Custom Writing Essay Service Paper on Microsoft Company

Microsoft Company

                                                           Section 1 Introduction             

Current Information on Your Company

With yearly revenues of more than $70 billion (Microsoft, 2014), Microsoft is more than just the biggest software company in the globe; the business has become part of the global culture. Under the leadership of Bill Gates, Microsoft has been largely successful in delivering at least one of its product offerings on each personal computer across the globe. Through its market leadership, Microsoft is considered a standard setter in the computer industry.  Microsoft was created on September 22, 1993. Microsoft’s core business is the development and licensing of various software products and services. Moreover, the business sells supporting services for various software products. In addition, Microsoft is involved in the designing and selling of hardware and also carries out online advertisement for clients. The company`s operations are grouped into five major divisions that include windows division, entertainment and devices division, server and tools division, Microsoft business division, and online services division (Reuters, 2014). Some of Microsoft’s product offerings include personal computer, phones, server applications, servers, and other smart devices (Reuter, 2014). Other products include video games, Xbox 360 hardware, server and desktop management tools and business solution applications. The company is also involved in cloud computing solutions. Microsoft`s cloud revenues mainly come from promotions and user fees. Some of its cloud computing offerings includes Windows Live Essentials, Microsoft Office 365, Xbox Live service, Azure, and online CRM. In 2014, the company has acquired several third party companies and partnered with several others. In February 2014, it purchased a stake in Foursquare Labs Inc. In May 2014 the company acquired GreenButton, followed by its acquisition of Syntaxtree SARL in July 2014. In the same month, it acquired InMage Systems Inc. (Reuter, 2014).

Headquarters, CEO, Sales, % of US Market Share

The corporation has its headquarters in Redmond, Washington, United States. The present CEO is Satyanarayana Nadella. He became Microsoft`s CEO on 4th February 2014 after Ballmer`s exit. In terms of the company`s latest financial performance, In 2013, the company`s total revenues reached $86 billion, representing an increase of $9.0 billion (12%) over its 2012 revenues. This indicates that the company`s commercial and consumer business segments are growing. Growth was particular high from its Xbox Platform, Commercial Cloud, and server products. Its commercial cloud revenues increased two fold, an indication that many more customers are subscribing to its cloud offerings. Similarly, for 2014, the company`s gross margin increased by 4% ($2.3 billion) to reach $59 billion compared to the 2013 figure of $57 billion. Other than the impressive performance, the company`s operating costs are also increasing. The increase in cost of revenue for 2013 is primarily attributed to the high costs of maintaining data centers, acquisitions, and the increase in its marketing and sales expenses (Microsoft, 2014).

            In terms of its market share, Microsoft offers different products and services. Therefore, the company has different market shares in the U.S. for its different products.  For smartphones, Microsoft`s market share as at July 2014 stood at 3.6% (Frank, 2014). Similarly, for the operating system market, which is Microsoft`s most popular product offering, Microsoft`s Windows OS has a total market share of 91.1%. Out of this, windows 7 accounts for 50.1%, Windows XP 25.3%, Windows 8.1 6.4%, Windows 8-6.3%, Windows Vista 2.9%, Windows NT-0.08% and Windows 2000-0.03% (Goldsborough, 2014).

Comment off of the Value Line Report

For 2014, Microsoft`s stocks have significantly improved. Although Microsoft`s stock prices are still low, a look at the Value Line Report (2014) stock chart indicates that the company`s stock has reached 52-week high. Despite the impressive performance, Microsoft`s stock is still ranked four, which means it is below average and is not recommended for short-term investors. Microsoft has evolved significantly over the years. Its commercial environment now generates the largest percentage of its revenues (57%) and the consumer and devices segment is the second largest in terms of revenues (43%). Based on the Value Line Report (2014), the company`s market capitalization stood at $392 billion, making it one of the largest corporations in the world, and this has given it a competitive edge over its competitors. Similarly, the company`s debt level is manageable, accounting for only 17% of Microsoft`s capital. In addition, the company ended its 2013/2014 fiscal year with approximately $90 billion in cash reserves. This level of liquidity opens more opportunities for the company and gives Microsoft more flexibility in making strategic moves that its competitors cannot undertake. In summary, based on the Microsoft`s value line report, its current stock price is unfavorable. However, the company has strong fundamentals that will likely result in the increase in its stock prices (Value Line Report, 2014).

Insert a 5 Year Stock Chart, Compare Stock Chart vs. SP 500

Source: Microsoft (2014).

From the chart, it is evident that Microsoft`s stock over the five years ending 2014 has performed poorly compared to both the S&P 500 and the NASDAQ.

Briefly History

            Microsoft history dates back to 1975 when Gates dropped out of college and together with his associate Paul Allen they designed the first programming code for a microcomputer owned by Altair 8800. By 1979, they were making sales in excess of $ 1million prompting them to relocate the company from New Mexico to Washington. In 1980, Gates recruited a former college classmate Steve Ballmer to be the company`s manager. In 1981, the company released its first operating system- Microsoft Disk Operating System (MS-DOS) for IBM PCs. Two years later, the company announced its new operating system Windows. After two years of product development, “Windows 1.0” began selling in 1985. In 1986, the company relocated its headquarters Redmond, Washington, and then it went public with its shares going at $21 per share(Reuters, 2014). In 1987, the company produced Windows 2.0, and by 1988, Microsoft had become the biggest computer software company in the world. In 1990 the company developed and released windows 3.0, followed by Windows 95 in 1995. Sales for Windows 95 exceeded 1 million in just four days. With the emergence of the internet, in 1995 the company developed its web browser- Internet Explorer. In 1998, the company released its first operating system targeted for consumers (Windows 98). In 2000, Ballmer took over as the CEO replacing Gates. In 2005, the companyreleased Xbox 360. In 2007 the company released Windows Vista, followed by the launch of its search engine Bing in 2009 to challenge Google`s dominance (Musolf, 2009). In 2010, the company released Windows Phone OS for mobile phones, followed by its Windows 8 OS for in touch devices 2012. In 2014, the Ballmer is replaced by Nadella as the CEO, making him the third Microsoft’s CEO (Reuters, 2014).

Section 2 Global Operations Strategy

Define Operations Strategy in Tour Text Book and Apply to Your Company

Global strategy can be defined as any strategy that a company uses outside its home country (Peng, 2014). Globalization of businesses has necessitated the need for a global strategy. Microsoft is a global corporation. By its very nature, information technology and software are global industries, and so is Microsoft Corporation. The company has been a major player on the global scene from 1982, when it opened its first office in the UK. In 1985, it constructed a production facility in Ireland. By June 2002, 34% of Microsoft`s staff were working outside the U.S., and 27% of its revenues came from the international segment. Presently, the company has approximately 214offices in different parts of the world, with a total global workforce of 126,945 people. The company`s global strategy can be described as transnational in that uses both global integration and local responsiveness. The company responds to the unique needs of the markets where it operates by including in their products different language versions. For example, for windows, users have the option of selecting their preferred language at the time of installation. Similarly, its MS office program permits users characters from one language to another. For example, it is possible to change from traditional to simplified Chinese. Similarly, the company manages its international operations on an enterprise level. This permits the delivery of identical source codes and functionality regardless of the endusers` location.

How Microsoft Delivers Value to Customers

Microsoft delivers value to its customers through its differentiation strategy.  Through this strategy, the company places more emphasis on branding, innovation, software design, and quality service. This is contrary to the low-cost strategy that places more emphasis on scale economies and reducing input costs. According to Hooley, Piercy & Nicoulaud (2012), differentiation involves the delivery of value to customers by providing products and services that provide unique attributes that are considered valuable by customers and customers perceive them to be better than those offered by competitors. Corporationslike Microsoft that rely on this strategy must be efficient in R&D, have extremelyexperienced staff, a reputation for excellence in the market and a strong sales force. Given that Microsoft charges premium prices for its products, it always strives to maintain the uniqueness of its products in the industry by delivering both tangible and intangible product characteristics to its customers through innovation.

There are various factors that drive the uniqueness of Microsoft’s products thereby delivering value to customers.  These include consistency in product and service delivery, product reliability, sales service, ensuring that accessories are always available, ensuring upgrades are always available and speedy delivery and offering sales services. Additional factors that c contributes value to customers, and which Microsoft has control over include exemplary technology, quality control, intensive marketing and the skills of its workforce. Microsoft equally maintains high levels of product consistency and integrity (Hooley et al., 2012). Similarly, the company delivers value through innovation. Microsoft operates in an industry that is technology intensive, which is highly competitive. To remain competitive, the company delivers value to its target markets through innovation, technology application, and control of industry standards. Microsoft does not invent much; instead, the company is more focused on improving and commercializing its existing innovations. This has enabled the company to attain a larger market share.  It is through the use of these characteristics that Microsoft delivers value to its customers. The high value that the company delivers differentiates its offerings from those offered by competitors, and consumers are willing to pay a premium price for the company`s products and services(Hooley et al., 2012).

The core Competencies of Microsoft Company

            A firm`s core competencies means more than just its core technologies. Microsoft`s core competencies sets the company apart from the rest of its competitors. Firstly, the company`s product offerings can be grouped under seven different categories that include Windows, Business solutions, Servers, Games and Xbox Game Console, Windows Mobile, MSN and Developer tools(SEC, 2013). The company delivers the correct services just in time by strengthening its business as a strategically focused information technology organization. Through technological innovations, the company has gained a competitive edge in the market. Microsoft maps information technology infrastructure, applications, and operations transforming them into a consistent set of services that support the accomplishment of the company`s goals. As a way of eliminating redundancies, delays in services and inefficient processes, the company has taken the lead in the application of technology in innovative ways. This has in turn resulted in faster response times for the business (SEC, 2013). The company`s core competencies cannot be easily imitated by competitors for various reasons. Firstly, the company`s customers across the globe know the benefits they derive from Microsoft products and services.  Secondly, the company has its own partner network where business enterprises can demonstrate their expertise via Microsoft`s competencies(SEC, 2013). The company has two types of competencies that it can offer to a new business. Silver or gold competencies can help differentiate a company from its competitors by showcasing proven skills set to its potential customers. It is easy for customers to identify a firm`s expertise and capabilities because as a corporation, Microsoft has aligned its operations to match how customers purchase a company`s products (Microsoft, 2013).

Discuss Global Locations of Your Company

Microsoft is has office locations in 214 countries globally. Microsoft is present in all the continents from Africa to Asia (, 2014). The table below gives a list of Microsoft`s global locations.

Source: (, 2014).

Go into Depth on One Emerging Market for Your Company

India is one of Microsoft`s main emerging markets. As at July 2014, India`s population was 1,236,344,631 people, making it the second most populated country after China.A large number of India`s population is made up of individuals in their productive years. Specifically, people in the 25 to 54 age bracket account for 40.6% of the population (CIA, 2014).India is a major market for Microsoft. In 2013, the company`s revenues from India increased by 13% to reach Rs.6122 crore. Most of the revenues came from the sale of Microsoft`s products to businesses and government departments. Microsoft`s cloud business is also performing well in India. The company added more than 15,000 new Azure Indian customers in 2013 and revenues from its Windows server data center increased by 150% in 2013 (Ghosh,2014). Similarly, in the third quarter of 2014, the company`s commercial cloud sales in India increased by 128%. By 2018, India`s cloud market is projected to be worth $2 billion, and this is a significant market opportunity for Microsoft (Agarwal, 2014).

What competitive priorities does your company compete on?

            The major competitive priorities that Microsoft competes on currently are cloud and tablet services. In this regard, the company has extended its licensing and technology beyond personal computers to include mobile devices. The focus is more on developing and selling cloud services. These competitive priorities are important because the future of Office and Windows businesses will depend on tablets. Similarly, iPads and Android devices have already eaten into PC sales, reducing Microsoft`s OS sales. Similarly, many organizations are adopting tablets for tasks that were previously done on PCs, and this could further reduce Windows sales. Similarly, tablets do not require Office applications, which has further reduced Microsoft`s revenues. To counter this, Microsoft seeks to compete on the basis of Windows tablets and cloud computing (Helm, 2013).

Discuss Your Company`s Product Development Strategies

            Microsoft product development has incorporated both Silverlight and HTML 5. Silverlight is the platform Microsoft uses for its windows phone. Through this product development strategy Microsoft has solved application compatibility issues across platforms. As a result, the company develops new web-based applications that can be run on standard web browsers and on a PC running any operating system be it window, Linux or Mac(Microsoft, 2014). The adoption of web standards is a solution to many compatibility issues. Microsoft has adopted HTML 5 because the company feels that the future of web technology will be shaped by HTML 5. Similarly, HTML 5 is also more focused on the future of mobile computing, and bridges the gap between different and incompatible mobile platforms such as Android, Windows Phone and I-Phone(Microsoft, 2014). Modern mobile devices run on different operating systems, with each having its unique applications. HTML 5 can permit the development of apps that can be used across all the three platforms in different languages. Microsoft keeps an eye on the latest technologies and innovations that it can implement into its existing platforms to make the brand bigger and better (Microsoft, 2014).

Analyze and Provide Your Advice to Your Company`s CEO on their Global Strategy

Microsoft makes use of various strategies to reach its customers in the global markets. However, its main strategy is outsourcing. Microsoft outsources some of its important operations to foreign countries. For example, the production of its gaming system Xbox is done in China. Similarly, its information technology operations are done in India (Tesseras & Parsons, 2011). Through outsourcing, Microsoft is able to reach global markets with a higher level of efficiency, and at a reduced cost. In its efforts to reach the global markets, Microsoft largely relies on China owing to the dynamic nature of the Chinese economy(Tesseras & Parsons, 2011). Despite the successes the company has registered in its global strategies, the company also faces numerous challenges that include the need to adapt to different social and legal systems and the differences in infrastructural development across countries(Tesseras & Parsons, 2011). To enhance its global strategies, the CEO should implement the following recommendations:

Firstly, there is need for the company to develop more partnerships and strategic alliances with foreign companies in countries such as China and India in order to succeed in these markets.  Secondly, the company can expand by acquiring leading IT businesses in foreign markets. Similarly, with the growing importance of cloud computing, Microsoft should further expand this business segment in major emerging markets such as China and India since these markets have high growth prospects. In addition, apart from horizontal diversification, Microsoft should also diversify into unrelated products. Furthermore, to expand its global presence and deliver value to customers, the company should focus more on research and development to ensure that more quality products and services are launched on a regular basis.

Section 3 Lean Systems

Define lean systems and describe how your company uses it to reduce waste and streamline processes

Lean systems are those systems that result in reduced volume of resources used. Therefore, lean systems should result in reduced use of labor, time, materials and space. These systems make it possible to eradicate wastege by reducing the number of defects. This enables the company to produce products that are of right fisrt time, and of the best quality that satisfies customers` requirements. The concept was fisrt used by Toyota and was applied in the manufacture of vehicles (Kerber & Dreckshage, 2011). The purpose of lean manufacturing is to help companies cut costs and increase their productivity by getting to the actual cause of a problem. This is done through the elimination of wastes. The manufacturing process often involves one or more types of wastes discussed below:

            Overproduction waste- overproduction occurs when a manufacturer is producing more than what is required by the market. This can involve producing products or product components for which no orders have been made. It also involves producing more of a particular product in excess of what is presently needed. This is the most serious type of waste because it often results in the multiplication of other types of wastes. It increases the defects that require to be reworked on, increases stock, processing, and results in needless transportation and motion (El-Namrouty, 2013).

            Inventory waste- inventory refers to the number of items on stock necessary to manufacture a particular product. These stocks also create expenses to the business, when inventory is not utilized, they occupy useful warehouse space. In addition, if they are kept in the warehouse for a prolonged period, they may become outdated. As a result, they become less useful raw materials that cannot be used in manufacturing important products. Efficient organizations ensure that they have control systems in place that control their inventory levels to ensure that financial resources are not wasted on items that not necessary or build groups (El-Namrouty, 2013).

Defects (rework) – in manufacturing rework are often necessary when a products or its components have defects. Defects arise because of faulty manufacturing processes arising from machine and human errors. Reworking on these defective products takes extra time, which ultimately increases the cost of the final product. In extreme cases, the defective products are discarded (El-Namrouty, 2013).

Waiting Times- each stage in the manufacturing process relies on both downstream and upstream stage processes. If workers, materials, information or equipment used in the production process are behind schedule, waste of production time occurs, which in turn increases production costs (El-Namrouty, 2013).

            Needless transportation- this involves unnecessary flow of components, information, or products from one location to another. This needless transportation is often accompanied with damage to products, lost product systems and parts (El-Namrouty, 2013).

            Needless motion- this often occurs when workers move around their works stations leading to waste of effort and time. All these unnecessary motions are a direct result of poor work practices, poorly designed work area layout and poor process design (El-Namrouty, 2013).

            Over processing- this involves extra processes within the manufacturing process that have to be undertaken. It can also imply production of products that of a higher quality than what the consumers demand. This may be caused by various factors including incorrect use of equipment, erroneous rework process, poorly designed process and poor communication. It can also arise if the manufacturer does not verify the real specifications that the customers require (El-Namrouty, 2013).

            Unused creativity of workforce- time is wasted and employees` ideas are not put into good use. As a result, employees do not participate in manufacturing processes design. Without employee involvement, the other types of wastes cannot be avoided because development of ideas that can help in achieving waste reduction is suppressed. It is important for employees’ inputs to be incorporated into the manufacturing processes. This not only increases the available knowledge, but also promotes creativity among employees. In addition, it increases employee motivation and morale (El-Namrouty, 2013).

How Microsoft Uses Lean Systems to Reduce Waste

Microsoft uses a type of lean system known as Kanblan in its software manufacturing/ engineering process. Kanblan is a Japanese word meaning a board (inventory visualized on a board). Software engineers at Microsoft only order for new parts, when the remaining inventory is too low, and this leads to justintime assembly. Engineers/programmers use the Kanban “card” which gives authority to build to the next engineer/programmer in the process. In the absence of the card, a programmer has no authority to complete his/her task because in doing so, he/she will be creating additional waste in the form of surplus work in progress (Heusser, 2012). Work in progress is visible to all programmers. In conventional software development environment, employees are assigned work; each employee scrambles to complete his/her task and then pushes it to the next programmer on the line. If the next programmer has a backlog, he/she is in trouble and the other employees will definitely complain (Heusser, 2012). Microsoft`s system does not work this way, instead, other programmers view the backlog in the desk of the programmer as waste (surplus work inprogress inventory). For Microsoft, Kanban is a lean system for software development. All tasks and the stages involved in the process are identified. Work in progress for each stage in the process is limited. As a result, the workers have no room for multitasking. This system has enabled Microsoft to eliminate the different types of wastes already discussed. In addition, Microsoft further reduces wastes by making use of the feedback from its partners and clients and surveys to determine not only customer satisfaction levels, but also customer requirements (Microsoft Case Studies, 2011). By placing more emphasis on the needs of its partners and customers, Microsoft is able to reduce wastage and products and services of better quality.

Does lean lead to Green? Discuss your company`s Green strategies (Sustainability/Environment). Has this been effetive for them? Why?/why not?

Leandoes not necessarily lead to green, however, in particular cases lean can lead to green. One of the major impediments that prevents lean from leading to green is distance. Where a company`s lean suply chain is entirely situated within  a small geographical area, it will surely be green in terms of emmissions because of the low inventory levels and shorter shipping distances. However, if the manufaturing facilities are dispersed, lean may not lead to green due to high emission levels (Dhingra, Kress & Upreti, 2014).

Microsoft has implemented a number of green strategies as discussed below:

Reduction of carbon footprint- environmental sustainability is a major concern for the business in its daily operations. Therefore, in 2012, the company`s target was to reduce its carbon dioxide emissions for every unit of revenue by at least 30% when compared to its 2007 emission levels. The company has been successful in this regard through various initiatives such as permitting telecommuting among its employees, providing commuting incentives to its staff and its recycling initiatives. The company has also purchased renewable energy for its facilities and constructed new buildings that meet the LEED standards stipulated by the U.S. United States Green Building Council. In addition, solar power accounts for approximately 15% of the company`s energy needs (Microsoft Environment, 2014).

The company improved its data centers to reduce energy consumption- These efforts have been largely successful. The newly created data centers consume 50% less energy compared to those that existed before with average power usage effectiveness of 1.25 compared to 1.7 for the industry (Microsoft Environment, 2014).

The company is involved in sustainability partnerships- each year, the company gives out the Sustainability Partner of the Year Award to the best partners that offer solutions to help Microsoft`s customers in reducing their energy use as well as managing their resource use and environmental footprint. The award recognizes those entities that have successfully delivered software and technological innovations based on Microsoft`s platform that support people, corporates and other organizations in reducing their overall environmental impact (Microsoft Environment, 2014).

Cloud computing- many business organizations and individuals are already making use of the services offered through cloud computing. These include social media, email, documents and online games. Cloud computing reduces energy use and carbon footprint by at least 30%. Microsoft delivers cloud services, and these efforts have successfully reduced carbon footprints by enhancing the efficiency of its data centers and permitting application sharing. The company has been won numerous awards; including the U.S.Environmental Protection Agency (EPA) award for its green energy initiatives (Microsoft Environment, 2014).

Section 4 Supply Chain Management and Environemtal Performance

Describe A Comprehensive Overview Of Microsoft`s Supply Chain

Microsoft`s supply chain has been transformed significantly in the last 10 years so as to be aligned with the company`s ever changing product portfolio and to remain a head in an industry that is highly dynamic. The company changed itself from a software manufacturer to a software and hardware solutions provider. As a result, the company had to reassess and fix its supply chain. Software is much simpler to deal with than hardware. Software problems are solved by simply releasing patches, the same is not applicable to hardware. As a result, the company has to modify its supply chain strategy and today, Microsoft`s supply chain is a significant component of its overall business strategy. To Microsoft, supply chain takes the center stage as it incorporates all elements of the business beginning from the idea to offering after sales services (Tesseras & Parsons, 2011). At present, Microsoft has fully outsourced its supply chain. This has enabled the company to become a fully demand driven enterprise. The company has a network of approximately 15 supply chain partners and nearly 600 suppliers across the globe. As part of its supply chain strategy, Microsoft has consolidated the number of its third-party logistics vendors (3PL) across the globe. In addition, the company operates two distribution hubs and freight management vendors in India, Middle East andAfrica (IMEA) (Tesseras & Parsons, 2011). The company ensures that its logistics vendors make use of the best available logistics in their respective regions. Although Microsoft makes uses of global leaders in the logistics industry like DHL, such big companies are often not the best logistics solutions for small regions. As a result, the way the company`s supply chain model is designed gives the company the discretion to select a product depending on the product and location.  Given that Microsoft has outsourced the whole of its supply chain, there are risks associated with this model. To counter this, Microsoft has its employees on the ground. These are very experienced factory managers that interact directly with manufacturing partners. As a result, through the supply chain is outsourced; the company still has the final say. If things are not going as they should, the company halts the operations (Tesseras & Parsons, 2011).This is because even through the manufacturers design the physical products, it is the Microsoft brand that appears on the finished products, as a result, the company`s strategy governs the outsourcing partnership.The distribution of Microsoft`s services and products happens primarily through four channels Original Equipment Manufacturers (OEM), online, and resellers and distributors.

Original Equipment Manufatuerers

            Under this, the company`s products are pre-installed on new computers, smartphones, servers, tablets and other smart devices sold by OEMs to the  end consumers. Microsoft has distribution contracts for one or more of its produxcts with nearlly all international Original Equipment Manufacturers including but not limited to HP, Lenovo, Acer, Dell, Toshiba,and Samsung(SEC, 2013).

Resellers and Distributors

            Many businesses that license Microsoft`s products and services enter into contracts directly with the company with support from Enterprise Software Advisors. However, there are other organizations that license the company`s products and services indirectly mainly through distributors, value added resellers and large account resellers(SEC, 2013). Although all resellers regardless of their type sell to businesses of all sizes, large account resellers mainly sell to large organizations, value added resellers purchase from distributors , while value added resellers reach out to small-medium sized organizations (SEC, 2013).


At the global scale, its Dynamics software products are sold through an international network of channel partners who offer specialized services and vertical solutions. The company`s retail products are distributed mainly through retail outlets, non-exclusive distributors, resellers, and authorized replicators. Individual customers purchase Microsoft’s products mainly via retail outlets like Microsoft Stores and Wal-Mart. The company also has a sales team responsible for offering sales support and training on the company`s products. In addition, they look for orders from distributors (SEC, 2013).


The online platform also forms part of the company`s supply chain. As already noted, the company is increasingly delivering more services via cloud. In addition, it offers online content and services to end users through its products such as Windows Phone and Office 365. Other cloud based applications include Azure, SharePoint, and Windows Intune.

HowThe Company Manages Suppliers

Prior to being accepted as a Microsoft supplier, the potential suppliers must first understand the rules that govern Microsoft`s operations. The company has developed stringent standards for itself and for its suppliers as well. Microsoft undertakes market research and cost analysis to ensure it gets the best possible deal from its suppliers on everything it purchases. Microsoft has a list of top suppliers categorized asPremier. It is from this list of suppliers that procurement managers select their preferred suppliers. The selection process is based the performance and quality of a particular supplier, and the ability of the supplier to handle the future needs of the company. Even after being accepted as a supplier, each supplier must be reviewed on an annual basis and given a rating on a scale of 1-5. The following areas are rated: innovation, value, delivery, service, quality, organizational health and supply chain management. Based on these ratings, procurement managers make purchase decisions for the company. The ratings are also used in measuring costs and determining which businesses qualify for more, less or no business (Barney, 2006).

Companies that are categorized as Premier suppliers supply goods to Microsoft goods worth more than $5 million each year. Such suppliers cannot be easily replaced by the company and are accorded priority in Microsoft`s procurement process. Out of the company`s 13,000 suppliers in the U.S. only 1,000 are categorized as Premier (Barney, 2006). However, even suppliers that do not make it to this category can still do business with the company, but at a provisional level. This implies that the company does business with the supplier, however, the business is not among the company`s preferred suppliers. This category accounts for the largest percentage of Microsoft`s suppliers (Barney, 2006). At the very top are super high-end suppliers who supply the business with large volumes of goods and services globally. This category of suppliers is Gold Certified, and they are carefully managed by the company. The company conducts a 360-degree review process with these suppliers (Barney, 2006).

Even after a contract is signed, suppliers must play by the rules and they must be effective to remain there. Adherence to the company`s supplier guidelines is mandatory, including the invoicing system and procedures for accepting direct deposits. In the supplier-Microsoft deals, the latter is treated as the client, and suppliers must ensure the client is satisfied and the project is successfully executed (Barney, 2006). On the other hand, Microsoft ensures the happiness of its suppliers by providing them software for free or at reduced prices. Suppliers are also trained on how they can improve the company`s brand. In addition, the company listens to its suppliers and considers their advice on how it can makes things better on its end. Although Microsoft values the quality of its deals, it is also committed to keeping its suppliers happy by ensuring they have the best experience possible. Microsoft believes in working with strong, responsible and proactive suppliers in delivering value to its consumers, while expecting the suppliers to live by the company`s values and operational philosophy (Barney, 2006).

What Challenges Does Your Compay Face in Their Suply Chain

             As leading technology company, Microsoft faces various challenges in its suply chain. Large volumes of data and changing customer demands- Microsoft`s supply chain has significantly expanded over the past few years. According to Nguyen (2010), in 2007 Microsoft was managing approximately 25GB of data each day coming into the company. By 2010, the figure had increased to 350GB of data per day originating from various organizations. The large volumes of data flowing into the company is a major supply chain challenge because it affects the company`s adaptability and agility.In deed the biggest supply chain problem for Microsoft is not the physical movement of its products, but rather the management of information, being in a position to synthesize the huge data volumes with speed and quickly make the correct decisions that help the company in minimizing risks and maximizing opportunities. In addition, globalization has significantly affected the company`s global supply chain. Because of globalization, both customer needs and market requirements are changing. This has forced the company to increase the scale of its business and operate a more complex network of suppliers, which has further complicated its supply chain (Nguyen, 2010).

Declining product life cycles and technological disruptions- the technology industry is today characterized by reduced product lifecycles. Products that in the past took years to develop are presently completed in a few months. With the introduction of each new product, the value of Microsoft`s products drop. This trend is further worsened by technological disruptions, whereby when a new product is brought to the market, it records significantly high sales because they are perceived to be better and less expensive compared to Microsoft`s products. For Microsoft, this means less sales revenues. Microsoft also faces threats from Linux, which is free (Humberto, 2014).

Increasing cost pressures- Microsoft faces increased pressures to reduce costs in its supply chain because of various product-related and competitive factors. For instance, currently there is a high level of product convergence for items like computers, mobile devices and tablets. As a result, product orientation to particular tasks is no longer the main differentiating factors, forcing Microsoft to compete on price. Worse still, new technology products come with significant price reductions and this has damaged the economic profile on which Microsoft supply chain operations are based (Krajewski, 2013).

Multi-channel supply chain- with the increased adoption of internet technology the conventional method of doing business through isolated sales channels has become less relevant. Customers and business organizations today expect to make orders and receive products in their preferred mode. For Microsoft, this means blending both the traditional and online channels. For instance, customers can order online, but pick the product from a retail outlet. This use of multi-channels significantly complicates Microsoft`s supply chain operations (Humberto, 2014).

What Concerns do you Have in the Future of your Company`s Supply Chain? Explain

There are various concerns in relation to the future of Microsoft`s supply chain. The first concern relates to Microsoft`s strategy of outsourcing its entire supply chain. Outsourcing results in two major concerns. Firstly, the reliability and availability of deliveries; as the company continues to innovate and expand will this model be effective? The second issue in relation to outsourcing deals with total costs of products received. With outsourcing, there are additional costs that the company incurs in the form of transport costs, cost of keeping inventories and the likelihood of having large variations in quality. In addition, with time Microsoft is likely to lose its manufacturing capabilities. All these concerns raise questions as to whether Microsoft will continue to outsource its supply chain or it will change to in-house manufacturing.

            Another concern relates to managing demand, Microsoft spends a significant amount of time making demand forecasts. As its supply chain continues to expand with new products such as cloud services, the supply chain is becoming even more complex. As a result, the company`s traditional methods of using past data to forecast future demand may no longer be adequate. Microsoft`s future will not be like its past. Even though the company has complex data collection techniques such as POS software, these systems still use historical data. In the future, Microsoft must be able to see what customers are going to do, for example, entry of new competitors and introduction of new products.

Furthermore, management of risks is also a concern. Risk management is one of the most common concerns about the future of supply chains in general. Supply chain professionals including those at Microsoft are increasingly concerned about what they will do in the event that a major disruption such as the Japanese earthquake occurs. Is Microsoft`s supply chain well equipped to handle such disruptions?

The final concern relates to privacy and security of the supply chain and information technology compatibility. Information technology presents both optimism and worry for Microsoft`s supply chain managers. In the future, it can permit the company to improve its supply chain by enabling stakeholders in the supply chain to share information in a quick and reliable manner that will benefit the whole organization. On the negative side, information technology is often accompanied by problems such as privacy of confidential data, system compatibility, and security concerns. All challenges are potential concerns in Microsoft`s supply chain.


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