Porter’s Five Forces Analysis of Microsoft 

Microsoft is a tech giant American multinational corporation. Paul Allen and Bill Gates founded the Software and Operating System Company in 1975. Today, we’ll discuss Porter’s five forces analysis of Microsoft; bargaining power of suppliers and buyers; threat of new entrants and substitutes; and competitive rivalry as competitive forces in strategic management.

Porter’s five forces analysis of Microsoft would analyze the bargaining power of suppliers and buyers; threat of new entrants and substitutes; and competitive rivalry as competitive forces in strategic management. Here’s Microsoft Porter’s five forces analysis of software, operation systems, and Tech Companies as follows;  

Porter’s Five Forces Analysis of Microsoft 

Let’s discuss Porter’s five forces analysis of Microsoft as competitive forces in strategic management; they’re as follows;

Bargaining Power of Suppliers in Microsoft

The bargaining power of suppliers is Higher in the software and tech industry as competitive forces in strategic management. The key suppliers of Microsoft are as follows;

• Xbox Gaming Consoles
• Semiconductors
• Nvidia
• AMD
• Intel
• Cloud service-providing firms
• Software vendors
• Hardware components manufacturing companies

Some of the main factors impacting the bargaining power of suppliers in Microsoft Porter’s five forces analysis of software and tech industry are as follows;

I-Better Supplier Relationship

Microsoft has developed better relationships with its software and hardware component manufacturing company suppliers. It creates a win-win situation for both partners; MS receives well-assembled components suitable for its operating system and software. Suppliers would partner up with the tech giant company and receive orders in the long term.

II-Standardization

Microsoft is one of the world’s five top tech companies and the brand has established a global influence, including setting up industry standardization. The industry standardization for suppliers helps the company to easily switch from one supplier to another without incurring a lot of costs.

III-Backward Integration

Backward integration is when the retail service company acquires the suppliers and manufacturing to have complete control over the service production. Microsoft acquired Skype, Xbox network, and gaming network to have complete control over the end consumer product or service.

Bargaining Power of Buyers in Microsoft

The bargaining power of Buyers is lower for individual customers and higher for large enterprises that have mega orders as competitive forces in strategic management. Some of the main factors impacting the bargaining power of buyers in the Microsoft Five Forces analysis of the software and tech industry are as follows;

I-Long Term Contracts

Microsoft focuses on building long-term contracts with large enterprises to develop a better relationship with its industry clients. The big tech companies place mega orders and they are in a better position to decide the terms and conditions than any individual customer or user.

II-Additional Value

The focus of Microsoft should be on including any additional value for customers and clients along with the main product or service. It could be in the form of customer service, discount, free service, or something; it helps the company gain a competitive edge in the software market.

III-Unique & Differentiation

Microsoft has always differentiated its products, services, and OS completely different from its competitors. In fact, the tech company is the pioneer in the operating system market. The company should keep maintaining the unique and differentiated factor from its customers; it would help the tech brand gain a competitive edge in the market.

Threat of New Entrants to Microsoft

The threat of new entrants is Higher in the software and tech industry and Lower for individual startups as competitive forces in strategic management. Some of the main factors impacting the threat of new entrants in the tech industry and Microsoft five forces analysis of software and tech business are as follows;

I-High Capital & Branding Cost

Microsoft is worth over a trillion dollars and has been operating its business in the tech industry for the past four decades. The company has established a strong global influence; trust and confidence of customers worldwide; and invests a significant amount of resources in marketing and branding.

Collectively, all these factors make it difficult for any tech company or individual startup to defeat Microsoft. They could decrease the market share of the company, but they can’t win the market share.

II-Patents and Proprietary

Microsoft has earned patents and proprietary rights for its wide range of products and services. They help the company to protect its intellectual properties and strengthen its position in the market.

Threat of Substitutes to Microsoft

The threat of new substitutes is Higher for individual firms and lower for large enterprises as competitive forces in strategic management. Google Docs and iWork Suit are the main substitute products and services. However, some of the main factors impacting the threat of substitutes in the tech industry and Microsoft five forces analysis of software and tech business are as follows;

I-Unique Features & Pricing

The focus of Microsoft is always to add unique and differentiated features to its products and services to attract the attention of customers. The tech giant company offers its service at a competitive price, rather than making it unaffordable for individual customers. However, the company charges high prices from the big companies for the customized and personalized service. All these approaches help the company to decrease the substitution threat.

II-Portfolio Expansion

Instead of relying on products or services; Microsoft has diversified and expanded its product portfolio to a great extent. It helps the company to decrease the risk factor and reliance on one product or service as a main source of income. However, it also allows the company to decrease the substitution threat. 

III-Proprietary Technology

Microsoft invests a significant amount of capital resources in research and development for the development of proprietary technology that no other could copy and counterfeit. The company has successfully done so with its operating system and software services.

Competitive Rivalry with Microsoft

The competitive rivalry among the tech, software, and operating system brands is very high in the tech industry as competitive forces in strategic management. Some of the main factors impacting competitive rivalry in the Microsoft Five Forces analysis of software and tech business are as follows;

I-M&A and Strategic Alliances

Mergers and acquisitions and building strategic alliances are great strategies to fight off potential competitors. In order to decrease the competition, Microsoft bought Skype, LinkedIn, Xbox, and many other tech services and companies to decrease the risk factor and diversify its portfolio.

Conclusion: Microsoft Porter’s Five Forces Analysis |Microsoft Five Forces Analysis 

After an in-depth study of Porter’s five forces analysis of Microsoft; we have realized that Microsoft is the world’s leading tech giant company. If you are learning about Microsoft five forces analysis of software and tech companies; then you should keep in mind the abovementioned bargaining power of suppliers and buyers; threat of new entrants and substitutes; and competitive rivalry as competitive forces in strategic management.