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Low Bargaining Power Of Customer Marketing Essay

Microsoft Corporation is one of the largest and most influential companies in the personal computer industry. It has won several awards for innovation, for their commitment to diversity, and for their flexible work arrangements. Microsoft is a most   successful company in the world because of their workplace environment, empowerment of employee ideas, and their employee benefits,(annual report 2012).These elements are the result of the strategy that the Microsoft is following in order to compute its mission which is to enable business and people throughout the world to realize their full potential. Microsoft uses a variety of strategies to create an economic environment that depresses the profit of potential entrants sufficiently to discourage them from entering. According to CIA(2013), Singapore has a highly developed and successful free-market economy. It enjoys a remarkably open and corruption-free environment, stable prices, and a per capita GDP higher than that of most developed countries so the researcher has chosen the Singapore to sell the Microsoft products. Microsoft has many competitors in different product divisions: Business, client, entertainment & devices, online Services and server& tools however it's a well established company in Singapore already so the Microsoft surface with Windows 8 market highly potential market in Singapore.

Section 1.1 Aim of Study

The aim of the report is to analysis of the competitive position of the Microsoft and its market. Selection the real product and identify the target market and analysis the market intelligence (target country's economy, demography, infrastructure) and real business environment analysis (characteristics of the target nation) of the target country Singapore . In the final will be discussed and identify the market entry strategy and make a note how to implement the that strategy in the target country and make a conclusion of the report.

Section 2. Porter’s five forces (competitive position) analysis of Microsoft (this section assessor can see either appendix or main part of the report)

High Potential competitor.

Potential competition disciplines price if the incumbent—acting before entry has occurred—can commit the value of a future state variable. In Michael Spence’s (1977) cited on Robert E. Hall et. Al (2003), original development of this proposition, the state variable was the capital stock. Microsoft uses a variety of strategies to create an economic environment that depresses the profit of potential entrants sufficiently to discourage them from entering. In software industry people are less apprehensive about the brand name related to the product, what really matters is the quality of the product. So whether it is an existing brand or a new brand, the product sells because of its comfort, usability and cost. There is very little customer brand loyalty in the software industry. Any new firm with potential human capital and innovative technology can give a threat to existing firms. As per the government rule there is no preventive rule for the new entry into the market. So, it is easier to make an entry into the market.

High competition from well-known firms

The software industry is a highly competitive industry. Microsoft has many competitors in different product divisions: Business, client, entertainment & devices, online Services and server& tools. Linux is the main competitor of Microsoft in the Desktop and Server division. Linux operating system, which is derived from the UNIX and is available without payment under a general public license, has gained some acceptance as competitive pressures to Microsoft PC division. Microsoft each product and service they have has a different competitor.

Apple and Oracle: in the world of operating systems, Oracle are a far greater threat to Microsoft than Apple. Despite consumer migration towards Apple desktops and notebooks, especially in the younger generations, Apple is lacking Microsoft's Windows in most corporate environments. Microsoft identified its major desktop competitors as: Apple, Corel, Google, IBM, Novell, Oracle, Red Hat, Sun, and local application developer in Europe and Asia, Microsoft annual report (2012).

Google : Google is Microsoft's primary competitors in Internet Services outperforming Microsoft by a wide margin. In an effort to stiffen competition in this field, Microsoft signed a ten-year partnership with Yahoo! in February 2010 to use the Bing search engine on Yahoo's site while Yahoo focuses its internal personnel on a more aggressive sales effort, BBC news, (2010). Microsoft made strategic alliances with Facebook and also acquired Skype to compete with the google and other rival companies. Google also competes with Microsoft through its cloud-computing based software offerings. Under the terms of the revenue-sharing agreement, Yahoo will receive 78% of the search revenue generated from Microsoft's sites during the first 5 years of the agreement and 88% of search revenue generated from Yahoo's sites. This leaves Microsoft with 10% of the search advertising business to Google's 90% , Letzing, (2009).

Sony and Nintendo: Microsoft's two primary competitors in the Entertainment & Devices sector are the Nintendo Wii and the Sony Play Station 3. Following the announcement of the cutting-edge Kinect peripheral device to the Xbox 360, Sony plans to release Move, its own body movement-sensitive add-on to the Play Station 3, while Nintendo plans to release a new version of its DS handheld device that does not make use of 3-D Google, Team, (2010).

Low bargaining power of customer

Microsoft has a huge consumer base and product ranges. Every customer

Contributes least amount of money of the whole market share because the Microsoft customer who purchases Microsoft products in large size, it is still very small as compared to the whole Microsoft customer-base. So there is a very low bargaining power of the Microsoft customer. Buyers have to buy the product from the Microsoft which is very difficult to be produced by them. Microsoft focuses on mass production and they are less concerned when the few customers object about prices and services. Microsoft is the strong position because it has low bargaining power of its customers.

Low Bargaining Power of Supplier

Microsoft has no suppliers as such. In software industries, requirement for raw material in almost nil and other Microsoft products need less material and there are a number of suppliers in the market for its equipments what actually important in the software firm is the human capital. Microsoft has a large potential for hiring employees and it can get much more from the market. Microsoft has made its employees more complicated by its culture to learn and different training Programs. People there simply love to be a part of a company like Microsoft.

Low Threat of Substitute of product

There is usually no substitute product for any software product. Microsoft products designed for specific purposes and it is very less possibilities to substitute for another product. There is less concern about getting a substitute product. Therefore, there is a very low threat of substitute products which is a better competitive position of the company than the other rival companies.

Section 3. Select the New Market opportunity of Microsoft in Singapore (Ansoff’s Matrix)

Product

Market

Present

New

Present

Re-launch products

Discount the products

Advertise the products

New design product (Windows 8)

New

Sales the product through the online store.

Market via internet and other media.

Related diversification ( surface tablet)

Ansoff’s matrix new market opportunity of the Microsoft corporation.

Microsoft is expanding using Related Diversification to move into new lines of business which they hope to use to attract more potential customers. In the above Ansoff’s Matrix diagram clearly shows that many possibilities strategic options for further development of the product as well as market share. The researcher identified some area increase the market share and brand image so researchers decided to launch the new design product Microsoft windows 8 and the related diversification product (Microsoft tablet surface) to the Singapore .Microsoft is the world renown brand in the world and it is already established in the all over the world even Singapore. The researcher has chosen the Singapore to sell the new product of Microsoft. According to the above Ansoff’s Martix diagram, researchers have many strategic options to develop the new market and product for the Microsoft. According to CIA (2013), Singapore has a highly developed and successful free-market economy. It enjoys a remarkably open and corruption-free environment, stable prices, and a per capita GDP higher than that of most developed countries. A new report from IFC and the World Bank finds that Singapore, continues to provide the world’s most business friendly regulatory environments for local entrepreneurs so as a market researcher, we now have to decide upon which strategies the company should actually implement in the host countries like Singapore. As a researcher, researcher has decided to launch the Microsoft new tablet surface with windows 8 to the Singapore.

Section 3.1 Business Environment Analysis of Singapore

Business environment external factors are changeable over which the organization has little or no control. They incorporate a host country market factors, political, social-cultural factors, economic infrastructure, trade barriers, and home country factors (Douglas and Craig 1995). External factors also have direct influence on entry mode choice. The direct impact is through the delineation of levels of control, the degree of risk, resource commitment, and level of return associated with each mode of operation (Douglas and Craig 1995). Government policies influence the legislative and economic frameworks. Pricing is influenced by laws and regulations which necessitate product modifications, in compliance with health and safety standards, environmental regulations, measures systems, that may prevail in foreign markets (Theodosiou 2000). Host country GDP and per capita income are the main measure of economic attractiveness of international market environment. Singapore GDP $314.9 billion and per capital income is $59,711 per capita income and its Unemployment rate only 2% and growth rate is 4.9 in 2011. Above these data shows that Singapore is the most potential market for the windows product such Microsoft surface and windows 8. If GDP increases, the demand for goods and services also increases. It has a significant impact on firm’s costs, determines demand potential for a particular product/service, in addition to the prices that local customers can afford and are willing to pay (Whitelock and Pimblett 1997).

Well-developed communication infrastructure is an important factor to respond rapidly to customer’s needs. Singapore is a well developed country and its social, political, legal, technological, economic infrastructure are well developed for international markets. The internet allows online contact with the firm's customers, suppliers, and partners and subsidiaries around the world, but it may also increase the opportunities for existing competitors and openings for new competitors. Pricing is a strategic choice, and it will be partially influenced by environmental factors. (Williamson, 1975) cited on Musonera, E. and Ndagijimana, U. ( 2008), taking into account elements of cost, the behavioral assumptions of self-interest lead firms to take advantage when environmental forces fluctuate. However, some environmental factors, such as: economic and regulatory volatility, and competitive intensity, have been identified as the moderating effects between strategy and performance (Cavusgil and Zou, 1994; Myers 1997 cited on on Musonera, E. and Ndagijimana, U. ( 2008) ). Singapore GDP growth averaged 8.6% between 2004 and 2007). Singapore has well- developed infrastructure for the international market. The economy (See for detail economic condition of Singapore in appendix a) contracted 1.0% in 2009 as a result of the global financial crisis, but rebounded 14.8% in 2010, on the strength of renewed exports, before slowing to 4.9% in 2011 and 2.1% in 2012, largely a result of soft demand for exports during the second European recession, CIA (2013).

C:\Users\Tara\Desktop\SN_popgraph 2012.bmp

Source : CIA (2013)

The above population pyramid illustrates the age and sex structure of a country's population and may provide insights about political and social stability, as well as economic development. In the pyramid 15 to 54 years male population are almost 1.8 millions and female population is 1.87 million in the Singapore. (See appendix C for detail), In overall 15- 54 years people is 68.6% of the total population of Singapore. Some research shows that nowadays, gadgets mostly use within this age group in mass. So the Singapore can be the highly potential market for the Microsoft gadgets with windows 8 in the demographic point of view.

In Singapore has well developed by economy, demographics, infrastructure , political, legal, free market, imports and exports of goods, are highly established so the Singapore can be the highly potential market for Microsoft products.

Section 4. Market Entry Strategy Analysis of Microsoft to the Singapore

According to Onkvisit and Shaw (2004), a mode of entry into an international market is the channel in which your organization employs to gain entry into a new international market. This considers a number of key alternatives, but recognizes that alternatives are many and diverse. Selection an institutional arrangement a mode for entering or expanding in a foreign market is one of the most crucial strategy decision that an international firm has to make, (Root 1994). The most critical issues in international market entry strategy is the selection of an appropriate entry mode (Terpstra and Sarathy 1994). In addition to determining the amount of resources the firm will commit to the foreign market, initial entry mode choice significantly affects the performance and longevity of a foreign operation (Li 1995).

Section 4.1 Entry Mode Strategy

Many companies will attempt to enter foreign markets indirectly, by targeting foreign consumers on the Internet. Similar to exporting, companies retain their physical operations in their native countries, but ship products overseas. Among the many entry mode strategies, researcher has chosen internet entry mode strategy to sell the Microsoft product such as surface and Windows 8 and other products. In local location establish the Microsoft local store and collect the product from there. The advantages of this mode are that it is relatively cheap, entailing only the cost of a website and marketing.

Section 4. 2 The Target Market

The marketing researcher targets a single product offering at a single segment in a market with many segments the marketer could ignore the differences in the segments, and choose to aim a single product at all segments i.e. the whole market. Microsoft is mostly targeted at small-medium business and home office/home computing. Now Microsoft has changed its strategies as the diversity and innovation and it produces the Microsoft tablet surface which is targeted to the SMB and potable for all. The researcher has chosen the target market of Microsoft to the Singapore as an age group of male and female who really loved the tablets so the researcher has chosen the 15-54 years both male and female age group people. According to the above demographic pyramid shows that 15-54 years people are in high number in that country. Singapore people are well known about the computing technology and use it on a large scale. Because of GDP and per capita income are high people can afford the Microsoft product.

Section 4.3 Operations

According to Slack, et. al. (2007), Operations strategy is the total pattern of decisions which shape the long-term capabilities of any type of operations and their contribution to the overall strategy, through the reconciliation of market requirements with operations resources. Microsoft has operations centers that support all operations in their regions, including customer contract and order processing, credit and collections, information processing, and vendor management and logistics, Microsoft annual report (2012). The center in Singapore supports the Japan, India, Greater China, and Asia-Pacific region. The operations function must keep in view market sentiments and requirement and align its resources to deliver on identifying competitive factors. To serve the needs of customers around the world and to improve the quality and usability of products in international markets, Microsoft localizes many of the products to reflect local languages and conventions. Localizing a product may require modifying the user interface, altering dialog boxes, and translating text.

Section 4.4 Projected Sales of Microsoft Surface with Windows 8

Projected sales 2013 to 2017

Years

Sales of Surface

Sale of per./Surface in $

Total sales in $

2013

500000

400

200000000

2014

550000

400

220000000

2015

600000

400

240000000

2016

400000

400

160000000

2017

350000

400

140000000

In above graph shows that the five year projection of sales of Microsoft Surface in Singapore. In this projection 2013 sales will be started from 500,000 Microsoft tablet and it is continuing to increase until 2015 and in 2015 sales will be the highest point . However, from the 2016 surface sale will be decreased because of either high competition or due to the rapid technological change in the future and also will be replacing it with other devices.

Section 4.4 Human Resource plan

Recruitment and Selection: Attracting the Best and the Brightest

According to Priyadarshini J. (2012), Microsoft has believed in recruiting extremely intelligent staff, favoring intelligence over experience. Cofounders Bill Gates and Paul Allen shared a preference for hiring extremely intelligent, not necessarily experienced, new university graduates dated from Microsoft’s start-up days. Microsoft’s recruitment strategies reflect their philosophy. Microsoft is an aggressive recruiter and is often the first company to offer jobs to elite graduates at campuses and career fairs across the world.

Employee Motivation

The supporting the motivation of the employee is to understand what motivates each of them. While the recruitment and selection process at Microsoft aims to employ people who will be motivated by the environment they are provided, the HR department at Microsoft takes great care to understand such needs and try fulfilling them for the employees. Employee motivation can also be related to Maslow’s hierarchy of needs theory. According to Maslow’s theory, has the top level of the needs theory as self-actualization needs, which is a person`s need to be self-fulfilled. This is exactly what Microsoft provides for its staff and also exactly what it expects, for them to be the very best they can be for motivation.

Employee Satisfaction and Loyalty

Microsoft attempts to cater to the needs of its employees by recognizing that the majority workforce comprises fresh graduates just out of college. According to Christopher A Bartlett. (2001), this is the principle behind Microsoft setting up its offices as ‘campuses’ rather than plain workspace and parking space setting that was the norm before Microsoft. Employee satisfaction was also afforded by the opportunity for growth, development also occurred by encouraging horizontal transfers, and employees were encouraged to develop themselves by switching jobs..

Employee  Rewards: The Options driven Engine

Microsoft recognizes the importance of Its people and this is reflected in the reward systems, in the sense that not only Current achievements are rewarded but also rewarded are stocks to those employees that are seen as valuable future assets of the company. This can be seen as a prime example of the focus on a partnership that Microsoft aims to foster with its employees.

Section 4.5 Promotions/marketing campaign

Promotion is the integrated marketing communication. It integrates the message through the available channels to deliver a consistent and clear message about the company’s brands, products and services. Microsoft product promotion strategy in the Singapore will be included national daily newspapers to the target customers, public relation to the target group and people, direct mail contact with the existing customer who already used the Microsoft other products. Promotion through the trade fair and exhibition of the product in the particular area. Using the social media is the most effective promotional strategy in the present day. Through advertising the national, international campaign which is used in television, radio and poster media, (see details for communication media of Singapore in appendix B).

Section 5. References

BBC news . (18 February 2010). Microsoft-Yahoo search deal approved . Available: http://news.bbc.co.uk/1/hi/8522606.stm. Last accessed 07 March 2013.

Cavusgil, S. T. and Shoming Z. (1994). Marketing Strategy-Performance Relationship: An Investigation of the Empirical Link in Export Market Ventures. Journal of Marketing, 58, 1-21

Christopher A Bartlett. (2001). Microsoft: Competing on Talent . Harvard Business School. 9 (1), 300.

CIA . ( 2013). The World Factbooks United Kingdom. Available: https://www.cia.gov/library/publications/the-world-factbooks/geos/uk.html. Last accessed 08 March 2013.

CIA. (2013). The world factbooks. Available: https://www.cia.gov/library/publications/the-world-factbook/population/SN_popgraph%202012.bmp. Last accessed 07 March 2013.

Dan Farber. (2012). Why Microsoft built its own tablet -- think Apple and Xbox. Available: http://news.cnet.com/8301-1035_3-57455261-94/why-microsoft-built-its-own-tablet-think-apple-and-xbox/. Last accessed 08 March 2013.

Douglas, Susan P. and C. Samuel Craig. 1995.Global Marketing Strategy.New York: McGraw-Hill.

Economic freedom. (2013). Singapore’s economic freedom scores . Available: http://www.heritage.org/index/pdf/2013/countries/singapore.pdf. Last accessed 07 March 2013.

Ghannam. N. (2013). Report Finds Singapore Lead s the World in Ease of Doing Business — for Seventh Year in a Row. Available: http://doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Press-Releases/DB13/DB13EAPPressReleaseEnglish.pdf. Last accessed 09 March 2013.

John Letzing. ( Nov. 24, 2009). Microsoft, Yahoo search pact cleared in Canada, Australia. Available: http://www.marketwatch.com/story/microsoft-yahoo-pact-cleared-in-canada-australia-2009-11-24-173000?siteid=yhoof. Last accessed 07 March 2013.

Microsoft Annual Report (2012). Available: http://view.officeapps.live.com/op/view.aspx?src=http://www.microsoft.com/investor/reports/ar12/docs/2012_Annual_Report.docx. Last accessed 05 March . 2013.

Musonera, Etienne and Ndagijimana, Uzziel, ( 2008). An Examination of Factors that Affect Pricing Decisions for Export Markets . The Journal of Global Business Management, Vol. 4, pp. 189-198.

Myers, Matthew B. (1997). The Pricing of Export Products: Why Aren’t Managers Satisfied with the Results. Journal of World Business, 32 (3), 277-289.

Onkvisit, Sak and John J. Shaw (2004). International Marketing analysis and Strategy. New York and London: Routledge. p245-52.

Priyadarshini, J. (2012). Microsoft’s HR Strategy – An Analysis. Available: http://www.scribd.com/doc/13286642/HR-Planning-Strategy-at-Microsoft-Inc. Last accessed 11 March 2013.

Robert E. Hall, Jimmy Royer, Marc Van Audenrode. (2003). Potential Competition and the Prices of Network Goods: Desktop Software . Available: http://www.stanford.edu/~rehall/PotentialCompetition4-29-03.pdf. Last accessed 09 March 2013.

Root, F. R. (1994). Entry Strategies for International Market. Washington, D. C.: Lexington Books.

Slack, N., Chambers, S. & Johnston, R. (2007) ‘Operations Management’; 5th edition; London: Pearson & Prentice Hall; England, UK.

Theodosiou, Marios (2000). Factors Influencing Degree of International Pricing Strategy : An Empirical Investigation. Marketing in a Global Economy Proceeding. p. 246-53.

Trefis Team. (September 22nd, 2010). New Xbox Consoles Can’t Move Microsoft’s Stock. Available: http://www.trefis.com/company?article=24024#. Last accessed 06March 2013.

Vijayan. D. (2009). Impact Of Company’s International Strategy on Its Business Performance. Available: http://www.scribd.com/doc/39600843/Impact-of-Microsoft-University of s%E2%80%99s-International-strategy-on-its-business-performance. Last accessed 05 march 2013.

Whitelock, Jeryl and Carole Pimblett (1997). The Standardization Debate in International Marketing. Journal of Global Marketing, 10 (3), 45-66.

Section 6. Appendices

Appendix : A

Economy Condition of Singapore

Population:5.3 million

GDP(ppp):$314.9 billion

4.9% growth in 2011

5-year compound annual growth 5.7%

$59,711 per capita income

Unemployment: 2.0%

Inflation (CPI): 5.2%

FDI inflow:$64.0 billion

Public debt: 100.8% of GDP

Source : Economic freedom. (2013).

Appendix B

Media in Singapore

Excellent domestic facilities; launched 3G wireless service in February 2005; combined fixed-line and mobile-cellular teledensity more than 180 telephones per 100 persons; multiple providers of high-speed Internet connectivity and the government is close to completing an island-wide roll out of a high-speed fiber-optic broadband network.

state controls broadcast media; 7 domestic TV stations operated by MediaCorp which is wholly owned by a state investment company; broadcasts from Malaysian and Indonesian stations available; satellite dishes banned; multi-channel cable TV service available; a total of 18 domestic radio stations broadcasting with MediaCorp operating more than a dozen and another 4 stations are closely linked to the ruling party or controlled by the Singapore Armed Forces Reservists Association; many Malaysian and Indonesian radio stations are available (2008).

Appendix C.

Ethnic groups:

Chinese 76.8%, Malay 13.9%, Indian 7.9%, other 1.4% (2000 census)

Languages:

Mandarin (official) 35%, English (official) 23%, Malay (official) 14.1%, Hokkien 11.4%, Cantonese 5.7%, Teochew 4.9%, Tamil (official) 3.2%, other Chinese dialects 1.8%, other 0.9% (2000 census)

Religions:

Buddhist 42.5%, Muslim 14.9%, Taoist 8.5%, Hindu 4%, Catholic 4.8%, other Christian 9.8%, other 0.7%, none 14.8% (2000 census)

Population:

5,353,494 (July 2012 est.)

country comparison to the world: 114

Age structure:

0-14 years: 14% (male 382,537/female 364,542)

15-24 years: 18.6% (male 488,785/female 504,717)

25-54 years: 50% (male 1,309,014/female 1,369,912)

55-64 years: 9.7% (male 259,370/female 259,222)

65 years and over: 7.8% (male 187,448/female 227,947) (2012 est.)

population pyramid: https://www.cia.gov/library/publications/the-world-factbook/graphics/poppyramid_icon.jpg

Median age:

total: 33.5 years

male: 33.4 years

female: 33.6 years (2012 est.)

Population growth rate:

1.993% (2012 est.)

country comparison to the world: 55

Birth rate:

7.72 births/1,000 population (2012 est.)

country comparison to the world: 220

Death rate:

3.41 deaths/1,000 population (July 2012 est.)

country comparison to the world: 213

Net migration rate:

15.62 migrant(s)/1,000 population (2012 est.)

country comparison to the world: 6

Urbanization:

urban population: 100% of total population (2010)

rate of urbanization: 0.9% annual rate of change (2010-15 est.)

Sex ratio:

at birth: 1.07 male(s)/female

under 15 years: 1.05 male(s)/female

15-64 years: 0.96 male(s)/female

65 years and over: 0.82 male(s)/female

total population: 0.96 male(s)/female (2011 est.)

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