Sunday, July 19, 2015

Microsoft's Coherence Premium Imbalance

After reading this week’s article on the Coherence Premium and the case studies on Southwest and GE, I couldn’t help but think of about Microsoft and its unsuccessful foray into the mobile phone market.  Microsoft, which dominates the personal and business software operating systems market, is a software juggernaut.  According to Forbes magazine, “It (Microsoft) has 95% market share in the productivity software market, 75% share in the operating system market and approximately 75% share in the server software market.”[i]  While sticking to what it knows best, Microsoft also has made attempts to build on its software operating name brand to launch a engine capability with Bing to compete with Google. While this may seem daunting, the move made sense considering that Bing would be the default search engine for all Microsoft software users.  Microsoft’s decision to create a search engine capability could be considered an “efficiency of scale value” within the four values created from coherence according to the “Coherence Premium” article we read this week.  Although creating a search engine may have been an effort to take on Google, Microsoft was still sticking to what they were good at (software development) and further developing features and capabilities associated with that software.  

On the flip side, in an effort to compete with Google (Android) and Apple (IPhone), who have come to dominate the mobile phone operating system market, Microsoft severely miscalculated its purchase of a struggling Nokia company.  To begin with, Microsoft was way too late in entering the market.  In addition, the decision appeared to have been made in haste as it was made by Steve Ballmer, the Microsoft CEO, just prior to his departure from the company.    In articles written at the time of purchase, statements were made by Microsoft advising the decision was made to purchase Nokia “ to accelerate its challenge to the dominance of Apple and Google.”[ii]  To me this statement makes be believe that Microsoft did not properly figure out how it would compete in the market, and instead made the decision more out of desperation.  I believe that Microsoft did not clearly understand the market.  I don’t think they knew what they were going to sell and to whom, what capabilities they needed and how they were going to get into the market.  Because the market was already dominated by Google and Apple, most App developers built their Apps with those operating systems in mind.  It also didn’t help that Microsoft Windows 8 PC software deployment was panned by many of its loyal customers.  Therefore tying Windows 8 software to their mobile phone deployment didn’t help with phone sales either. 

While Microsoft is not entirely getting out of the mobile market, today, we see Microsoft’s new CEO working towards getting Microsoft back into coherence.  Microsoft appears to be “divesting” itself of its Nokia gamble. Just this week, Microsoft CEO Sayta Nadella, announced another round of cuts to the company, most of which associated with its mobile hardware business.   






[i] An Overview Why Microsoft is worth $42 a share. (2013, January 9). Retrieved July 18, 2015, from http://www.forbes.com/sites/greatspeculations/2013/01/09/an-overview-why-microsofts-worth-42/

[ii] Williams, Christopher. “Microsoft buys Nokia mobile business to challenge Apple and Google.” (2013, September 9). Retrieved July 19m 2015, from http://www.telegraph.co.uk/technology/microsoft/10283087/Microsoft-buys-Nokia-mobile-business-to-challenge-Apple-and-Google.html

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