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Commodity Hardware?: Understanding the entry of Microsoft an

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Cristina Martija-Harris

on 15 October 2014

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Transcript of Commodity Hardware?: Understanding the entry of Microsoft an

Embracing Vertical Integration
Comparing Integration Strategies
2011, Google purchases Motorola for $12.5 Billion
Loyalty to android
Motorola’s extensive patent portfolio
Ability to tightly integrate software and hardware the way they want
Honeycomb AKA Android 3.0

Surface tablet industry focus
Trying to follow behind Apple’s iPad
Key focus will be Window 8 functionality and price
2014, Buys Nokia for $7.2 Billion
Biggest seller of windows phones
New Windows 8.1 phones come with a personal digital assistant called Cortana
More personable and capable of learning more about you than Siri or Google

Company Background
Vertical Integration
Works Cited:
Strategic Management; Competitiveness and Globalization
http://customnation.com/the-rise-and-fall-of-dell-commodities-and-customization/ and http://gigaom.com/2011/08/17/dell-is-stuck-between-an-apple-and-a-hard-place/
http://appleinsider.com/articles/13/09/07/the-apple-era-begins-as-microsoft-google-shift- to-a-hardware-centric-model
http://www.cultofandroid.com/22969/why-google-and-microsoft-are-following-apple- into-the-hardware-game/
http://pando.com/2013/05/16/how-microsoft-google-and-square-use-hardware-to-market- their-software-and-services/
http://www.zdnet.com/apple-google-microsoft-where-does-the-money-come-from- 7000026043/

Commodity Hardware? : Understanding the entry of Microsoft and Google into Hardware
Christine Connors, Jay Kwon, Haley Lynn, Cristina Martija-Harris, Wade Rogerson, Morgan Spencer, and Daniel Wenker

Founded April 4, 1975 by Bill Gates and Paul Allen
Ranked 34 on the Fortune 500 (2014)
2013: $22 billion in profits

Founded September 4, 1998
Ranked 46 on the Fortune 500 (2014)
2013: $13 billion in profits
Original Products
Competes with Apple's iPad and other tablets
Control over quality, hardware, software, and total profit
Acquisition of Nokia
Design everything about mobile products
Created a "Windows phone"

Made solely by Google
Runs on Google's "chrome" operating system
Nexus Product line
Google has entered the mobile phone and tablet market, and not just as an operating system
Operating system can reach consumers in a different form
• Microsoft currently holds more power as far as vertical integration is concerned

• Although both Google and Microsoft have made changes to remain relevant in a market dominated by innovative software, Microsoft has had the most success pairing desirable software with their own hardware (ex. Windows Phone)

• Google does not have the historical success that Microsoft has making it harder for them to produce products that integrate software and hardware (Chromebook Laptop)

• Although Microsoft and Google face similar market barriers, Microsoft has the historical success and consumer awareness to develop products quickly and compete with industry leaders Apple and Samsung


Strategic Management: Competitiveness & Globalization

states that vertical integration exists when a company produces its own inputs or owns its own source of output distribution, meaning the company owns its supply chain

Microsoft Windows
A series of graphical interface operating systems developed, marketed, and sold by Microsoft.
Microsoft Office
Office suite of desktop applications, servers, and services for Windows and OS X operating systems
Google Search
Google Analytics
Google Apps
Google Docs
Google Chrome
Freeware web browser

Setting the Stage | 1990’s -1998

• Microsoft dominated the Tech Industry as a monopoly

• Prevented software alternatives while taking advantage of hardware partners

• Competitors and Buyers both believed an Integrated PC would not survive without Windows

Shifting the Market | 1998-2003

• Apple developed the Newton Computer that operated under Mac OS

• Steve Jobs had decided to create innovative products that packaged Hardware/Software

• Products such as the iPod directly competed with Microsoft and ultimately won over consumers

Competitive Strategic Situation
Reacting to a New Market | 2008-2013

• Demand for Desktop PC have been negatively impacted from Smartphones/Tablets

• Software has slowly been pushed into every aspect of our lives as consumers

• Google and Microsoft both acquired Motorola and Nokia in hope of remaining relevant in a software focused industry

Strategic Focus | Present

• Microsoft and Google must use their hardware as an advertisement for software dependent products such as smartphones and tablets

• Competing firms should began developing cutting edge software that requires firm specific hardware

Competitive Strategic Situation
Performance Results from Integrating Hardware
Performance High was best held with production of Xbox ($1.2 billion)
Performance Low was with the failed KIN music player
Introduced Slate, beating iPad into market, but market failure
In 2014 Surface revenues more than doubled, increasing to $893 million from $400 million in the beginning of the year.
Microsoft's entire corporate culture is built around selling Window Office licenses to businesses. They've done that relentlessly for decades, and they've been extremely successful at it.
Hardware sales produced a 14% growth in total revenues ($24.51 billion)
As a result, revenue for hardware devices was up $1.9 billion or 68% to $4.7 billion.
Flopped HTC-built Nexus One in 2010
Failed Galaxy Nexus
Stopped development of profitless phone, Android and dedicated performance to Android tablets, Honeycomb and ended up in “spectacular failure”
90% of revenue comes from websites and advertising, leaving hardware with 10%
"If Google and Microsoft want to catch up to Apple’s profits, they’re going to have to start operating more like them and offer completely integrated products"
Full transcript