Company Background:
Paul Allen and Bill Gates founded Microsoft Corporation in the year 1975. In current times, if one thinks of a computer, one evidently starts to think about Microsoft. In the personal computer industry, Microsoft is the largest and most influential company in the world. Microsoft developed operating systems like DOS and Windows and these operating systems have emerged as today’s de facto standards. Apart from the operating system, Microsoft also develops computer software for almost every aspect of programming tools and end user applications.
Microsoft has three core business divisions which offer the greatest potential to serve our customers. They are: Platform Products and Services Division: Includes the Client Group, the Server and Tools Group, and the Online Services Group. Business Division: Includes the Information Worker Group, the Microsoft Business Solutions Group, and the Unified Communications Group. Entertainment and Devices Division: Includes the Home & Entertainment Group and the Mobile and Embedded Devices Group (Microsoft Corp., 2005)
Microsoft is one of the largest computer software organizations in the world having revenue of more than $45 billion annually. The company has got a monopoly in operating system software industry and is providing a wide variety of software and ecommerce services and products. This includes operating systems for personal computers (PCs) and servers; server applications for client/server environments; business and consumer productivity applications; software development tools; and Internet and intranet software and technologies. The company has expanded its interactive content efforts, including the Microsoft Network online service (MSN), various Internet-based services, and entertainment and information software programs. Microsoft also sells PC books and input devices, and it researches and develops advanced technologies for the future software products. (source: https://finance.yahoo.com/q/pr?s=MSFT)
One of the most recent product launches from Microsoft has been of its Zune music player. Microsoft has developed this hard drive based MP3 music player with inbuilt wireless technology, enabling people to share music, videos and photos with friends and others using Zune. Microsoft has also developed a Zune Marketplace Service which allows music publishers to sell their songs via this service. The Zune player is capable of storing and playing songs, videos and photos.
Project Proposal:
Desired Functionality:
To enrich the functionality and power of the Zune music player, an intelligent remote control device is required to be developed. Zune already has a remote control device which helps the user to access play lists and control menu navigation and volume. But the play list and navigation is possible only when the Zune player is either attached to a TV, or a standalone docking station.
This new wireless, intelligent memory based remote control device, will have a memory of its own which will be hosting data and executing key commands managed through inbuilt remote applications. The remote will have a new design, look and feel. There will be a touch screen on top of the remote along with key features such as, fast forward, skip, play, stop, pause, plus (for volume increase), minus (for volume decrease) and mute likewise. The screen will have the ability to display the list of songs, videos or photos in the current play list or folder on the Zune player. The user can then select the desired song, video or photo to play or display on the player or any external display and/or audio device connected to the Zune player, such as TVs or music systems.
The remote will also be able to display the full menu screen of the video that has been selected for current play. This menu will always be available on the screen of the remote till the time the selected video is under play. This makes it easier for the user to jump directly to a desired scene or feature set instead of having to pause the current video play and then going through the complete menu launch cycle.
Further more, if the user has wireless internet connection at home then a specific part of the screen on this new remote will display web marketing Ads as sponsored by various companies. If the user likes the Ad or is interested in knowing more about the ad, the user can freeze the Ad on the remotes screen by a single tap. Further, the user could plug the remote directly to his or her computer via a USB connection cable and which will take the user directly to that displayed Ad Company’s website.
Such capabilities of this new Zune remote will empower it to function like a light weight mini computer in the user’s hands. The idea is to develop a new remote device for the Microsoft Zune music player.
Project Outcomes:
A new hand held computer based remote for running Zune. The device will work without the need for being attached to a TV or docking station, audio, video or photos and will become a prototype for future remote controls. This device will be recognized by Microsoft as an essential tool for Zune. The device will also provide a new medium of advertising for the web based marketers and will have a high degree of visibility and advertising value. Any advertising company will sponsor a major part of the development cost in return for exclusive advertising rights for the first two years.
Potential Device Software:
1) Software will be of high quality system, having no chance of developing defects.
2) A well defined development process will be defined and known to all parties involved.
3) Software will be built after conducting a market research and will feature the functions that the employees want.
4) The application will make the remote so useful bringing Microsoft’s position in the MP3 player market to a very strong ground.
5) The software will be properly configured and installed on every handset and will require no maintenance.
6) The software will have an inbuilt training program for first time users and will make them familiar with usability features in a step-by-step manner.
Potential Device Hardware:
1. New remote device Printed Circuit Board (PCB).
2. Touch sensitive LCD Screen.
3. Fiber plastic device body.
4. Memory chip.
5. In-slot external memory card adapter.
Potential Challenges:
The major challenges that will be faced by Microsoft for this project lifecycle are in adhering to quality standards and in distribution.
Quality standards"
The Company shall ensure the highest quality standards by using ISA 9001 certified manufacturing facilities. There will be highest quality standards upheld through strict execution of excellent control plans.
Distribution:
Most manufacturers of remotes face indifferent distribution problems. What Microsoft will do is, establish a discharge operation system to deliver the product on time, establish multiple distribution facilities all over the world and establish close relationships with inbound and outbound carriers. With the launch of the product, Microsoft hopes to become the leading designer of Zune remotes in the world.
Advantages and Disadvantages:
A few notable advantages and disadvantages that can be expected from this projects execution as discussed below.
Advantages:
1) The new Zune remote device will be the first of its kind in the world.
2) Microsoft will have a stronger market positioning and a potential market share capture compared to its competitors.
3) Ease of use and adaptability by users.
4) Remote memory will not just be dependent on a fixed memory chip (which by default will be 1GB) but will also allow the user to extend the memory capacity by means of a SD memory card or likewise.
Disadvantages:
1) Cost of hardware manufacturing could go up as a result of increase in hardware component prices around the world.
2) For the user to be able to view web marketing Ads on the remote device, a wireless internet connection will be required.
Prices for external memory media cards could go up around the world.
Environmental analysis:
If we closely analyze this statement, the patterns of an organization's actions will be clearly reflected not only in the financial performance of an organization over the years, but also in the relative strengths, weaknesses and strategic positioning of the firm in the business environment, industry or economy it operates in. The understanding of these elements is the prima facie requirement in the strategic planning and management process and is closely analyzed in the environmental scanning process of an organization.
These factors are very important in establishing the corporate level strategies of an organization. But one has to remember that there are numerous other factors also such as general state of economy, industry growth rates, etc. which influence the formulation of strategy.
Remote Environment:
The purpose of remote environmental scanning for an organization is to analyze the affect of societal forces and to see what trends are likely to affect Microsoft in a brief manner. The business environment of the new millennium will have to contend with issues like:
- Turbulent markets that change rapidly and unpredictably
- Highly fragmented ‘niche’ markets instead of mass markets
- Ever greater rates of technological innovation in products and processes
- Shorter product life-cycles
- Growing demand for tailored products i.e. ‘mass customization’
- Delivery of complete ‘solutions’ to customers, comprising products and services.
And all of the above to be achieved at less cost! (Christopher, M. 2007)
Economic Forces:
Globalization has also increased the opportunities. A mature product in the US can be at an introductory stage, e.g. GM AVEO is a mature product in the US, but in India it is at a growth stage. Moreover, globalization leads to the creation of a Universal Customer, one who expects the same quality of products and services regardless of where he or she is located in the world.
This does not mean one customer, one world, one brand or one positioning platform. What it means is that thanks to Microsoft, the expectation of a customer from Infosys (Indian software firm) is considerably higher today. Similarly, thanks to LG and Samsung, the expectations from BPL are different today. A convergence of expectations is happening globally. And as barriers fall further, technology advances rapidly, customers talk more to each other on the back of a robust telecom network, the ranks of universal customers will only swell. To meet the challenge of simultaneously reducing cost and enhancing customer value requires a radically different approach to the way the business responds to marketplace demand.
Technological Forces:
The impact of the Internet, portable information devices, electronic networking, smart mobile robots, and increase in speed of microprocessors will have tremendous impact on businesses. There has been tremendous impact of e-Business on the typical businesses itself. The information is exchanged much more quickly than any other thing which is helping the organizations to make more quick and accurate decisions. E-Businesses have removed geographical and time restrictions for the organizations. It also helps in:
- Recording and analyzing strategic management records: processing these strategic management records into industry trends reports, market share reports, mission statements, and portfolio models.
- Use of all the above to implement and control the businesses.
Thus they are more connected and knowledge seeking to improve the processes, quality, technology and overall customer delight. Due to e-businesses, there is much more agility to improve and also to respond to the needs of the customers, vendors, government and to society at large. This is also reducing the costs and making supply chain more efficient.
Political Legal Regulations:
As a large company, Microsoft will find it tough to handle regulations. Moreover, it has faced and is still facing a lot of antitrust regulations and suits. One should also be aware of foreign trade regulations, and attitude towards foreign companies as it is a multinational company. Also increasing instability and uncertainty in the political environment of certain nations and regions around the world, such as increasing terrorism has to be tackled by the organizations. Here if the political situation is unstable then the environment is unfavorable for the businesses. Similarly higher government debt, budget deficit or surplus is also unfavorable.
Some additional factors which can be implied are:
- Tax Laws and other economic laws
- Foreign trade regulations
- Import tariffs and quotas
- Restrictions on international financial flows
- Environmental protection laws
- Copyright and patent laws
All these have an impact. The more the transparency the better it is for the business (source: www.en.wikipedia.org).
Industry Competition:
Microsoft is facing competition in various segments. On internet its biggest competitor is Google. Google is one of the most successful new dot com companies in present times. Their success is based on innovation, rapid growth, and an obsession to be the best search engine in the Wide World Web. According to Saul Hansell, of the New York Times, Google is:
One of the biggest advertising vehicles the world has ever seen. Google is a public and profitable company focused on search services. Named for the mathematical term "googol," Google operates web sites at many international domains, with the most trafficked being www.google.com. Google is widely recognized as the "world's best search engine" because it is fast, accurate and easy to use. The company also serves corporate clients, including advertisers, content publishers and site managers with cost-effective advertising and a wide range of revenue generating search services. Google's breakthrough technology and continued innovation serve the company's mission of "organizing the world's information and making it universally accessible and useful (Hansell, S. 2005).
But now, Google will also give competition in operating systems as it has also softly launched the alternate operating system on internet which will give serious competition to Microsoft in the future (source: https://www.iht.com/articles/2007/02/22/business/google.php as retrieved on 22 Feb 2007).
The following table shows the comparison of Microsoft’s competitors:
DIRECT COMPETITOR COMPARISON
MSFT GOOG IBM ORCL Industry
Market Cap: 271.83B 134.30B 136.85B 86.59B 188.67M
Emploees: 71,000 10,674 N/A 56,133 165
Qtrly Rev Growth (yoy): 6.00% 67.00% 7.50% 26.50% 19.60%
Revenue (ttm): 46.06B 10.60B 91.42B 16.07B 61.72M
Gross Margin (ttm): 79.43% 60.33% 42.12% 76.73% 71.28%
EBITDA (ttm): 17.94B 4.58B 18.95B 6.51B 6.62M
Oper Margins (ttm): 36.20% 33.48% 14.35% 33.67% 4.18%
Net Income (ttm): 11.91B 3.08B 9.42B 3.70B 146.07K
EPS (ttm): 1.170 9.942 6.110 0.697 N/A
P/E (ttm): 23.73 44.12 14.88 23.97 31.79
PEG (5 yr expected): 1.38 0.95 1.23 1.09 1.61
P/S (ttm): 5.97 12.94 1.52 5.41 3.08
GOOG = Google Inc.
IBM = International Business Machines Corp.
ORCL = Oracle Corp.
Industry = Application Software
MSFT= Microsoft
(source: https://finance.yahoo.com/q/co?s=MSFT)
Microsoft is leader in Market capitalization, net income and gross margin percentage. Google and Oracle are doing well in revenue growth and Microsoft is laggard in revenue growth. Thus this is a concern for Microsoft.
Moreover, Microsoft has to be cautious about various laws regulating the internet and e-businesses. There are CAN-SPAM, gambling laws, the Federal Telecommunications Act, the Computer Decency Act and other laws which must be considered. B2B websites have more legal responsibilities for conducting their businesses with integrity and lawfully protecting the privacy of their customers. Customers provide details of important personal information and credit cards over the website to facilitate the purchase of goods and services. Complex legal issues such as intellectual property, competition, privacy, consumer protection, equal access/opportunity are to be addressed by Microsoft online services. Issues such as intellectual property, consumer protection, access, confidentiality, sustainability, reliability are very important.
Regulatory issues, for the most part, the Internet is unregulated. However, the government is now formulating laws and regulations to prevent illegal activities and fraud on the internet. There are security concerns, applicable laws, site policies, conditions of use, and disclaimers of warranties and limitations of liabilities for both types of websites.
Demand Conditions:
In this case, when the market for a product is larger in domestic markets then the local firms devote more attention to that product than do foreign firms, leading to a competitive advantage when the local firms begin exporting the product. In the US, Microsoft has huge local market which is more attractive to the foreign market. This led to a national advantage. It also helped in anticipating global trends. Moreover the customers in the US are more demanding which has led to greater pressure on firms to constantly improve their competitiveness via innovative products and higher quality.
Globally, Microsoft is seeing a rise in demand because of factors like:
- Global communications and cross-cultural experiences
- Globally standardized products sold the same way across the world
Microsoft has also implemented product modifications from country to country.
Related and Supporting Industries:
When local supporting industries are competitive, firms enjoy more cost effective and innovative inputs. In the US, the supporting industries are well developed which has led to cost efficiency for Microsoft. There is also proximity of upstream or down stream industries which facilitate the exchange of information and promotes a continuous exchange of ideas and innovations.
Firm Strategy, Structure, and Rivalry:
There is a healthy local rivalry such as Google, Yahoo, Oracle, and IBM competing with Microsoft. In the long run more local rivalry is better since it puts pressure on firms to innovate and improve. The direct competition has compelled firms to work for increasing productivity and innovation. All this has led to:
- Setting up facilities overseas to match lowers labor costs of foreign competitors.
- Expanding internationally to amortize investment in world scale production, and/or funding for world scale R&D.
Rationalization of product lines has lead to achieve scale of economies in design, purchase and production.
Customer Requirements:
Microsoft’s s goal is to provide excellent products and services to its customers. The differences in consumer behavior can be due to culture, habits, tradition and psychology. A marketer must understand the following psychological issues:
- How consumers think, feel, reason, and select between different alternatives (e.g. brands and products).
- How the consumer is influenced by his or her environment (e.g. culture, family, signs, and media).
- Behavior of consumers while shopping or making other marketing decisions (source: www.consumerpsychologist.com)
With the establishment of a well-functioning Internet operation, Microsoft can also begin to examine its customer base more intimately. Based on new abilities to tailor offerings under Customer Relationship Management (CRM) theory, Microsoft can start differentiating its customers and customizing its offerings for them. The company must also gather information about its customers and then interact with them further to deliver an end product which provides the most value.
Corporate Culture:
Culture has a prominent influence on the organization. The factors like lifestyle changes, age distribution of population, life expectancies, attitude towards materialism, capitalism, free enterprise, individualism, role of family, role of government, collectivism, role of church and religion, consumerism, environmentalism have got tremendous impact on Microsoft. According to the Microsoft’s website, its organizational values are:
As a company, and as individuals, we value integrity, honesty, openness, personal excellence, constructive self-criticism, continual self-improvement, and mutual respect. We are committed to our customers and partners and have a passion for technology. We take on big challenges, and pride ourselves on seeing them through. We hold ourselves accountable to our customers, shareholders, partners, and employees by honoring our commitments, providing results, and striving for the highest quality (source: https://www.microsoft.com/about/default.mspx).
Microsoft is one of the most successful organizations of the world due to its strategy which is in harmony with the prevailing culture. It has adapted to the cultural change, innovation and dynamism very well. It has launched new and innovative products and services continuously like MSN Internet Services, Zune music devices, MSN TV, XBOX. Recently it launched Microsoft adCenter, a service that offers pay per click advertisements, in an effort to further develop their search marketing revenue. In 2007 the company also launched Microsoft Vista and Office 2007.
Microsoft has often been described as having a developer-centric business culture. It always lay emphasis on its developers and provides them necessary training continuously. In January 2007, the Harris Interactive/The Wall Street Journal Reputation Quotient survey recognized Microsoft as having the world's best corporate reputation (Wikipedia, 2007)
Overall Microsoft is ready for the challenges ahead and meeting the ever growing customer requirements.
Potential Challenges:
Apple's success is built on top of three, interconnected technologies: iTunes Music Store, iTunes, and the iPod. The final piece to the triple threat is the device that plays back the music and, kudos has to go to Apple. The iPod is a brilliantly elegant solution. The success of the device can be seen in sales in places such as Japan where the iPod has been the most popular music player for years, but the Japanese have only just got the iTunes Music Store, which means that people were buying the iPod just to play their own MP3 music collection. The challenge that competitors are being faced with is that the iPod has become lodged into our cultural consciousness as the only music player that matters. This is supported by the many thousands of add-on features available for the iPod and the near zealous affection people have with the device. To take on the much-loved iPod is becoming a Herculean task (David, M. 2006).
In order to compete with Apple, Zune has not only to be more competitive in pricing but also offer unique services and features. The people are steadily shifting to the premium and quality products. Zune can easily satisfy this need as it is known for its high quality and has high brand loyalty. Here the uniqueness can be achieved through real product features like the multi functional remote which will enhance the uniqueness of the product.
The major challenges that will be faced by Microsoft for this project life cycle are in adhering to quality standards and in distribution. Thus the challenges that it is facing is satisfying and exceeding customer delight. This is in terms of product features and quality standards. They have to go for continuous improvement and learning, which can be directed toward better products and services, to better processes, and to being more responsive, adaptive, and efficient. Moreover by getting the certifications such as ISO 14000, and Deming will help in making itself a quality product. Some of the important requirements to succeed for TQM are:
- Consistent commitment
- Involvement of top management.
- Universal Approval
- Appropriate measures and rewards
It is important because top management can only ensure that resources necessary to affect the process are available.
“Consistent commitment means that the change becomes both an enterprise strategy and an enterprise goal that leaders continuously and obviously support”
(Perkins, A. 2006)
Any improvement process is successful only when the people involved, approve of the process. They understand the need for the process. If there is no support of top management then the improvement process may not have the required resources to implement the program. If there is lack of commitment then the improvement process may not be part of strategy. If there is no universal approval, then the employee may not believe that the process is good for the enterprise and good for them. Then the employee may be frustrated and may reject the process.
Measures and Rewards:
The best way to get and maintain universal approval is to ensure that the improvement process are measured appropriately and accurately and communicated enterprise-wide. Good results and changed behavior must be rewarded. At the same time, unchanged behavior and poor results should not be rewarded. Employees will not work toward change if they continue to be rewarded for old practices (Perkins, A. 2006). Therefore the company needs to have the above to manage quality improvement process.
Another challenge is of distributing the device to all the corners of the globe. This is a convenience good. Hence intensive distribution strategy can be used, which means high intensity, as these are frequently purchased goods. Microsoft will use multiple channel strategies to reach to the all part of the world. Thus they can have multi channel strategy, which means having more than one selling intermediary such as wholesalers, retailers, exclusive stores, and online shopping sites.
Realization of These Challenges:
There is already intense competition in the music market and Apple is a market leader. Moreover there is already a strong competition from companies like Sony, Nokia, Samsung, and Creative Labs. In order to maintain profit margins and survive in this industry, Microsoft needs to reduce its cost of production and remain competitive in the industry. Total quality management can really help Microsoft in eliminating wastages and improving operating efficiencies. Further, with an intelligent remote enabled Zune, Microsoft wants to become market leader. Thus a comprehensive quality management process will help this process in rolling out a world class product at competitive prices. Moreover optimal distribution strategy will reduce its distribution costs.
Project Goals:
The goal of the project is to develop a new hand held computer based remote for running Zune. The device will be multifunctional and autonomous to run Zune. This will not only be an essential part of Zune, but will also be the media vehicle for advertisers. Thus helping Microsoft’s to accomplish its vision to be a leader in all businesses in which it operates. Further, its goal is to provide total customer satisfaction to its consumers by introducing innovative products. It aims to satisfy all the stakeholders of the company by continuously incorporating their inputs in its operations, products and processes. In order to achieve all these goals and strategic vision to excel in the industry, Microsoft not only needs to produce quality and innovative products aimed at total customer satisfaction, but also needs to produce and offer it at a price which is affordable and competitive.
Total quality management is a tool which can help Microsoft in achieving its objectives from all ends. It will not only help the company in creating products which meets the utmost standards in quality and provide ultimate customer satisfaction, which is the prima facie goal of TQM process, but also helps in improving company's bottom line profits by increasing operating efficiencies, eliminating wastages and creating a conducive environment for growth of the company. The employees get a healthy environment which maximizes their efficiencies and enables them to perform at their best levels. Therefore, the quality improvement process pushes the company from all angles in achieving its strategic goal and plans, in both short term as well as long term.
References:
David, M. (2006) “Are MTV’s URGE and Windows Media Player 11 iTunes Killers?”, retrieved March 7th, 2007 from: https://www.samspublishing.com/articles/article.asp?p=602978&seqNum=1&rl=1
Perkins, A. (2006) Change Management: Change Management Practices, retrieved March 7th, 2007 from: https://www.tdan.com/i005fe10.htm
Christopher, M. (2007) “Managing the Global Supply Chain in an Uncertain World”, retrieved March 14th, 2007 from: https://www.martin-christopher.info/downloads/uncertain_world.pdf
Hansell, S. (2005) “Google Wants to Dominate”, retrieved March 14th, 2007 from https://www.nytimes.com/2005/10/30/business/yourmoney/30google.html?ex=1288324800&en=b0684c6ec54b2467&ei=5090&partner=rssuserland&emc=rss&pagewanted=all
Microsoft Corp. (2005) “Microsoft’s Business”, retrieved March 10th, 2007 from: https://www.microsoft.com/About/CompanyInformation/ourbusinesses/business.mspx