Microsoft Business Model Analysis

This assignment delves into the intricacies of Microsoft's business model. It explores the unique value proposition stemming from its affordable licensing model, achieved through high-volume sales partnerships with original equipment manufacturers. The analysis also examines how Microsoft effectively navigates cultural, administrative, and economic distances through global product localization, regulatory compliance, and uniform pricing strategies. Furthermore, the paper investigates Microsoft's innovation in adopting a 'freemium' model for software products, generating revenue through increased user engagement and volume.

Competitive strategy 1
COMPETITIVE STRATEGY
Author
Course
Professor
University
City, State
Date

Competitive strategy 2
COMPETITIVE STRATEGY
Introduction- Uber
Uber was founded in 2009 and by 2015 was operating in more than 300 cities and 50
countries. The company currently has a valuation of more than $ 60 billion with a total funding
of more than $50 billion (Kim 2017). It posted net revenues of more than $6 billion in 2016 and
had more than $20 billion in gross bookings. The company provides a cheaper alternative to
conventional taxi services and has more than 1 million drivers currently working for the
company. The success is seen in the number of user’s which stands at more than 1 million daily
globally and 8 million regular users.
Strategy
Market- Uber competes in the taxi services market which is was premised on fixed fares
using a meter inside the cab or taxi. This market is big and has not reached saturation as it offers
flexibility and convenience. The Uber model is based a ridesharing using apps that allow the
client to locate the nearest Uber car near them. The use of cars owned by the driver but operating
with apps and software proprietary to Uber eliminated the need to invest resources in buying
cars. This gave Uber competitive advantage in market entry and positioning over traditional taxi
operators.
Unique value- Uber operates with a unique value proposition on several elements. It
solves practical daily problems such as locating a taxi. Its disciplined drivers provide a refreshing
experience for the rider when compared to drivers of traditional taxis. Some Uber rides create
additional value by giving customers free items such as water and mints. UberKITTENS in the
US allows clients to cuddle real kittens during their ride for extra payment (Kim 2017). The
proceeds support centers which care for animals. This adds value at the social level.
CAGE FRAMEWORK

Competitive strategy 3
Using the CAGE framework, Uber has leveraged its services globally. The use of Uber is
not affected by cultural distance in terms of language, religion or social norms as taxi services
are universal in nature (Ghemawat 2015). In terms of geography, it requires minimum
geographic supervision as it operates with three executives for each city. Administrative distance
varies but is generally low with most governments allowing for free market dynamics to operate.
The economic distance is low as Uber services are not affected by the size of the country’s
economy.
Model of Innovation
The business model is to increase customer value while reducing their cost of using the
Uber ride. The customer uses apps to locate the nearest ride available using their smartphone
(Borker 2016). The driver using company software is able to identify the shortest route to the
customer’s destination using GPS. The customer benefits by lower fares while the driver uses
less fuel and time. Value is created mutually for both the customer and the driver and makes the
business model innovative and sustainable. It engenders loyalty in the customers and drivers and
contributes to its success as ride sharing company.
Introduction- Microsoft Corporation
Microsoft has been operating for more than forty years and is presently the largest
software maker worldwide. Its operating system (OS) for computers accounts for 90% of all
installations across the world. In 2016 the company posted a profit margin of 28% on revenues
of more than $70 billion (Statista 2017). Its innovative culture has resulted in new versions of its
OS such as Windows XP after Windows 98. It has also made major inroads into the home video
game sector which contributes significantly to its profits. The X-Box is one major profitable
product the company has innovated.

Competitive strategy 4
Strategy
Products- The Company competes in four software products categories in which it offers
value proposition to its customers over its competitors (Kryscynski 2015). It offers different
versions of Windows with updates available which is its flagship product. It also offers Office
Suite which is customized for home and office use. In email and communications, Skype offers
voice over internet protocols of calling using the internet (Microsoft Corporation 2017). This
service is customized for home and business use. Microsoft also offers online and Cloud
services customized for office and home use. It therefore offers a one-stop shop for software
products for its customers.
Unique Value- The unique value which it offers is through its licensing model which
offers costs which are low and affordable to the consumer. This is generated through volume in
its OS in partnership with manufacturers of original equipment. The company also develops
licenses and provides support for a wide range of customized software for companies of different
sizes. Selling and licensing in volume reduces the costs of its products and this gives the
company a competitive advantage over its competitors. The cost benefit reaches the customer as
products which are affordable when compared to the value they offer.
CAGE framework
Microsoft has been able to overcome the cultural distance and barrier by offering its
products in different languages globally. This flexibility allows for all users worldwide to enjoy
the same format and standard which is customized to their language. It overcomes the
administrative distance and obstacle by developing products for companies in compliance with
the rules governing the country. Microsoft is not limited in geographic terms as it works with

Competitive strategy 5
resellers and distributors of its products across the world. It sets a uniform price for its products
which are affordable in order to ensure that economic distance is not a challenge.
Model of Innovation
Microsoft offers a business model innovation based on cost advantages to its consumers
(Gassman 2013). While still continuing to sell its products through licensing, the company has
embraced a new model based on which offers free products for some of its software. This is
propositioned as “freemium” ('Microsoft Corporation Industry Profile 2015). The premise is that
once a large pool of free users is established, the revenue will be generated through engagement
on volume. An example is Skype which the company seeks to increase volume of usage. This
new model is long-term and seeks to generate revenue on volume through increased usage of its
products.

Competitive strategy 6
References
Borker, R, 2016, Quora Question: Why was Uber so Successful? Newsweek, viewed 25 August 2017, <
http://www.newsweek.com/quora-question-why-was-uber-so-successful-466022>
Gassman, O, 2013, Business Model Innovation. University of St.Gallen, viewed 25August 2017,
<https://www.youtube.com/watch?v=B4ZSGQW0UMI&feature=youtu.be>
Ghemawat, P, 2015, CAGE Framework for International Trade-Global Matters, Carlson School of
Management, viewed 25 August 2017, <https://www.youtube.com/watch?
v=7FpUJaG7uMk&feature=youtu.be>
Kim, L, 2017, 23 Crazy facts about Uber, the $51 Billion Startup, Inc, viewed 25 August 2017,
<https://www.inc.com/larry-kim/23-crazy-facts-about-uber-the-51-billion-startup-success.html>
Kryscynski, D, 2015, What is Strategy? , viewed 25 August 2017, <https://www.youtube.com/watch?
v=TD7WSLeQtVw&feature=youtu.be>
'Microsoft Corporation Industry Profile', 2015, Microsoft Corporation: Change in Direction Under
Satya Nadella, pp. 1-31.
'Microsoft Corporation', 2017, pp. 1-51.
Statista, 2017, Microsoft statistics and facts, viewed 25 August 2017,
<https://www.statista.com/topics/823/microsoft/>