MINOR PROJECT REPORT

ON

GROWTH AND MARKETING STRATERGY OF MICROSOFT

PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF

THE REQUIREMENTOF BACHELOR OF BUSINESS
ADMINISTRATION

BY: NISHANT SHRIVASTAVA

ENROLLMENT NO: 07191101722

Under the guidance of

MS. HARSIMRAN KAUR

SRI GURU TEGH BAHADUR INSTITUTE OF MANAGEMENT AND

INFORMATION TECHNOLOGY

(Affiliated to GGSIP University Delhi)

(2022-2025)

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 DECLERATION

I, hereby declare that the project work entitled

―CUSTOMER BEHAVIOUR OF “GROWTH AND
MARKETING STRATERGY OF MICROSOFT” submitted
to GURU GOBIND SINGH INDRAPRASTHA
UNIVERSITY is a record of an original work done by me
under the guidance of Ms. HARSIMRAN KAUR, faculty
member at Sri Guru Tegh Bahadur Institute of Management
and Information Technology.

……….…………………………..

(Signature of the Scholar)

Place: Delhi Name of scholar:
NISHANT
SHRIVASTAVA
Date: Enrolment number:
07191101722

2
 CAERTIFICATE

This is to certify that NISHANT SHRIVASTAVA, student of

SRI GURU TEGH BAHADUR INSTITUTE OF
MANAGEMENT & INFORMATION TECHNOLOGY of
course BBA(GENERAL) has completed project work title ―
“GROWTH AND MARKETING STRATERGY OF
MICROSOFT” under my guidance and supervision. This
work is genuine.

………………………….
(signature of project in charge)
Ms. DIVYA GUPTA

………………………….
(Signature of guide)
Ms. HARSIMRAN
KAUR

....................................

(Signature of the Scholar)

Place: Delhi NISHANT SHRIVASTAVA

Date: Enroll. number: 07191101722

3
 ACKNOWLEDGEMENT

I would like to take the opportunity to thank and express my

deep sense of gratitude to my mentor Ms. HARSIMRAN
KAUR . I am greatly indebted to her for providing their
valuable guidance at all stages of the study, advice,
constructive suggestions, positive and supportive attitude and
continuous encouragement, without which it would have not
been possible to complete the project.

………….……………………….

(Signature of the Scholar)

NISHANT SHRIVASTAVA
Enrolment number:07191101722

4
 Table of Contents

CHAPTER CHAPTER NAME PAGE

NO.

1 INTRODUCTION 6-8

2 MARKETING AND 9-13

GROWTH STRATERGY OF
MICROSOFT

3 RESEARCH 14-19
METHODOLOGY

4 FINDINGS AND 20-34

DISCUSSIONS

5 CONCLUSION 35

6 SUGGESTIONS AND 36-38

RECOMMENDATIONS

BIBLIOGRAPHY 39-42

ANNEXURE 43-44

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 CHAPTER-1

INTRODUCTION

Microsoft Corporation is an American multinational technology

corporation headquartered in Redmond, Washington. Microsoft's best-known
software products are the Windows line of operating systems, the Microsoft
Office suite, and the Internet Explorer and Edge web browsers. Its flagship
hardware products are the Xbox video game consoles and the Microsoft
Surface lineup of touchscreen personal computers. Microsoft ranked No. 14 in the
2022 Fortune 500 rankings of the largest United States corporations by total
revenue; it was the world's largest software maker by revenue as of 2022. It is
considered as one of the Big Five American information technology companies,
alongside Alphabet (parent company of Google), Amazon, Apple,
and Meta (formerly Facebook).

HISTORY OF MICROSOFT

Microsoft was founded by Bill Gates and Paul Allen on April 4, 1975, to develop
and sell BASIC interpreters for the Altair 8800. It rose to dominate the personal
computer operating system market with MS-DOS in the mid-1980s, followed by
Windows. The company's 1986 initial public offering (IPO) and subsequent rise
in its share price created three billionaires and an estimated 12,000 millionaires
among Microsoft employees. Since the 1990s, it has increasingly diversified from
the operating system market and has made a number of corporate acquisitions,
their largest being the acquisition of LinkedIn for $26.2 billion in December
2016, followed by their acquisition of Skype Technologies for $8.5 billion in May
2011.

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As of 2015, Microsoft is market-dominant in the IBM PC compatible operating
system market and the office software suite market, although it has lost the
majority of the overall operating system market to Android. The company also
produces a wide range of other consumer and enterprise software for desktops,
laptops, tabs, gadgets, and servers, including Internet search (with Bing), the
digital services market (through MSN), mixed reality (HoloLens), cloud
computing (Azure), and software development (Visual Studio).

Steve Ballmer replaced Gates as CEO in 2000 and later envisioned a "devices and
services" strategy. This unfolded with Microsoft acquiring Danger Inc. in
2008, entering the personal computer production market for the first time in June
2012 with the launch of the Microsoft Surface line of tablet computers, and later
forming Microsoft Mobile through the acquisition of Nokia's devices and services
division. Since Satya Nadella took over as CEO in 2014, the company has scaled
back on hardware and instead focused on cloud computing, a move that helped
the company's shares reach their highest value since December 1999.

Earlier dethroned by Apple in 2010, in 2018, Microsoft reclaimed its position as

the most valuable publicly traded company in the world. In April 2019, Microsoft
reached a trillion-dollar market cap, becoming the third U.S. public company to
be valued at over $1 trillion after Apple and Amazon, respectively. As of 2022,
Microsoft has the fourth-highest global brand valuation.

Microsoft has been criticized for its monopolistic practices and the company's
software has been criticized for problems with ease of use, robustness,
and security.

Childhood friends Bill Gates and Paul Allen sought to make a business using their
skills in computer programming. In 1972, they founded Traf-O-Data, which sold a
rudimentary computer to track and analyze automobile traffic data. Gates enrolled

7
at Harvard University while Allen pursued a degree in computer science
at Washington State University, though he later dropped out to work
at Honeywell. The January 1975 issue of Popular Electronics featured Micro
Instrumentation and Telemetry Systems's (MITS) Altair
8800 microcomputer, which inspired Allen to suggest that they could program
a BASIC interpreter for the device. Gates called MITS and claimed that he had a
working interpreter, and MITS requested a demonstration. Allen worked on a
simulator for the Altair while Gates developed the interpreter, and it worked
flawlessly when they demonstrated it to MITS in March 1975 in Albuquerque,
New Mexico. MITS agreed to distribute it, marketing it as Altair BASIC. Gates
and Allen established Microsoft on April 4, 1975, with Gates as CEO, and Allen
suggested the name "Micro-Soft", short for micro-computer software. In August
1977, the company formed an agreement with ASCII Magazine in Japan,
resulting in its first international office of ASCII Microsoft. Microsoft moved its
headquarters to Bellevue, Washington, in January 1979.

Microsoft entered the operating system (OS) business in 1980 with its own
version of Unix called Xenix, but it was MS-DOS that solidified the company's
dominance. IBM awarded a contract to Microsoft in November 1980 to provide a
version of the CP/M OS to be used in the IBM Personal Computer (IBM PC)

Microsoft released Windows on November 20, 1985, as a graphical extension for

MS-DOS, despite having begun jointly developing OS/2 with IBM the previous
August.

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 CHAPTER-2

GROWTH AND MARKETING STRATERGY OF MICROSOFT

In 2013 the global leader in market research, International Data Corporation

illustrated declining trends within the traditional PC market. This new change
presented Microsoft an opportunity to reevaluate its business priorities as it could
not afford to statically hold dominance in software services. The forecast
prompted Microsoft to strategically shift away from its myopic reliance on its
software cash cows and transition the company to pursue emerging consumer
trends. Microsoft’s new CEO, Satya Nadella has designed a vision for growth that
aims to reinvent productivity and empower individuals to achieve more. The
company’s new mission is not simply a shared goal that the business aspires to
reach, but has taken measured steps to ensure business outcomes that improve
value for the firm and its stakeholders. Microsoft’s rebirth for future success can
be attributed to its financial strength, R&D’s ability to drive innovative products,
and new executive leadership that will enhance the company’s competitive
advantage. First, Microsoft has established itself in the market through its robust
financial performance for over 40 years. Strong reported earnings and ethical
business engagements serve to illustrate the corporation’s dedication to
continually drive profit. The firm’s proven financial history demonstrates its
ability to take measured risks, to capture profitable revenue streams, but also
signifies financial freedom to pursue new business opportunities for growth.
Financial performance is the underlying crux of a company; fortunately for
Microsoft it is the driving force that ensures flexibility to test new markets and
maximize value in regards to its new paradigm shift. Microsoft’s financial
strength sets the fundamental pillar for growth and drives its ability to promote
research and development. The firm’s large R&D investments 2 illustrates its

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initiative to recognize emerging trends which it aims to capture before
competitors crowd the market space. Furthermore, R&D also improves prudent
decisionmaking in which the company can assess the long term opportunity cost
of selecting one project over another. Microsoft’s investments have identified
strong potential for hybrid laptops and cloud computing to drive profitable returns
in the future; hence, supports the company’s product diversification strategy to
remain competitive within the marketplace. Microsoft has tactically transitioned
away from its myopic reliance on its software products and is pursuing diversified
growth that aims to capture market trends. The paradigm shift is vital for the
company as it leverages its new leadership and financial strength to capitalize on
new windows of opportunity. Microsoft’s strategic turnaround illustrates its
ability to reinvent itself through a diversified product portfolio and demonstrates
how the company has dynamically adapted to the market to retain its competitive
advantage.

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New Leadership Revitalizes Microsoft’s Trajectory for Growth:

From 2000 to 2014, Steve Ballmer served as the Chief Executive Officer for
Microsoft. During his tenure, he contributed to the company’s profitability in
which annual revenues increased from “$20 to $70 billion and net income
increased 215% to $23 billion.”1 Under Ballmer, the company’s cash cows,
Windows and Office serviced as the business’s financial powerhouse. Although,
his leadership emulated a conservative approach of “protecting entrenched
interests” which turned the company into a “graveyard for big ideas” that inspired
tech giants like Apple and Google to thrive. 2 Microsoft’s inability to shift
directions to meet new consumer trends affected the stock to “hover the same
price for a decade,” as seen in Figure 1.3 Furthermore, Microsoft’s innovative
brand started to diminish as competitors such as Apple, Google and Samsung
pursued a mobile revolution, while Microsoft “struggled to modernize.”4 As
Machiavelli suggests, Ballmer “always prospered by proceeding one way;”
therefore, “he could not persuade himself to change” and adapt to the future (80).
Unfortunately, Ballmer’s leadership dismissed emerging technology that could
have driven the company to achieve greater market penetration and profitability.

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 Fig- Stock Prices Escalate with Satya Nadella's New Leadership for Growth

In 2014, Satya Nadella replaced Steve Ballmer as the CEO of Microsoft.

Fortunately, Nadella’s entrance presented him an ideal opportunity to exploit his
technological prowess in order to save the firm from its myopic pitfalls.
Understanding that Microsoft had already lost crucial time, due to its late entrance
within the hardware market, Nadella quickly revitalized the company’s direction
for diversified growth through his vision to “take risks and move quickly when
mistakes are made."5 He recognized that Microsoft needed to adapt to changing
consumer preferences; therefore, he pushed a new mission to empower everyone
through a “mobile first, cloud first” platform.6 Under Nadella’s leadership,
Microsoft transitioned from its flawed myopic approach to a strategic shift
towards innovation and growth. Microsoft’s paradigm shift aims to capture global
trends by leveraging new leadership and vision to shape future organizational
growth. The company’s agility to reinvent productivity, through its “mobile first,
cloud first” products, strengthens its ability to drive consumer connectedness and
performance for investors. Microsoft’s transition is significant as it achieves a key

12
business objective: to sustain its competitive advantage and deliver long term
value for its shareholders. Consequentially, Microsoft’s paradigm shift towards
innovation and diversified growth has enabled the organization to restore its
competitive advantage, even after its late entry. Nadella’s strategic vision has
strengthened Microsoft’s corporate culture, improved stakeholder trust and
provided new momentum to capitalize on new opportunities for growth. The
organization’s adaptability has successfully increased stock improved financial
performance, with revenues increasing to $85.3 million and net profit margins
growing from 13.03% to 19.69%.14 Microsoft’s organizational transition
demonstrates a positive change for the business in terms of aligning corporate
objectives with changing consumer preferences. Furthermore, the favorable shift
has been positively received by investors as stock prices reached a record high
due to an increasing assurance in the business’s trajectory for growth, as seen in
Figure 1. A comparison of Microsoft’s five year cumulative total return indicates
that the company has consistently matched or outperformed S&P 500 and
NASDAQ indexes to deliver the best returns for investors, as illustrated in
Appendix 1. Satya Nadella’s new executive leadership has revitalized Microsoft’s
corporate culture, investor confidence and momentum to strategically capitalize
on new windows of opportunity. Nadella’s entrance marks a new paradigm 6 shift
for the organization, as it aims to deliver long term value to its shareholders while
also retaining its competitive advantage across time.

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 CHAPTER-3

RESEARCH METHODOLOGY

OBJECTIVES OF MICROSOFT’S MARKETING

1. Market Penetration (Primary Strategy). Market penetration is the

primary intensive strategy that Microsoft uses to grow its business. This
intensive growth strategy involves selling more products to the markets
where the company currently has operations. For example, the company
grows by intensifying its marketing and sales in its current markets in Asia.
This intensive growth strategy is responsible for Microsoft’s global
dominance in the IBM PC-compatible operating system market. The
company effectively applies market penetration through the broad
differentiation generic strategy, which uses product uniqueness to attract
more customers from various market segments. A strategic objective based
on this intensive strategy is to ensure business growth through Microsoft’s
marketing mix (4Ps), involving aggressive sales and marketing strategies
and tactics.

2. Product Development (Secondary Strategy). Microsoft Corporation uses

product development as a secondary intensive growth strategy. This
intensive strategy facilitates growth based on the development and sale of
new products. For example, the company continually develops new
software products to generate higher revenues. Through new products that
address market needs, the business supports its generic strategy, which
requires product uniqueness as a competitive advantage. This intensive
strategy of product development points to the strategic objective of
enabling Microsoft’s growth through product innovation.

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3. Market Development (Supporting Strategy). Market development is a
supporting intensive growth strategy that has considerable but minimal
impact on Microsoft’s current business performance. Market development
supports business growth through the firm’s entry into new markets. For
example, in its early years, Microsoft applied this intensive strategy to sell
its computer software products outside the United States. However,
considering that these products are already globally popular, market
development is no longer as significant in the company’s growth. The
generic strategy of broad differentiation empowers Microsoft in applying
market development as an intensive growth strategy. For instance, through
unique business-specific computer products, the company initially entered
overseas markets. A strategic objective linked to this intensive strategy is to
grow the information technology business by entering new markets, likely
in developing countries or regions.

4. Diversification (Supporting Strategy). Microsoft Corporation considers

diversification as a supporting intensive growth strategy. In this intensive
strategy, the company grows by developing or acquiring new businesses.
For example, the company diversified its business when it acquired Nokia’s
devices and services division to re-enter the smartphone hardware market.
Microsoft can effectively apply this intensive growth strategy through new
product development in new business ventures, based on the broad
differentiation generic strategy. A strategic objective based on the intensive
strategy of diversification is to facilitate the information technology
company’s growth through mergers and acquisitions. These mergers and
acquisitions typically come with changes in Microsoft’s organizational
structure or corporate structure.

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SWOT Analysis

Strengths

1. Brand loyalty. Over the years, Microsoft has been the leading OS and
software provider, which resulted in more than 90% market share for PC
OS. Most of us grew up using its easy to use OS, are familiar with it and
will keep using it. Few other brands are capable to compete with Microsoft
for this reason. Even open source OS, which are completely free and well
suited to use for common user, find it hard to attract users.
2. Brand reputation. According to Interbrand, Microsoft’s brand is the 5th
most valuable brand in the world, valued at $ 57.8 billion. Forbes listed the
corporate as the 7th most reputable business in the world. Brand reputation
leads to higher sales and greater market share.
3. Easy to use software. Windows OS and Office software products are so
popular not just because Microsoft has great monopolistic power, strong
distribution channels and good brand reputation but also because its
products are of great quality and really easy to use.
4. Strong distribution channels. The company works with all the major
computer hardware producers such as Lenovo, Dell, Toshiba and Samsung
and major computer retailers to make sure computers would be sold with
already pre-installed Windows software. The company also invested in
Dell and Nokia to tighten its relationships with these companies.
5. Robust financial performance. Microsoft grew its revenues by 15% from
2020 to 2021 and holds more than $130 billion of cash and cash
equivalents that can be used for acquisitions and substantial investments
into R&D.

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Weaknesses

1. Poor acquisitions and investments. Few of Microsoft’s acquisitions were

successful and brought not just revenues and products but new skills and
competencies to the company. Massive, LinkExchange, WebTV, Danger
are just few examples of multimillion acquisitions made by Microsoft but
soon shut down or divested.
2. Dependence on hardware manufacturers. Microsoft is a giant software
corporation but it does not produce its own hardware and depends on
computer hardware manufacturers to develop products that run Windows
OS. If cheap and popular alternative OS would appear, hardware
manufacturers may simple choose the alternative and Microsoft could do
little to change the situation.
3. Criticism over security flaws. Windows OS, the main Microsoft product
has been heavily criticized for being so weak against various viruses’
attacks. Compared to other OS, Windows is the least protected against such
attacks.
4. Mature PC markets. Only recently has Microsoft entered the mobile
technology sector and still heavily depends on its OS and software sales for
standalone and laptop computers. The market for these products has
matured and Microsoft will find it harder to grow revenues in these sectors.
5. Slow to innovate. Microsoft has huge R&D resources and great position to
enter new markets with innovative products but constantly failed to do so.
It had an opportunity to be the first player in online advertising but missed
the opportunity. It’s entrance to mobile OS was also too late, while Google
and Apple captured the market share.

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Opportunities

1. Cloud based services. Microsoft could expand its range of cloud services
and software as the demand for cloud-based services is expanding.
2. Mobile advertising. Mobile advertising markets are expected to grow in
double digits over the next few years and Microsoft has a great opportunity
to tap into these markets with its mobile OS.
3. Mobile device industry. Smartphones and tablets markets will grow
steadily over the next few years and Microsoft could exploit this
opportunity by introducing more of its own tablets and a new company
phone.
4. Growth through acquisitions. With a huge reserve of cash Microsoft
could start acquiring new startups that would bring new technology, skills
and competences to the business.
Threats

1. Intense competition in software products. Microsoft is more than ever on

the pressure to introduce successful OS both in PC and mobile markets as
such competitors like Google and Apple have already established positions.
2. Changing consumer needs and habits. Customers shift from buying
laptops and standalone PCs to buying smartphones and tablets, the markets,
where Microsoft has only a modest market share and may never establish
itself.
3. Open source projects. Many new open source projects are coming to the
market and some of them became quite successful, such as new Linux OS
and Open Source Office. Open source projects are free and so they can
become an alternative to expensive Microsoft’s products.

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4. Potential lawsuits. Microsoft has already been sued for many times and
lost quite a few large scale lawsuits. Lawsuits are expensive as they require
time and money. And as Microsoft continues to operate more or less the
same way, there is high probability for more expensive lawsuits to come.

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 CHAPTER- 4
FINDINGS AND DISCUSSIONS
Current Market Situation:

Fig-1: Microsoft revenue in billions from 2002-2022

Microsoft: A wealth-generating machine

One of the world's largest and most successful technology companies, Microsoft's
global revenue has increased relatively consistently since its conception, with the
figure reaching a record high of over 198 billion U.S. dollars in their 2022
financial year. That same year, Microsoft reported net income of 73 billion U.S.
dollars, another record high for the company. Microsoft’s success has translated
into personal wealth for those closely involved in its formation. Predictably, both
Bill Gates and the late Paul Allen amassed large fortunes on the strength of
Microsoft's growth. Mr. Gates is joined by Steve Ballmer, Microsoft's 30th
employee and former CEO, as two of the richest men in the United States - and
subsequently the world - each with a multi-billion-dollar fortune to their name.

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Core businesses

Historically, Microsoft has generated the majority of its revenue from the
commercial licensing of its software and various operating systems. One of the
company's largest segments is ‘intelligent cloud'. This is perhaps unsurprising,
considering that the segment contains Windows OS sales, searching advertising
revenues, and gaming revenues from Xbox software and hardware. Microsoft
Windows continues to dominate the personal computer operating system
market and Microsoft's most recent gaming consoles have experienced moderate
success, with the Xbox One gaming console selling millions of units years after
its initial release. The cloud computing segment is taking on a bigger and bigger
role in Microsoft's overall business. The software industry has been undergoing a
shift to the cloud and Microsoft is well-positioned in this industry-wide
transformation: it is one of the major cloud service providers and has a big
presence in both the infrastructure-as-a-service (IaaS) and the software-as-a-
service (SaaS) market. Its primary rivals in the cloud market are other tech giants
such as Amazon, IBM, and Salesforce.

Notable acquisitions and partnerships

In January 2022, Microsoft announced plans to purchase game

company Activision Blizzard in an all-cash deal worth nearly 70 billion U.S.
dollars. This dwarfs Microsoft’s 26-billion deal with LinkedIn back in 2016 and
would become Microsoft’s biggest acquisition ever, should it go through. The
acquisition also marks Microsoft’s shift to focus more on gaming content delivery
on top of platform building, and the company’s ambition to venture into the
emerging metaverse industry. Another of Microsoft’s recent blockbuster
acquisition is that of the voice artificial intelligence (AI) company Nuance in
2021 for almost 20 billion U.S. dollars. This marks Microsoft's industry-specific
cloud strategy, as Nuance has a good standing in the healthcare market. The latest
partnership with OpenAI shows Microsoft’s ambition to advance its AI
capabilities with some popular models already deployed on Azure in products like
GitHub Copilot, DALL·E 2, and ChatGPT.

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 Apple v/s Microsoft

One of the most well-known rivalry in the technological industry is between

Apple Inc and Microsoft Corporation. They are two of the largest companies in
the world as both Apple and Microsoft have touched market capitalization value
of $1.5 trillion in 2020. Both the companies have revolutionized the technological
industry by providing us with two very different software applications and
gadgets such as Mac and PC.
They are two of the most established companies when it comes to the production
of computers. Both Apple and Microsoft are competitors even in different sectors
of the industry like hardware devices like smartphone and PCs, advertising,
making software's, operating systems, etc. Apple main aim is to produce gadgets
like iPhone, Mac, Apple watch , etc, while Microsoft focuses on making software
applications for different devices and giving license for their software services.
Which is why both the companies have different approaches to marketing
strategies. Let’s put a light on some of the key points from the marketing
strategies of both companies and check how you can implement them in your
business.

Fig-2: Microsoft revenue compared to other companies in billions

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A BRIEF ABOUT APPLE INC.

Apple Inc is one of the most well known American corporation which is popular
for creating unique designs and selling electronics, computer software and online
services. The headquarters of people Inc is situated in Cupertino, California. The
company is credited for designing products such as Macintosh range of
computers, iPad, iPhone, iPod, Mac, Apple watch, etc. The company is also know
to make software such as iLife, the safari web browser, iOS and iTunes among
others. Apple now operates in over 350 stores around the world and offers both
software and hardware.
The success of Apple Inc. is solely because of the contributions made by the
cofounder and entrepreneur, Steve Jobs who created good looking, easy to use
products and the ability to create innovative products that consumer’s desire. The
company was created during the unstable economic situation of the 1970’s. The
company introduced Macintosh in 1984 after which it also got its widespread
recognition because of its marketing and advertisements for its products. In 90’s
after jobs resignation, apple lost a huge market share to its lower priced
competitors Microsoft and Intel.
In 2000, when jobs returned and became the CEO, Apple gained it prominence
after the launch of iMac and the Think different campaigns. In August 2011, Jobs
resigned as CEO due to health issues, which led to Tim Cook becoming the new
CEO. And the rest is history. Apple’s annual revenue for 2020 was $274.5 billion,
making Apple Inc the world’s most valuable company. As of January 2021,
Apple has achieved the title of becoming the world's largest PC vendor and also
becoming the world's fourth largest manufacturers of smartphones. Apple is now
also the world’s largest music retailer with iTunes.

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THE TARGET AUDIENCE OF APPLE AND MICROSOFT

Apple Inc. has both software and hardware products and services, for software it
has iCloud, iLife, iMessage, iMovie, iTunes, etc and for hardware it has iPhone,
Macbook, iMac, Apple watch, iPad, etc. Which is why the apple has a vast array
of target audience as it keeps expanding its market with every new product. Apple
already has 1.5 billion users who fall under the age bracket of 22 to 55 years old.
The male to female user ratio is 60.8% to 39.2% showing that it is expanding in
the male market.

Apple also targets people with medium to high income individuals who live in
metropolitan cities and are loyal to the brand. The occupation group of Apple
users are considered to be students and young professionals to even managers and
executives. Microsoft also has both software and hardware products and services.
Everyone from the middle class house at least owns one Microsoft hardware or
software that is because the target audience of Microsoft are people who don’t
necessarily have a high income.

Microsoft's target audience age group range from 16 and older and from both
urban and rural areas around the world. They also target young crowds that are
usually students, employees and professionals and are loyal to the brand.
Microsoft also uses the approach of STP which is Market Segmentation,
Targeting and Positioning in order to bring about communications in marketing as
it enables the company to make propositions their priority.

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The Marketing Mix of Apple and Microsoft

Fig-3:Marketing mix of apple

Apple’s marketing mix shows us how the company matches with its business
activities to the conditions in the worldwide market for information technology,
consumer’s electronics and online services. While Microsoft’s is known to be
marketing mix that shows how rapid invention and innovation can be combined
with effective approaches to maintain a strong share of the market. Here are the
4Ps (Products, Place, Promotion, Price) of both the companies.

Fig-4: Marketing mix of Microsoft

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Product mix
Apples products mostly comprise of mostly of both hardware and software which
involve information technology. Apple although has more hardware products and
some of the well-known products are Mac products line, iPhone line, iPad line,
iPod line Apple watches, Apple TV, while it software products are software of
devices, accessories, cloud services, digital content, etc.
Microsoft on the other hand started out as a software developer and still continues
to give it its first preferences. However this company has grown to include an
variety of products and services. Some of its products are providing different
software to various devices, Apps, Xbox Video game consoles and entertainment.

Placement mix
Placement mix analyses the selection of appropriate places or venues that are
used by the company to distribute its products. Apple Inc. placement involves
apple owned locations and other parties that the company authorizes to distribute
its products. Most of Apples distribution happens from Apple store locations,
Company owned website and online stores for desktop and authorized sellers and
lastly the telecommunication companies.
Microsoft tries to maximize its reach in the sectors of both computer hardware
and software market. The company does its distribution on their official website,
authorized sellers and Microsoft stores.

Price mix
Apple uses two pricing strategy which are Freemium pricing strategy and
premium pricing strategy. Apple uses premium pricing strategy to set high prices

26
for its products which is why apple products are more expensive then android
products, with this it maximizes profit margins.
In the freemium pricing case apple products are free but customers have to pay to
access better features, for example the company offers free 5 GB iCloud storage
but if the user wants more they can by purchasing. However Microsoft applies
suitable pricing approaches like Market-oriented pricing strategy, Freemium
pricing strategy similar to apple’s and Buy only what you use price strategy.

Promotional mix
Apple promotes its products in various ways to include different channels and
parties. Apple also uses word of mouth, marketing campaigns and beautifully
planned ad video that reaches out to their target audience. Microsoft aims on
creating effective communication strategies and tactics which can be used to
attract target audience. Both Apple and Microsoft uses tactics such as advertising,
sales promotion, direct marketing, personal selling and public relations to
promote their products.

The Market Strategy of Apple and Microsoft

Apple is known to be the best companies when it comes to branding and

tech marketing. They don’t just market their products they try to market a brand
identity. One of its main market strategies is to keep the products and
marketing simple because they don’t want to overwhelm their prospective
customers with too many choices. Apple lets its products speak for themselves
with their simplistic design and easy to understand descriptions and simple
visuals.

27
One of Apple's best marketing strategies is hyping its products and making a
creative campaign. The other reasons are that they understand their target
audience and try to reach out to them in the language they will understand which
is done by simplifying the marketing process. One of the points of Apple's tech
marketing is that they know how to speak directly to their consumer. They
also create brilliant video ads and billboards that showcases human needs and
speaks to the customer’s human needs.

Microsoft on the other hand depends completely on showcasing its product

effectiveness and usability. Microsoft spends a lot as it depends on B2B
marketing that directly sells its products to the customers. Microsoft has also
updated its marketing strategy which is now based upon customer feedback and
market changes. In this day and age, Microsoft has somehow managed to develop
not only its marketing but also its products in order to match the rapid rate of
change in today’s market.

Microsoft’s marketing strategy is to drive its enterprises business by creating

cloud based solutions that will stick with its consumers. Microsoft uses a mix of
demographic and behavior segmentation strategies to segments the market into
different group with similar characteristics. Segmenting based on demographics is
important for products like Operating systems and Office products which are
applicable to everyone.

28
Competitive advantage of Apple and Microsoft

Apple has several competitive advantages over its competitors one of which is
that it produces superior technological products with good OS and technology
like iPhone, Macbook and iWatch making it a leader in the market space. Apple
has also repeatedly taken the top spot for its brand equity and also has loyal
customers. Apple has increased its revenue over the past years and also has high
margins.

One of the major competitive advantages of Apple is the amount it spends on

R&D, always thinking about the future of the company. Microsoft offers both
software and hardware products and services, from Microsoft tablet to Xbox
console games to even software. So one of the main competitive advantage that
Microsoft has over its competitors is the strategy of making acquisitions.
Microsoft has so far acquired companies like Hotmail, Skype and even Nokia.

Microsoft is a main competitor to apple because its operating system is installable

on any PC or laptop and there is no hardware binding on the operating system
which is a problem noticeable in Apple gadgets. It also has a vast product line and
has worked upon TCO which is total cost of ownership so as to make the software
easily and economically available to the customers.

29
Financial Overview

Fig-5: Microsoft's Financial Data over the Past 5 Years

Prior to Nadella’s leadership Microsoft’s revenue steadily increased over the past
five years, from $73,723 to $85,320 million. The company’s greatest cash inflow
can be seen in 2015 due to the surge in Surface product sales. 8 Even within a
highly competitive industry, the positive revenue growth indicates the firm’s
ability to select profitable business ventures that consistently generate sales. The
business also noticed an incline in profitability from 2012-2014; however, it saw
a drop in 2015 due to the arrival of the new CEO. Nadella’s first year was
dedicated to reflect, re-evaluate and define a shared Prior to Nadella’s leadership
Microsoft’s revenue steadily increased over the past five years, from
organizational purpose that would align the company with consumer market
trends. After his initial year, profitability increased back to $16,798 million.
Mirroring a similar trendthe net profit margin escalated from 23.03% to 28.08%,
prior to Nadella’s entry. Although the margins slightly decreased during the
reevaluation year, they began to trend upward in 2015. 9 The change in
executives highlights Microsoft’s proactive efforts to bring in an innovative

30
leader, after the predecessor’s conservative ten year reign. Nadella is central to
the significant organizational transformation that is transitioning the business
away from an “atrophying, software license-based past” and towards a “thriving,
mobile and cloud-based future.”10 He is cleverly directing the firm’s software
legacy towards a new family of products that promote mobility and cloud
accessibility. This new focus is becoming increasingly prevalent through the
organization’s attention on enhancing the Surface product line, improving
Azure’s cloud computing capabilities, and developing new devices for artificial
intelligence. Nadella’s leadership aims to interconnect the fabrics of the company
and its products under three key pillars: to reinvent productivity, build an
intelligent cloud platform to ensure mobility and create more personal computing.
Nadella claims that “software is the most malleable insight that define
experiences,” in which he aims to combine Microsoft’s software competencies to
strategically drive “the future of intelligent devices.”11 From 2012-2016, Nadella
integrated a strategic vision for growth within the organization. As a result, the
company received positive shareholder attention in which stock prices
consistently grew from 2012-2016 from an initial value of $30.59 to $68.78 in Q2
of 2017.12 This is a key example in which the paradigm shift has resulted in
beneficial outcomes and restored shareholder confidence in the company’s future.
Analyst Walter Pritchard observes that Microsoft reported strong Q2 2017
earnings “with an upside to all three major segments,” which improved the
company’s market capitalization to soar over $530 billion—something which the
firm has not observed in over 17 years.13 The steady price increases illustrate
strong evidence for investment in which shareholders view Microsoft’s consistent
performance as an opportunity to gain a profitable return on investment (ROI).
The increase in market value demonstrates added interest in the company’s
credibility and serves to present new business opportunities to drive growth.

31
Table 1 also illustrates an improvement in growth rates during Nadella’s
leadership from initial values of 5.4% in 2012 to 9.68% in 2016. Microsoft’s
financial performance presents flexibility and freedom to continually seek new
business ventures to ensure its long term competitive position.

I. Leveraging Research and Development

Research and development is a core competency for Microsoft as it utilizes the

resource to identify new avenues for growth. Microsoft is recognized for its
ranking as the 6th global leader for R&D spending.14 In 2016, Microsoft invested
nearly $12 billion in R&D which outperformed competitors such as Apple’s $8.1
billion and IBM’s $5.2 billion.15 With over 37,000 research specialists, the
business is committed to leveraging research and development to seek new
avenues to maximize growth, profitability and market penetration.16 In essence,
R&D supports Microsoft’s core purpose to create value for consumers by
addressing their demands and preferences to drive revenue.

A. R&D Diversifies Microsoft’s Hardware Product Portfolio:

Within fiscal years 2014-2016, Microsoft increased it R&D budget from $11.4 to
$12 billion, which is approximately 13-14% of the firm’s revenue.17 As the PC
market was declining, Microsoft needed to shift its focus and better align its
corporate resources to meet new demands. With the help of R&D, Microsoft was
able to assess consumer preferences and create the Surface product line to satisfy
consumers’ need for “versatility, power, and productivity.”18 The hybrid product
line is the company’s first stride towards developing a hardware product portfolio
that appeals to consumers. Without any new product updates in 2016, the Surface
grew “three consecutive quarters of 25% plus growth” leading the Surface
product line to generate an annual revenue of $4.3 billion.19 Furthermore, while
Apple holds the largest market share within the tablet market at 33%, Microsoft’s

32
Surface Book is closing the gap as it achieved a 25% market share, in Q4 of 2016.
20 Microsoft’s research has also tactically marketed the product to a targeted
niche audience. This strategic approach has helped the business make inroads in
Apple’s leading position, within the premium PC market. The Surface product
line serves as the strongest evidence in regards to how Microsoft’s paradigm shift
has leveraged its R&D expertise to appeal to consumer needs, while also finding
the correct distribution channels to turn potential opportunities into profitable
successes. During the former CEO’s leadership, Microsoft simply invested all its
resources within its software products, Office and Windows, leaving minimal
room for growth. However, under Nadella’s vision the company is coupling its
software heritage to deliver intelligent devices that will power the future. The
paradigm shift has revived Microsoft’s credibility as an innovative and creative
company that is actively adapting to changing times and trends. In the process,
the firm is increasing its market share as its products are connecting and
appealing to a new generation of mobile consumers.

B. Microsoft’s Focus Towards the Fastest Growing Sector, Cloud Computing:

In addition to diversifying the company’s hardware product portfolio, Microsoft

is using its distinctive competency, in software services, to support growth in
cloud computing. In 2017, Q2 financials reported Microsoft’s Azure increased
93% and achieved a revenue of $14 billion for its cloud business, which is on
track to meet its $20 billion target for 2018.21 In addition, a recent assessment in
Worldwide Public Cloud Services forecasted the cloud computing market to
reach a potential of $195 billion in 2020, in which the U.S. will be “the largest
market, generating nearly two thirds of global revenue.”22 Taking such
information into consideration, Microsoft has assessed cloud computing as the
fastest growing sector and aims to take advantage of this opportunity to deliver

33
additional services for its corporate clients. Due to its high profit potential, the
company has also allocated $1 billion annually to cyber-security research to drive
security and client satisfaction with Microsoft’s Azure platform. 23 The
increasing support to fund extensive research ensures Microsoft’s promising
vision to saturate new markets and sustain its competitive advantage within the
industry.

C. Surging Sales in Surface and Cloud Computing Drive Microsoft’s Growth

Microsoft’s R&D investments have helped identify positive business outcomes by

developing the Surface product line and entering the cloud computing sector. The
company’s profitability has resulted in an increased sense of reliability and trust
in Microsoft’s ability to aggressively pursue new avenues for growth. The new
sense of confidence justifies the exponential market capitalization growth and all
time high stock prices of $68. The company’s adaptability, dedication to meet
consumer needs, and agility to take measured business risks are driving reasons
that identify its potential to become a market leader. It is necessary to assess that
Microsoft has entered the hardware market nearly a decade late, compared to its
rivals that already control a large percentage of the market share. While the
second mover advantage presents difficulties in Microsoft’s path for dominance,
Microsoft demonstrates new momentum, agility, and strong executive leadership
to help the company outperform its rivals. The company must continually exploit
its distinctive competencies to strategically cover lost ground and recapture
market share, which it has successfully done with Azure and the Surface within a
short two year period

34
CHAPTER-5

CONCLUSION

The operating systems and the software markets are monopolistic competition
markets. That means the companies use the patent rights for a certain time, and
the entire companies try to differentiate their products to have the monopolistic
power. However, pursuing this monopolistic power requires a cost of
sustainability, and it is impossible to continue the monopolistic power forever.
When the cost of differentiating products reaches a top, the monopolistic power
disappears and a high level of competition begins in the markets.

Microsoft has experienced all the stages mentioned in the previous paragraph.
Microsoft had the monopolistic power until 2000s; however, after 2000, the other
companies have solved the puzzle of Microsoft, and they can produce and market
the same technology and even relatively better ones. Thus, after 2000, the
operating systems and the applications markets are not monopoly markets. We
still might claim that these markets are monopolistic competition markets because
product differentiating can still work in these markets.

In conclusion, when Microsoft was punished, the court was right about the
verdict; however, for the current time, Microsoft is no longer a monopoly.
However, we should not forget that the high technology markets are always very
close to being a monopoly market because of the characteristics of the high-
technology products.

35
CHAPTER-6

SUGGESTIONS AND RECOMMENDATIONS

Microsoft is a strong company to invest in due to its ability to reinvent its vision,
sustain strong financial performance and ability to utilize R&D to identify
emerging trends. Microsoft’s paradigm shift demonstrates a positive corporate
transformation in which the firm is pursuing diversified growth to deliver
innovative products for its consumers. As an investor, it is necessary to observe
that Microsoft has shown development in three interconnected elements that
address a holistic approach to revitalize the company for growth. The
organizational vision has set the stage for a growth strategy; in which financial
strength drives R&D investments to pursue new opportunities that will improve
the company’s revenue stream.

I. From an organizational vision to financial strength to practical success,

Microsoft demonstrates the strengths and resources to address new
opportunities that drive long term growth and improve its competitive
position.The company’s financial performance provides a holistic
perspective in terms of Microsoft’s overarching ability to target a shared
goal.
II. CEO Nadella’s leadership has successfully laid the fundamental framework
to sustain the company’s strategic competitive advantage and avoid myopic
thinking. The organizational transition has caused a positive paradigm shift
that has significantly improved the firm’s agility to take measured risks for
continued growth.
III. Leveraging its technological expertise and brand value, Microsoft’s Azure
and Surface divisions have seen impressive growth within a short time

36
 frame. The new family of products has sufficient market presence, ample
resources and capabilities to challenge current market leaders.
IV. Microsoft has not only transformed the corporate culture to replicate a
think tank that innovates to consumer needs, but has also tested its products
in the market. Among which the Surface and Azure ventures are positively
contributing to the company’s revenue stream.
V. Microsoft’s turnaround has benefited in regards to a raise in stock prices,
drastic increase in market capitalization and has outperformed Wall Street’s
expectations in “seven of the last eight quarters.”24 Nadella’s entrance has
improved corporate culture, financial stability and provided a new
approach for the company to enhance its strategic position within the
industry.
VI. Overall, Microsoft serves as a beneficial long term investment in which the
company has undergone a holistic transformation in terms of new
leadership, diversified product lines and consistent R&D to drive the
excellence. Microsoft’s new paradigm shift is striving toward new business
opportunities through cloud computing and hardware products, instead of
simply relying on its software cash cows.
VII. The justification that solidifies Microsoft as a strong investment is based on
its projected future potential. Instead of simply investing in a company with
strong finances, it is much more pertinent to select a company that has a
detailed perspective of its current position and desired future destination.

VIII. Microsoft is a strong company since it has assessed its weakness and
constraints, due to its late market entry, and transformed those issues into
opportunities for future improvements. With CEO Nadella’s progressive
perspective, Microsoft has a clear shared goal and purpose. Microsoft’s

37
executive leadership, strong finances and awareness for emerging market
trends demonstrates long term profitability for the company; thus, greater
return on investment for shareholders.

38
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42
 ANNEXURE

QUESTIONNAIRE:

1. WHAT IS YOUR GENDER?

MALE

FEMALE

2. WHAT IS YOUR AGE ?

0-15 16-20

21-30 30 ABOVE

3. DO YOU KNOW ABOUT MICROSOFT MARKETING?

YES

NO

4. DO YOU THINK THAT MICROSOFT IS BETTER THEN GOOGLE OR

APPLE?

YES

NO

5. DO YOU THINK MARKETING STRATERGY OF MICROSOFT IS

GOOD?

YES

NO

6. HAVE YOU EVER BEEN A COSTOMER OF MICROSOFT?

YES

NO

43
7. ARE YOU SATISFIED WITH THE PRODUCT/SERVICE?

YES

NO

I DON’T KNOW

8. WILL YOU BE A COSTOMER OF MICROSOFT AGAIN?

YES

NO

I DON’T KNOW

9. DO YOU THINK BEING MORE TECHNOLOGICALLY ADVANCED

WILL PROVIDE MORE SUCCESS TO THE COMPANY?

YES

NO

10. DO YOU THINK MICROSOFT SHOULD IMPROVE THERE

MARKETING STRUCTURE?

YES

NO

44