Porter's Five Forces and Porter's Generic Strategic Model

INTRODUCTION 1 TASK 11 Overview of the company1 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 RECOMMENDATION8 INTRODUCTION Strategic management is a kind of management process that helps organisation in using all resources that are available to them for achieving set goals and targets in speculated period of time. Strategic management includes setting of objectives, identifying andanalysing competitive environment, making of strategies

STRATEGIC
MANAGEMENT

Executive Summary
Microsoft is a leading company that develops and manufactures software for different
operating system that includes computes, mobile phones etc., Company's prime product is
Window and they have various versions which customers can avail according to their choices
and preferences. Porter's Five Forces and Porter's Generic Strategic model is included for having
knowledge about internal and external strengths of organisation. Further limitations and
contribution is mentioned through which company can know make changes and modifications.

Table of Contents
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

INTRODUCTION
Strategic management is a kind of management process that helps organisation in using
all resources that are available to them for achieving set goals and targets in speculated period of
time. Strategic management includes setting of objectives, identifying and analysing competitive
environment, making of strategies etc., in terms of business culture, strategic management
includes skills and competencies of workers, company's structure through which firm can attain
objectives (Wilson and Gilligan, 2012) Main motive of conducting this research is to bring some
kinds of modifications which company can implement for gaining competitive advancement in
market area. In this report, includes business policy, strategic management and philosophical
underpinning of a specific methodology in relation to public and private sector is mentioned. All
these above mentioned points are in context with Microsoft is a multinational technology
company and its headquarter is situated in Redmond, Washington. This firm basically develops
and manufactures computer software for operating system.
Therefore, the present report will help company in knowing competitive analysis with the
help of Porter's five forces. Apart from this, Porter's generic strategy is also explained along with
its strengths and weaknesses so that firm can use that for accomplishing all set targets and goals.
TASK 1
Overview of the company
Microsoft is a American brand company which develops, licences, sell and manufactures
computer software for personal computers, consumers electronics etc., Firm was established in
the year around 1975, by Pual Allen and Bill Gates and its headquarter is in Microsoft Redmond
campus, Redmond, Washington, U.S. Firstly, this company was constituted for developing and
selling BASIC interpreters than gradually for MS-DOS and finally for Microsoft Windows. In
the tear 1986, theyopened their market shares for public and subsequently a rise in its share price
can be seen. In its initial years of opening firm's estimated gross income was 12,000 millionaires
amongst software employees. Since then it is increasing. Company's best selling software is
Microsoft Window for operating system and gaming console as well.
According to a study in 2016, Microsoft's largest acquisitions was LinkedIn of
worth$26.2 billion followed by Skype of $8.5 billion in the year 2011 respectively. Although
company was in great boom but in the year 2015, firm majorly loss its business of operating
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system market to android. After getting replaced by Satya Nadella as the CEO in the year 2014,
he had majorly focussed on cloud computing because of which company's market share was at
highest peak as compared to shares that was in 1999.
Microsoft has key personalities who are working for them in order to provide maximum
benefits and these are John W. Thompson (Chairman), Brad Smith (President and CLO), Satya
Nadella (CEO), Bill Gates (Technical advisor). Products which company are selling Windows,
software for Xbox, mobile and many more. According to the survey in Microsoft's estimated,
revenue was US$89.95 billion and its operating income was US$ 22.27 billion respectively. In
this organisation around 124,000 number of employees are working who are assisting companies
in providing maximum benefits (Thrassou and et. al., 2012).
Strategic analysis plays a crucial role in and most of the companies adopt this in order to
analyse market situation and how firms can attain competitive benefits. It tells enterprise about
the internal as well as external strengths that are present in business environment. Further for
analysing competitive advancement Microsoft has adopted Porter's Five Force model and its is
helping the company in analysing various dimensions.
Porter's Five Force Model
Strategic management is used for formulating and implementing various strategies where
initiatives are being taken by top level management. Thus, it is made by considering all resources
that are available to them along with this external and internal environments are also determined.
Therefore, it can be said that strategic management gives overall direction to companies that
includes specific objectives and goals. Designing and development of policies are done in this so
that company can operate its business in a better manner.
Microsoft has adopted Porter's Five Force model and it is assisting company in
generating business strategies through which firm can achieve competitive advancement. It is
useful for understanding different kinds of factors as well as forces that are present in the
environment. For example: if an organisation wants to get into a strong position in a particular
time frame than through this model it can be achievable. Its framework includes certain steps in
which first step constitute collecting of information from different sources and than analysing
that with the help of diagrams and lastly formulation of strategies are done based on which
conclusion is drawn.
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It is determined as one of the powerful hence effective tool for evaluating and identifying
various competitive nature in market environment. As a result it helps companies in increasing
their profitability through applying potential strategies. Further it gives company with
opportunities in making some modifications so that firm can deliver commodities to its
customers according to the needs and wants of customers. Other than this, it is necessary that
company make strategies that are flexible in nature as a result it will assist firm in making
modification according to the situations that are present in market area. Thus, in context with
Microsoft, this model is helping company in making appropriate decision which they can
implement in future success (Line and Runyan, 2014). As a result firms is able to rectify their
strengths and weaknesses in providing long term benefits. Henceforth, the entire concept can be
understood with the help of Porter's Five Force Model that is explained below:
Competitive rivalry: This assist companies in knowing at what stage the firm is according
to current market scenario. In this competitive world it is required that enterprise, in order to
increase their market shares it is crucial that firm adopts aggressive market shares so that
company can get maximum profits. Thus, it assist them in identifying various kinds of threats
and issues that can create a problem in operating its functions.
In context with Microsoft they have quite a number of rival companies who are giving
them tough fight in sustaining in market position for a longer period of time and in good position
as well. Company have some of rival competitors that includes Apple (AAPL), Google
(GOOG), IBM and Oracle (ORCL). As Microsoft deals in vibrant sphere so they have some
other rival firms as well that includes Logitech, SAP and many more. Although people are
preferring Apple for but as these are expensive in nature because of which large number of
people are using Microsoft software for their operating systems. So, it can be said that Microsoft
company has managed to attract a ample number of customers towards their organisation as a
result an increase in company's revenues can be seen (Lee, K. C. and et. al., 2013).
Power of supplier: It is considered as one of the effective process as it assist companies
an perspective of increasing their prices. Thus, it can be said that suppliers have a strong
bargaining power which can be set by firms themselves. Company can sell their products at
higher prices or low rates depends upon market situation. Products that are manufactured by
Microsoft can be avail by customers through online and offline process. So, enterprise have a
great distribution channel and customers can purchase through any sources that are suitable to
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them. As Microsoft is a big company so they doesn't have a problem in switching towards
different market distribution channel if firm is not having benefits or getting appropriate
outcomes in return. Thus, through this step company is being able to analyse power of suppliers
in term of introducing pricing strategies in difficult circumstances.
Power of buyer: In this current market scenario, it is crucial that company knows
preferences and choices of consumers so they can have an option of buying from same
organisation. Thus, evaluation of power of buyer is important so as to know the impact of pricing
strategies upon clients. In terms of Microsoft they have proper information about customers in
accordance to its sizes and commodities that are required by them. This concept helps companies
in understanding the position that are given by consumers to them (MacMillan and Day, 2011).
In context with Microsoft, it comes amongst top most and it has expanded its business all over
the world. Company gets high number of orders which shows that power of buyers is low in
terms of prices and profits. In relation with consequences company must set a subsequent price
which customers can agree to pay as a result it will increase company's sales and profitability.
Threat of substitute: In this competitive world for a single product many substitutes are
available so, it gives a wider perspective to consumers. As a result customers can have many
choices from where they can purchase products according to their needs and wants. In terms of
Microsoft, in comparison to this Oracle is rival company for software who are selling the same
products to its customers at reasonable rates (Aghazadeh, 2015). So, it can be said that a certain
amount of threat is there for Microsoft if company doesn't make any changes in their strategies or
policy in terms of price and rates. For example: if an individual is not happy with the products
that are providing by company than they can switch to other for having better results.
Threat of new entry: It determines the concept of how easy it is for companies in
entering to the market area. There can be few barriers that can have an effect on business
operations if the firm is big. Thus, it can be evaluated that if a large number of companies
compete on the same field than there is a chance that profit and shares get decreased. In context
with Microsoft, example can be taken of a targeted place where organisation is looking forward
to expand its business, local companies and start ups of that place in same sector can put impact
on their profit ratios.
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Therefore, all these points that are mentioned above is assisting Microsoft in determining
competitive environment that is present at market area. As a result by considering all these
company is being able to make appropriate decision for their future proceedings.
Porter's Generic Model
Main purpose of applying this theory is to know internal and external strengths &
weaknesses. Along with this, it assist companies in grabbing attention of market share by
working on price strategies. Other major role of this model is to cut down the prices to minimum
that customers can agree to pay (Porter's Generic Strategic Model, 2018). Therefore, Porter's
Generic Strategic Model is adopted in order to know how company takes competitive advantage
while pursuing business operations. Further it assist companies in knowing the demands and
needs of customers as per changed locations and circumstances. Concept was given by Michael
Porter in the year 1980 and this is formulated in such a way that it can be applied in any
organisation whether they are small, medium or big. Focus strategies can further classified into
two variants i.e. cost and differentiation focus (Kashmiri and Mahajan, 2014) . With the help of
Porter's Five Force Model researcher has analysed that company stands in a good position at
market area because of which they are getting positive impacts from its customers. There are
basically three type of generic strategies which company can implement and these are explained
below:
Cost leadership strategy: Main purpose of adopting this strategy is to reduce the cost
price of commodities and for this company looks for providing discount offers to its consumers.
This is considered as a traditional method in order to achieve set targets and objective in given
period of time. It is applicable for the companies those who are working for upgrading their
standards in front of customers. Competitive advancement can be achieved by applying two
ways of cost leadership strategy (Kellezi, 2014) .
Cost leadership method helps company in enhancing number of profits by working on
different pricing strategies whether firm wants to raise prices or reduce the same as a result it can
be applied for increasing sales and profitability in speculated period of time. Changing in pricing
strategies can directly be linked with increase or decrease in sales and profitability. For example:
if company applies low rates of their products than an increase in sales can be seen and if it is not
done than people can shift to other substitutes for fulfilling their needs and demands.
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In context with Microsoft, they have implemented effective strategies because of which
company is gaining competitive advancement from market area. For this, many aspects have
contributed their part in implementing strategies in a proper manner and effective manner. Some
of the aspect that are given below are related to better conduction of business operations in terms
of Microsoft:
As company have a large amount of market shares and value because of which it is
helping firm in implementing latest tools and technologies for getting effective results in return.
Thus, for introducing effective price company has utilised all resources that are available to
them. Microsoft's distribution channel is very strong as company has its outlets in around all the
nations which is enabling them in providing different commodities to its end customers
(Robertson and Wardrop, 2012). Along with this, firm's low cost base has helped company in
operating their business in an effective manner as it has reduced labour cost. Raw materials and
facilities are available to enterprise at reduced cost which is aiding Microsoft in implementing
cost in other fields in which company is operating.
Major risk that are faced by firms is entry of new entrants with new and innovative ideas,
so, it is prime role of top authorities of Microsoft to make new and effective strategies for
increasing its sales and profitability.
Differentiation leadership strategy: This strategy assist companies in making their
commodities unique from others. For example: Microsoft is using different method of coding –
decoding for developing their software and it is helping them in making software that are fast
and doesn't have relevancy with other applications. Further differentiation strategy is applicable
for competitive or saturated customers who wants different products according to its needs and
wants. Thus, it includes designing, applying features so that company can enhance brand image.
Therefore, it plays a crucial role when company wants to establish themselves different from
others. In order to fulfil demands and wants Microsoft is taking feedbacks from intellectuals who
are using their software for their operating system.
As company is dealing with every aspect of products that are regarding to hardware,
software along with some different gadgets and technologies. Firm has implemented all kinds of
factors that can be helpful in implementing and introducing strategies in a n effective manner.
Some of the points that is making Microsoft different from other companies are given below;
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 Improvement in productivity has increased because of good research departments in
Microsoft, who are providing with all required information that can help them in
manufacturing goods in speculated period of time. Having eligible and excellent team is enabling them in making software that are best and
compatible in all kinds of computer devices and gadgets. Other than this, firm's
department of sales and marketing is assisting company in implementing various
strategies in order to increase its sales (Hollebeek, 2011).
Focus leadership strategy: This concept come into being when firm wants to deliver
their product to a particular or targeted market. For this, it is essential that company have have
proper knowledge about customer's choice and preferences so that relevant commodities can be
delivered to its end customers. Further the entire process can be classified into cost and
differentiation focus that is assisting firms in adopting specific strategies for gaining maximum
profits in return. This help enterprise in knowing the needs and wants of customers according to
the set targeted areas and segments.
Therefore, all the above mentioned strategies is assisting company in getting competitive
advancement and adopting strategies that can provide them maximum benefits.
Contribution and limitations of Porter's Five Forces and Porter's Generic Model
Porter's Five Forces: As it is mentioned above this kind of strategy is applied by most
of the organisation in order to know competition that are present in the market area. Some of the
contribution and limitations are mentioned below that are related to this model are explained:
Contribution:
 This is assisting companies in knowing at what position company is actually present so
that they can make strategies for improving the same. It enable firm in making comparison of prices that have been implemented by other rival
firms. As a result it provides with an insight whether firm will be able to attract a large
number of customers or not (Shank and Lyberger, 2014).
Limitations:
 This is applicable for small and simple market structure.
 Company most of the time tend to eliminate certain issues that are related to outside
strategies.
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Porter's Generic Model: It is incorporated when companies wants to know about the
internal strengths so that firm can analyse in sectors in which they are lacking behind.
Contribution:
 This model assist companies in identifying best possible strategies that can give firm
maximum benefits in return. It is providing opportunities through which Microsoft can evaluate needs and wants of
customers so that firm can manufacture goods accordingly (Smith, 2011).
Limitations:
 Company requires lot of resources in order to develop and implement effective strategies.
CONCLUSION
From the above report it has been concluded that company for increasing its sales and
revenues is adopting various kinds of marketing strategies like Porter's Five Force Model and
Porter's Generic Model. It is assisting firm in knowing internal and external strengths as well so
that enterprise can make modifications. Further in this cost leadership, focus leadership and
differentiation leadership strategy is included for having better understanding.
RECOMMENDATION
Form the points that are mentioned above it can be recommendation to companies that
they can make products with the help of different strategies where porter generic model will help
in attaining all goals and objectives in much effective and efficient manner. On the other hand, it
has also been located that firm can use different sorts of leadership as well as per requirements of
business. Through this, modifications can easily be made right on time.
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REFERENCES
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Online
Porter's Generic Strategic Model. 2018. [Online]. Available through.
<https://www.mindtools.com/pages/article/newSTR_82.htm>.
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