Competitive Strategy Report: Comparative Analysis of Microsoft & Nike

This report provides a comprehensive analysis of the competitive strategies employed by Microsoft and Nike, two market leaders in their respective industries. The report delves into the core concepts of competitive strategy, including cost and differentiation advantages, and examines how both companies leverage these to gain a competitive edge. It explores Microsoft's cost advantages in its desktop operating system and its differentiation through the Microsoft Office Suite, as well as its adaptation of a 'freemium' business model. The analysis extends to Nike's strategic marketing, brand recognition, and value chain, highlighting its focus on innovation, direct-to-consumer strategies, and sustainable manufacturing practices. The CAGE framework is also applied to understand how both companies navigate cultural, political, geographic, and economic differences. The report concludes by emphasizing the importance of competitive strategy in achieving market leadership and sustainable success, and the strategies employed by Microsoft and Nike in their respective industries.

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

Competitive strategy 2
Executive Summary
Competitive strategy can be defined as the plan that is long-term that seeks to gain an
advantage that is competitive over its competitor. The strategy aims to generate returns on
investment that are superior in the industry and thus position the firm as being dominant. The
strategy is derived after evaluating the internal and external strengths of the firm. The main focus
on strategy is on leadership and cost.
Microsoft and Nike have consistently shown performance results that have positioned
them to be market leaders in their sectors and industry. An analysis of each firm shows that the
use of different approaches of competitive strategy have resulted in positive outcomes for the
firms. Some of the tools use by both firms is to use advantages in cost and differentiation in
order to solidify their market share and dominance.
This presentation introduces the background of each company and the reasons as why
they are considered as being successful. Specific reasons with regards to theory and practice
further buttress the reasons the reasons for their success. Each company exhibits unique value
propositions, and strengths through the strategy approach that is taken.

Competitive strategy 3
Table of Contents
Executive Summary.........................................................................................................................2
COMPETITIVE STRATEGY.........................................................................................................4
Microsoft-Introduction................................................................................................................4
Practical source of excellence......................................................................................................4
Cost advantage.........................................................................................................................4
Differentiation advantage........................................................................................................4
CAGE distance framework......................................................................................................5
Business Model Innovation.....................................................................................................5
Introduction-Nike........................................................................................................................5
Practical cause of excellence.......................................................................................................6
Business model innovation......................................................................................................6
Value chain..............................................................................................................................6
CAGE framework....................................................................................................................7
Conclusion...................................................................................................................................7
References....................................................................................................................................8

Competitive strategy 4
COMPETITIVE STRATEGY
Microsoft-Introduction
Microsoft is currently the largest software maker globally and has been posting consistent
profits yearly. It commands 90% of the Operating System for desktops around the world. It
posted revenues of more than $78 billion with a profit margin of 28% (Statista 2017). Its
consistency in innovation over a period of 39 years is testimony of a culture of organizational
excellence that is founded on an ethical business model. Having a concise CSR approach as a
responsible corporate citizen, the company operates sustainably with social and environment
considerations at its core. The business model rests on licensing of its software to businesses
through enterprise agreement contracts.
Practical source of excellence
Cost advantage- Cost advantage can be defined as the cost of production for a firm
that is lower than its competitor and therefore gives it an advantage. Microsoft enjoys an
advantage of cost for its desktop operating software which is used globally (Damodaran 2012).
The volumes produced help to push down the cost of production making it difficult for new
entrants to compete. Economies of learning translate into improved organizational dexterity and
coordination for its global operations. Maximum capacity utilization as a driver of advantages of
cost push down the costs associated with installing and closing capacity for the company.
Differentiation advantage- This can be defined as the creation of services or goods
that are superior than that of the competitor and therefore avails the advantage of being different.
Microsoft has managed to maintain an advantage over its competitors with its Office Suite that
offers unmatched services. Users of different operating systems such as Mac and Linux still use

Competitive strategy 5
Microsoft Office as a separate application (Satell 2013).Its ease of use and versatility for both
home and office applications makes it different from other similar software.
CAGE distance framework- This framework is founded on Cultural, Political,
Geographic and Economic differences between nations that impact business entities. Microsoft
has been able to overcome the distance of differences by offering products with universal appeal
that cuts across cultures, land boundaries and economies. The Microsoft Office Suite has
universal application for home and office use despite the above differences (Microsoft
Corporation 2017). Another product is the Xbo that crosses boundaries of economics such as
bilateral and multilateral arrangements.
Business Model Innovation- The company has adopted a new business model based
on innovating a new approach. Microsoft has relied on its licensing model of its products to
generate revenue over the years. This is changing with a new model that is known as “freemium”
( Microsoft Corporation Industry Profile 2015). This model moves beyond free trials to a tier on
free offering for some of its products. Once the pool of users has grown, revenue will be
generated by increased engagement that will be volume based. This transition to a new business
model is to ensure that revenues and profit in the long-term are maintained. This transition will
ensure market relevance in the face of changing market dynamics in the technology sector.
Introduction-Nike
Nike is the leading sports footwear and apparel globally with a market share of 22%.
Income revenue for 2016 stood at $32 billion which was due to growth in every geographical
market (Nike 2017). The brand has been in operation for more than forty years and has been
leading through innovation in the sports apparel industry. Through sustainable manufacturing
that empowers local communities where it operates, Nike has shown leadership as a corporate

Competitive strategy 6
citizen. Environmental stewardship has resulted in factory scrap being reused to manufacture
premium apparel and footwear. Strong brand recognition has also contributed to the success of
Nike with its distinctive logo and use of brand ambassadors to drive growth.
Practical cause of excellence
Strategic Marketing- Strategic marketing is the way a firm leverage on its core strengths
in order to differentiate itself from its competitors. Nike uses two distinct forms of marketing that
contributes to its strategic approach. The firm focuses on the high end in its market position and
pricing strategy that is buttressed by products which are unique to offer a better value proposition
for the customer. Nike (2015) states that the company competes competitively through its direct-
to-consumer strategy that rests on the pillars of innovation, speed and direct connection with the
end consumer.
Business model innovation- the firm has consistently modeled its business with
strong brand recognition that uses brand ambassadors. Starting with Michael Jordan, the
company has become synonymous with leading sports stars and this helps to reinforce the
positioning of being associated with success and industry leader (Matt Dom et al. 2016). The
firm has also partnered with other strategic partners such as Apple to innovate new sports
technologies that are wearables such as the Apple Watch Nike+ (Apple 2016). Nike leverages
on the social and marketing capital of Apple to drive growth in sports wearables.
Value chain- Value chain can be defined as the processes that are used by a firm in
order to add value to its products or service. The firm leverages its core strengths in its primary
and secondary activities of manufacturing. It exercises strong control over its global channels of
distribution in order not to dilute brand recognition and premiums. In its secondary activity of
procurement, it maintains relations which are progressive and sustainable with its manufacturers.

Competitive strategy 7
The innovative Flyknit technology ensures that wastage in the designing stage reduces wastage
by 60% which translates to savings on cost of production (Nike 2015). The firm ensures
sustainability by engaging manufacturing contractors who are compliant with labour and
environmental industry best practices.
CAGE framework- Nike uses a strategy that seeks to maintain brand premium in every
market where it operates. While factoring in the economic distance between the different
markets, the firm sets prices that reflect the incomes of its target audience in each geographic
market. The prices offered are still well above average in order to maintain the premium attached
to the brand. This ensures that there is growth of revenue despite the different markets differing
in incomes. It is also a key growth factor for emerging markets such as China which are forecast
to be the major revenue driver in the future.
Conclusion
Competitive strategy is important in positioning companies and firms to market
leadership and dominance. Success which is sustainable is also as the result of embracing
competitive strategies in a business entity. Advantages in cost, value addition in supply chain are
some of the approaches that can be employed. Positioning on brand recognition and leveraging
the CAGE framework all contribute in achieving competitive advantages in the industry of
operation. Microsoft and Nike have used the above strategies in achieving success in their
respective industries.

Competitive strategy 8
References
Apple, 2016, Apple & Nike launch the perfect running partner, Apple watch Nike+, viewed 18
August, https://www.apple.com/newsroom/2016/09/apple-nike-launch-apple-watch-nike/
Damodaran, A, 2012, Investment valuation: tools and techniques for determining the value of
any asset, New Jersey: Wiley.
Mat Dom, SS, Ramli, Hb, Audrey Lim Li, C, & Tan Tze, F 2016, 'DETERMINANTS OF THE
EFFECTIVENESS OF CELEBRITY ENDORSEMENT IN ADVERTISEMENT', Journal of
Developing Areas, vol. 50, no. 5, pp. 525-535.
'Microsoft Corporation Industry Profile', 2015, Microsoft Corporation: Change in Direction
Under Satya Nadella, pp. 1-31.
'Microsoft Corporation', 2017, pp. 1-51.
Nike, 2015, Nike, Inc announces new consumer direct offense: a faster pipeline to serve
consumers personally, at scale, viewed 18 August 2017, < http://news.nike.com/news/nike-
consumer-direct-offense>
Nike, 2017, Nike, Inc reports fiscal 2017 fourth quarter and full year results, viewed 18 August
2017, http://news.nike.com/news/nike-inc-reports-fiscal-2017-fourth-quarter-and-full-year-
results
Satell, G, 2013, The secret of Microsoft’s success (and some lessons for Apple), Forbes, viewed
18 August 2017, https://www.forbes.com/sites/gregsatell/2013/04/15/the-secret-of-microsofts-
success-and-some-lessons-for-apple/#3e2489f21587
Statista, 2017, Microsoft statistics and facts, viewed 18 August 2017,
https://www.statista.com/topics/823/microsoft/