Porter's Five Forces and Generic Model Analysis

This assignment provides an analysis of Porter's Five Forces and Generic Model, highlighting their contributions and limitations. It uses a case study of Microsoft to demonstrate the application of these strategies and models. The report concludes by recommending that businesses make changes in strategies regularly to remain updated and provide services as per customer preferences.

STRATEGIC ANALYSIS

EXECUTIVE SUMMARY
Microsoft is one of the leading company and providing its services all over the world.
Mainly firm manufactures software for various operating systems like computers, mobile
phones, gaming consoles etc. Microsoft's prime product for which they work is Window
Software. In addition to this, different versions are also produced as per the choices of customers.
With the help of Porter's Five Forces and Porter's Generic Strategic model, proper knowledge of
internal and external environment is gained. Apart form this, limitations that are creating issues
in business operations is included so that company can do modifications accordingly.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Overview of the company......................................................................................................1
Porter's Five Force Model......................................................................................................2
Porter's Generic Model...........................................................................................................5
Contribution and limitations of Porter's Five Forces and Porter's Generic Model.................7
CONCLUSION................................................................................................................................8
RECOMMENDATION...................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Strategic management is considered as a process through which resources are identified
so that managers can utilise them for accomplishing its goal and objectives. Thus, it tends to
provide facilities through which, performance of a company can be improved so that competitive
advancement can be gained in a speculated time frame. Therefore, strategic management is a
continuous process which includes planning, monitoring and analysing of all resources in order
to meet goals and objectives (Aghazadeh, 2015). Purpose of conducting this research is to
evaluate some business ideas through which company can do changes for gaining competitive
advancement. Present report will focus on business policies, strategic management in context
with public and private sectors. Therefore, all the points that are mentioned above are in relation
with Microsoft, which is one of the renowned organisation in the world. Its headquarter is
situated in Redmond, Washington. Furthermore, in order to know about the competitive analysis
Porter's Five Force is being explained. In addition to this, Porter's Generic Strategy is included in
this report which will enable researcher in knowing strengths and weaknesses. As a result, can
achieve set goals and targets in a given period of time.
TASK 1
Overview of the company
Microsoft is famously known as a American brand company that deals in developing
software for computer, licences, gaming consoles etc. In the year 1975, organisation was formed
by two of the personalities i.e. Paul Allen and Bill Gates. During their initial year’s, company
was developing and selling BASIC Interpreters, later on started making MS-DOS and now
company is well known for delivering services Microsoft Windows (Famous and et al., 2017).
During the initial years of Microsoft company, their market share was low but gradually after
1986, when firm open their market share for public than in a short period of time its share price
was raised subsequently. Company's estimated gross income was around 12,000 million and
from then sit is increasing.
Microsoft have some of the key personality named Brad Smith (President and CLO),
Satya Nadella (CEO), Bill Gates (Technical advisor), John W. Thompson (Chairman) who are
giving their best so as to provide maximum benefits to the organisation. As per the survey
Company's estimated revenues was around UD $ 89.95 billion along with this its operating
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income nearby US $ 22.27 billion. Currently approximately 124,00 employees are working who
are performing their job in order to meet goals and objectives in a speculated time frame.
According to current market scenario, Microsoft is one of the leading firm in the world.
As per the study that was done in the year 2016, with the amount of $26.2 billion LinkedIn was
one of the largest acquisitions for Microsoft and later in the year 2011, Skype was having
acquisition of $8.5 billion (Hollebeek, 2011). But later on with the implementation of android in
the market area Microsoft faced some kind of complications and issues in increasing its sales and
profitability. In the year 2014, when Satya Nadella became CEO of Microsoft entire system has
changed as he implemented could computing and this is the reason of increase in the market
share of Microsoft and market share of the company raised to highest peak as compared with the
shares which firm was having in the year 1999.
Strategic analysis assist companies in evaluating market situation so that appropriate
strategies can be made in order to gain competitive advantages and benefits as well. With the
help of this, internal and external strengths of company can be analysed other than this, in order
to determine different dimensions Porter's Five Force model will be used.
Porter's Five Force Model
Strategic management is used by companies in order to formulate strategies which can be
further incorporated for executing its plan action in an appropriate manner. Thus, for making this
top level management determine all resources and factors so that a proper analysis of external as
well as internal environment is being done correctly (Kashmiri and Mahajan, 2014). In addition
to this, it includes the process of designing and development of policies so that firm can function
properly.
In context with Microsoft, they have incorporated Porter's Five Force Model which is
providing company with an overview of external and internal factors and further it is assisting
managers in making effective strategies and taking appropriate decisions as well. Therefore, it is
helpful and assist manager in knowing the various kinds of elements which are present in
environment and in future can have an effect on business operations. For example: Company can
use Porter's Five Force model if they want to gain success and sustain the better position at
market area. As it incorporates certain steps for evaluating business environment because in its
first step, information are gathered with the help of different sources later on evaluating collected
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data with the help of diagrams and at the end making of strategies, so as to executing action plan
through which a valid conclusion can be drawn.
Therefore, Porter's Five Force Model is one of the important tool that provides
information about the nature of market and assist managers in making potential strategies. Thus,
this is the reason why Microsoft is one of the renowned company in the world. Making strategies
is not the only task as action plan that are formulated must be flexible in nature so that changes
can be made with the changing scenario of market area (Lee and et. al., 2013). Apart from this, it
is assisting company in identifying its strengths and weaknesses on which firm can work and
gain long term benefits in return. Thus, Porter's Five Force Model and its factors are explained
below for better understanding:
Competitive Rivalry: Each company has its rival firms and these enterprise helps
organisation in knowing their position at market area. In order to sustain in the market area, it is
necessary that Microsoft adopts aggressive form of marketing so as to get competitive benefits.
As a result, it will assist firm in gaining maximum benefits. Hence, it is necessary that
organisation identify different kinds of threats and problems which can hinder the performance
of company in future. In relation with Microsoft, they have many rival companies who are giving
tough fight to them and it includes firms like Google, IBM, Apple, Oracle etc., services that are
provided by Microsoft are vibrant as compared with other competitive companies and this
includes Logitech, SAP etc., For example: In recent times people are preferring APPLE as
because of its brand name but products which are provided by them are costly and this is the
reason why large number of people are using Windows till now. Therefore, it can be said that
Microsoft through its products and services company is grabbing attention of maximum number
of people.
Power of Suppliers: The referred company Microsoft is having large number of suppliers
over the world; company sell its products via retailers, whole sellers etc. In order to produce its
products in effective manner, the brand also called raw materials from various suppliers. As if
these suppliers will increase their prices and low quality of raw materials; it turn outs reduction
in sales and profitability of the company. Bargaining power of Microsoft's supplier is moderate
because most of the business activities depends upon supply condition. For example: some of the
suppliers can make modification on the pricing strategy which can hamper company's cost and
further potential adjustment can be done. Thus, in terms of Microsoft they are as their suppliers
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are limited thus, it can work as a failure for their business operations if company doesn't get
appropriate materials.
Power of buyer: In this present era, it is essential for business organisations to grab
attention of large number of target audiences thus to obtain competitive position at marketplace.
Having broad client base may also affect adversely to a company as if all customers want low
prices and high quality products then companies will force to reduce the prices of their offerings.
In context of Microsoft, it is having vast range loyal customers thus bargaining power of
customers is also high. In order to attain and retain customers for long run, it is essential for
Microsoft to recognise customers' needs and produce products accordingly. In this case, power of
buyers is moderate as customers find it difficult in getting computer network solution which are
appropriate as per products provided by firm. Therefore, it can be a tendency that customers shift
to other products given by rival firms.
Threats of Substitutes: As competition in the market is increasing, so customers have
many substitutes products and in relation with consumers they have many choices while
purchasing goods and services. In terms of Microsoft, Oracle is the rival firm that develops
software and selling them at reasonable rates. Thus, their threat of substitution is low. Therefore,
for Microsoft, mentioned company can be one of the threat and to remain in the market at
superior position it is crucial that firm make changes in their strategies and must implement new
and innovative products on a regular basis. For example: Microsoft's credibility and market share
is high because of which to sustain in the market area for a longer period of time they are re-
launching their products on a regular basis.
Threat of new entry: With the change in course of time most of the companies are
establishing its business and coming up with new and innovative products (Line and Runyan,
2014). The reason behind less market share is that some companies are working on the same
field because of which shares are being distributed and decreased as well. For example: an
entrepreneur coming up with his/her new ideas of developing a software which cannot be hacked
than this can work as a threat for Microsoft. Like upgraded version of Apple OS at reasonable
rates with additional features.
Henceforth, Microsoft must determine points that are mentioned above so that they can
operate its business in a better and effective manner. As a result it will provide maximum
benefits and firm will sustain a better position at market area.
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Porter's Generic Model
Company mainly use this model if they want to know about internal and external
strengths & weaknesses. Main purpose of applying this theory is to pull attention of maximum
number of people by making modifications in pricing strategies. Concept of Porter's Generic
Model, was given by Michael Porter in around 1980, and all companies adopt this model for
gaining benefits and analysing competitive benefits. This model can be classified into three types
which are explained below for better understandings:
Cost Leadership Strategy: This kind of strategy is used by companies in order to
minimise the cost of the goods so that maximum number of people can be attracted through this.
Further, to increase its sales and profitability, company is providing gift vouchers and discount
coupons to its targeted customers. This process is determined as a traditional method for
obtaining set goals and objectives. Modifications in pricing strategy can be directly linked
between increase and decrease in sales and profitability. For example: if cost will rise, sales will
directly gets minimised and if prices will be low than an increase in sales can be seen
(MacMillan and Day, 2011). For example: Cloud infrastructure and management services of
Microsoft are more convenient and affordable service that has successfully entered and
dominated the markets along with Google and Apple.
In relation with Microsoft, as its market share is huge because of which it is enabling
firm in implementing latest tools and technologies in order to get appropriate outcomes. In
relation with Microsoft, they have a strong distribution channel throughout the globe. As a result
customers can purchase its commodities according to the choices and preferences of consumers.
Further more, raw materials that are available to the company are at low cost because of which
company can now apply these money in incorporating it in different fields. New entrants is
determined as one of the major threat for companies as fresh firms can sustaining a better
position by providing effective services and facilities to its customers.
Differentiation Leadership Strategy: This kind of strategy is incorporated by firms in
order to make its commodities different from one another in order to increase its sales and
profitability. For example: Microsoft while developing its software are using unique method of
coding and decoding which cannot be used by other company as it does not have any kind of
relevancy with other applications. In addition to this, company contains a monopoly of providing
gaming consoles which is grabbing attention of maximum number of people. Other than this,
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strategy which is used by companies for manufacturing goods for saturated and targeted
customers who have different demands for its products and commodities as it consist of elements
like designing, incorporating features through which company can improve its brand image.
Furthermore, Microsoft is taking feedbacks and reviews for the products that are provided by
company as a result, it is assisting firm in production goods as per the needs and wants of IT
solutions and company. There are some points which is making company different from other
are explained below:
 Microsoft has a good research department which is assisting firm in providing
appropriate data and other related information.
 An effective team is required in order to accomplish set targets and objectives in a given
period of time. For example: Microsoft has hired individuals who are eligible in
developing software which are congenial and as per the computer devices (McGrath and
et. al., 2016). In addition to this, marketing department of Microsoft is assisting managers in making
proper strategies so that sales and profitability of the company can be increased.
Focus Leadership Strategy: Under this, targeted market plays a crucial role as company
tend to produce goods that are as per the needs and wants of these consumers. Thus, it is crucial
that firms have proper knowledge about choices and preferences of customers according to the
goods which are needed. For example: As per the current scenario, people wants window
software that does not hang much so further Microsoft can develop the same for increasing its
sales and profitability.
Henceforth, above mentioned points must be considered by companies if they want to
sustain in the market for longer period of time and gaining competitive advancement as well.
Contribution and limitations of Porter's Five Forces and Porter's Generic Model
Porter's Five Force: This strategy is adopted by company in order to know competition
that are present in market area. As a result it assist firm in developing strategies and action plan
in a better manner. Although, it gives better results but it has both positive and limitations that
are given below and it has been explained for better understanding:
Contribution:
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 This is applicable in knowing how company is grooming whether it is getting positive
outcomes or negative results. Thus, it assist firm in making appropriate strategies for
taking business in forward direction. In addition to this, it help firm in doing comparison of prices that are applied by other
rival companies. Hence, it is provides with an overview that after applying strategies and
action plan company will get benefits or not.
Limitations:
 If the market structure is simple than this kind of strategy can be applicable. Firm in its maximum time company try to cope up with problems that are in relation with
outside market strategies (Uhl and Gollenia, 2016).
Porter's Generic Model: This is applicable in determining internal strengths which can
have an impact on business strategies. Other than this, it assist firm in analysing factors in which
company is lacking behind.
Contribution:
 This is helpful in identifying effective strategies through which company can gain
maximum benefits. In relation with Microsoft, it is assisting them in determining the internal factors that are
to be addressed so as to get better results.
Limitations:
 For implementing latest tools and technologies company requires a lot of resources which
can be one of the limitation for company.
CONCLUSION
From the above report it has been concluded that there are certain strategies and models
which company can incorporate for making strategies and action plan. Further, firm can use
Porter's Five Force and Porter's Generic Model as it will help company in analysing internal and
external strengths of companies. As a result through this, firm can do modifications in order to
gain better position at market area. Other than this, cost leadership, focus leadership and
differentiation leadership strategy is explain so as to understand the concept in a better manner.
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RECOMMENDATION
As per the points that are mentioned above it can be analysed that company should make
changes in strategies on a regular basis according to market scenario. Thus, it helps company in
remaining updated and providing services as per the choices and preferences of customers.
Further, while making strategies, firm should other models as well for formulating effective
action plan through which goals and objectives can be achieved in a limited time frame and in a
better manner as well. In addition to this, company should use different leadership styles for
performing their activities in a proper way.
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