Microsoft Value Chain Analysis
Microsoft value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business. Figure 1 below illustrates the essence of Microsoft value chain analysis.
Figure 1 Microsoft Value Chain Analysis
Microsoft Primary Activities
Microsoft contracts with multiple suppliers internationally, as illustrated in Figure 2 below. Accordingly, the company has to maintain highly complicated supply-chain operations without any disruptions. It is compulsory of all suppliers to adhere to Microsoft Supplier Code of Conduct and The Microsoft Supplier Requirements. The main sources of value for Microsoft inbound logistics include the economies of scale, presence of strategic relationships with suppliers and in-depth knowledge of supply-chain management practices due to selling relevant software i.e. Microsoft Dynamics AX.
Figure 2 Microsoft production supplier locations[1]
Microsoft Corporation business is divided into the following three operating segments:
1. Productivity and Business Processes. This segment comprises Microsoft products and services related to productivity, communication, and information services. The segment comprises a range of devices and platforms such as Office Commercial, Office Consumer LinkedIn and Dynamics.
2. Intelligent Cloud. This operating segment includes public, private, and hybrid server products and cloud services that can power modern business. Intelligent Cloud segment comprises server products such as SQL Server, Windows Server, Visual Studio, System Center, and related CALs, and Azure, as well as, Enterprise Services, such as Support Services and Microsoft Consulting Services.
3. More Personal Computing. This segment consists of products and services geared towards harmonizing the interests of end users, developers, and IT professionals across screens of all sizes.
Microsoft’s regional centre in Ireland supports the European, Middle Eastern, and African region; the centre in Singapore supports the Japan, India, Greater China, and Asia-Pacific region; and the centres in Fargo, North Dakota, Fort Lauderdale, Florida, Puerto Rico, Redmond, Washington, and Reno, Nevada support Latin America and North America[2]
Microsoft devices except phones are mainly manufactured by third-party contract manufacturers. Microsoft manufacturing plants are located all over the world ensuring proximity to suppliers at the same time reducing transportation costs and negative environmental impact. Some of the manufacturing plants are located in the poorest areas such as Brazil’s Manas and Mexico’s Reynosa, thus creating jobs for local people. Interestingly, unlike many other corporations of similar size, Microsoft does not provide detailed data about the numbers and other details of its manufacturing plants around the globe. Cost advantage through outsourcing can be specified as the main source of value in Microsoft operations.
Microsoft outbound logistics combines the following distribution channels:
1. Original Equipment Manufacturers (OEMs). OEMs serve as a vital distribution channel for Microsoft via pre-installing Microsoft software on new devices such as PCs, tablets, servers, smartphones, and other intelligent devices. These OEMs include Acer, ASUS, Dell, Fujitsu, Hewlett-Packard, Lenovo, Samsung, Toshiba, and with many regional and local OEMs.[3] Pre-installation of Windows operating system on computing devices represents the largest component of OEM distribution channel.
2. Distributors and resellers. Distributors and resellers of Microsoft products and services include retail outlets, such as Wal-Mart, Dixons, and Microsoft retail stores, as well as, license solutions partners (“LSPs”), web agencies, and developers and others.
3. Online sales. Microsoft provides online content services to consumers through Bing, MSN portals and channels, Office 365, Xbox Live, Outlook.com, OneDrive, Skype, and Windows Store. Additional range of services delivered by Microsoft online includes online advertising platform with offerings for advertisers and publishers, as well as Microsoft Developer Network subscription content and updates.
4. Microsoft Stores. There are 116 Microsoft stores worldwide: 106 stores in the USA, 8 stores in Canada, 1 store in Australia and 1 store in Puerto Rico. Similar to Apple Store, in Microsoft stores customers have an opportunity to use products helpful ‘technical advisers’ in stores are happy to assist.
The major source of value in Microsoft outbound logistics relates to effective use of multiple shipment channels in an integrated manner.
Brand marketing message is closely associated with the values of effectiveness, efficiency and convenience in dealing with a wide range of professional and personal tasks. Microsoft uses licensing method to sell its products and services and organizations can choose from the following forms of licensing depending on their size, scope of operations and resources:
- Enterprise Agreement Licensing
- Microsoft Product and Services Agreement Licensing
- Select Plus Licensing
- Open Licensing
Major sources of value creation for Microsoft marketing and sales activities include an effective engagement in viral marketing and the use of licensing sales method to decrease cost of sales to a considerable extent. Sales and marketing expenses increased USD2.0 billion or 13% in 2018 compared to the previous year, primarily due to LinkedIn expenses and investments in commercial sales capacity, offset in part by a decrease in Windows marketing expenses.[4]
Service primary activity within the framework of value chain analysis refers to support provided to customers after the sales. Microsoft attempts to maintain the highest level of customer services pre-purchase, during the purchase and after the purchase. Sophisticated online answer desk offers timely customer services in the areas of account and billing, technical support, setup and installation support and buying advice. Additionally, Microsoft offers support for businesses and IT professionals in terms of deriving the maximum benefits from their products and services.
Microsoft aims to support its customers in terms of online security. The company has an online security centre on its website and provides information about download security essentials. Moreover, also offers an online Malicious Software Removal Tool to customers as a part of its customer service program. The global technology company also has an online disability answer desk to support customers with disabilities.
Microsoft Corporation Report contains a full version of Microsoft value chain analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Ansoff Matrix and McKinsey 7S Model on Microsoft. Moreover, the report contains analyses of Microsoft leadership, business strategy, organizational structure and organizational culture. The report also comprises discussions of Microsoft marketing strategy, ecosystem and addresses issues of corporate social responsibility.
[1] Responsible Sourcing (2019) Microsoft Corporaton, Available at: https://www.microsoft.com/en-us/about/corporate-responsibility/responsible-sourcing
[2] Annual Report (2016) Microsoft Corporation
[3] Annual Report (2018) Microsoft Corporation
[4] Annual Report (2018) Microsoft Corporation