Dell was using telephone to receive orders from customers. This was a tedious job for the call attendant who had to describe the features of the products and note down the requirements of the customers. It took long time to secure the order and there was high risk of the call attendant missing out the key requirements of the customers.

The establishment of www.dell.com opened up the company's product to a greater number of potential customers. Dell customers could configure and order their PC online, get technical support, and download updates to their software. Dell’s Direct model had outstanding success because customers now were able to order the PCS through the website. It reduced overheads because online shop costs less to set up and run than a physical store. Internet enabled the company to have automated order and payment processing.

The internet helped the company improve its business cycle and process.  Customer can access troubleshooting information and configuration diagrams customers can configure and price systems within Dell's entire product line; order systems online; and track orders. The company’s institutional customers, who are scattered throughout the world, use premier.dell.com to do business with the company.  Furthermore, Dell is also able to share information with its suppliers for range of topics, including product quality and inventory through its extranet, valuechain.dell.com. Dell is able control its customer lifecycle, selling life cycle and flow of information to subsidiaries through the use of Internet.

References

Pearce II, J. A. & Robinson, R. B. (2011). Strategic Management: Formulation, Implementation, and Control. (12^th ed.). NY: McGraw-Hill.