The following factors intensify the level of rivalry in the industry:ġ. Rivalry among existing firms is fierce in technology and consumer electronics industry. Rivalry among existing firms in Microsoft Porter’s Five Forces Analysis
For Microsoft, the cost of supplies relative to selling price of its products is low and this can be highlighted as another factor that decreases supplier bargaining power. Cost of supplies relative to selling price of products. Such a situation has an evident adverse impact on supplier bargaining power.ģ. The multinational technology company can replace the majority of its suppliers for little or no cost for the business. There are large numbers of suppliers around the globe and Microsoft is the biggest customer in terms of purchase volume for the majority of its suppliers.Ģ. The following set of factors play an important role in the formation of supplier bargaining power:ġ. At the same time, there is a small number of suppliers such as Dell that have greater bargaining power compared to other suppliers mainly due to the unique nature of their products and services. For example, as part of its CSR initiatives Microsoft started requiring its US suppliers with more than 50 employees to to offer a minimum of 12 weeks of paid parental leave at up to USD1,000 per week. The technology giant exercises its bargaining power over suppliers extensively to secure low prices and to ensure supplier commitment to other requirements. Although, there is generally low buyer propensity to choose substitute products and services as discussed above, the absence of switching costs to substitutes may increase their threat to a certain extent.īargaining power of suppliers in Microsoft Porter’s Five Forces Analysisīargaining power of Microsoft suppliers is low. Absence of switching costs to substitutes. This is because according to its mission ‘to empower every person and every organization on the planet to achieve more’, Microsoft products and services are highly convenient to use.ģ. The level of buyer propensity to choose substitute products or services to Microsoft’s products and services can be assessed as low. Indirect substitution for Microsoft gaming and recreation products, on the other hand, include but not limited to music, movies, sports, spending time with friends and family members etc.Ģ. Indirect substitution for Microsoft products and services belonging to productivity and business processes segment include a wide range of stationary products, planners and organizers.
There is no direct substitution for these products and services, however, indirect substitution exists.
THREAT OF NEW ENTRANTS PERSONAL COMPUTER INDUSTRY SOFTWARE
The company also designs and sells hardware including PCs, tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories.Īdditionally, Microsoft offers a wide range of software applications and cloud-based computing services such as Bing, Microsoft Azure, Microsoft Dynamics CRM Online, Microsoft Office 365, OneDrive, Skype, Xbox Live, and Yammer. Range of products offered by Microsoft include operating systems for computing devices, servers, phones, and other intelligent devices server applications for distributed computing environments productivity applications business solution applications desktop and server management tools software development tools video games and online advertising. The following factors determine the level of threat of substitute products or services for the multinational technology company:ġ. Threat of substitute products or services for Microsoft is low.
Threat of substitute products or services in Microsoft Porter’s Five Forces Analysis Microsoft Porter’s Five Forces are illustrated in figure below: Porter’s Five Forces analytical framework developed by Michael Porter (1979) represents five individual forces that shape an overall extent of competition in the industry.