Case Study Microsoft Works

Section C Group 11

Microsoft Corporation: Introduction of Microsoft Case Analysis Section - C Group 11

Name Aman Srivastava Deepak Sudhakar Krishna Bajaj Prasanna Patange Richa Singh Saikiran Pollamarasetty Vivek Gupta Roll Number PGP2011532 PGP2011617 PGP2011696 PGP2011770 PGP2011823 PGP2011843 PGP2011944

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Case Study Microsoft Works

Section C Group 11

Microsoft, a leader in the micro software industry, was all set to launch Works, a new integrated software product which included a spreadsheet, word processor, graphics program, and database and communications program. Since over 41% of Microsofts sales were to countries outside the US, there were two key issues which need to be tackled. Firstly, their US positioning strategy of launching Works as easy to learn, easy to sell product for home and small business market might not be appropriate in a number of countries. Second issue involved requests from different countrys managers to modify the design of Works, whose standard version was being launched to meet a set of common needs around the world. Keeping both issues in mind Microsoft had to decide positioning and responses to requests. Country managers want Microsoft Works to include the following two features.

1) Toggle Switch for cell references: Works was designed to use the A1 format cell reference as seen in Lotus 1-2-3 and there was no provision for R1C1 format which was present in Microsofts Multiplan. Because Lotus 1-2-3 was the dominant player in US offices, incorporation of toggle switch doesnt have any significance. However, in Europe both Multiplan and Lotus 1-2-3 were widely used and therefore the toggle switch would be very useful especially for the users who use Multiplan at work. 2) Conversion program: Works was designed only for data exchange with Lotus 1-2-3. Because Multiplan was widely used in Europe, there was a need for conversion programs to be incorporated in Works to allow the exchange of data with Multiplan.
Alternative 1: Launching a Single Global Customised Product The microcomputer industry is driven by timing and skills. The company that launches its product first in the market has more advantage over its competitors. Since sales are maximised during November-December due to Christmas etc. it becomes necessary to launch the product in the market as soon as possible. Thus positioning it as a global standard product shall be helpful in spreading the reach. The country managers are looking for customisation in Works, which requires considerable time. But in order to pre-empt competition in US market Microsoft looks averse to bringing in more and more customisation as it will require longer time to launch in the market. The overhead cost of keeping the development team on Works is $50000 per month. But the standard version has certain disadvantage. 41% of Microsofts sales dollars i.e. $141814.9 is earned through sales outside US. Thus it cant repudiate the demands of the country managers for localization and without their two demands toggle switch and conversion programs it is suspected that Works is less likely to succeed in other countries. If two changes are incorporated in the US version then the introduction of Works in US would be delayed by two months which also means $100000 extra cost incurred due to direct overhead cost. If the two features are added to the international version then elapsed time would increase from 1 month to 5 months which shall cost up to $ 250000. Initially the standardised version may look like cost saving but after deeper analysis we realize that these costs are nothing in comparison to the loss in sales revenue if the standard version is not accepted in other countries. PGP 2011-13 Page 2

Case Study Microsoft Works Alternative 2: Incorporation of both the requests of country managers in US

Section C Group 11

This version will delay the launch of Works by two months, in turn further delaying the launch of international English version by one more month. Pros:

i)

ii)

Since Multiplan is the market leader in major European countries like France and Germany, Microsoft making Works compatible with Multiplan will strengthen its market position and ensure favourable sales in European countries. Since these changes are not significant for US market, launching Works without the changes was possible. But this would mean major redesign and five month launch delay for the international version. This would cost $50000 per month for the upkeep of the development team on Works and also creates short supply in other Microsoft products.

Cons:

i)

Incorporation of US changes would mean that the US target launch date of mid-September will not be met. It was necessary to launch Works in mid-September to order the product and train the salesman by October end. ii) Being Christmas, November-December was the period of heavy buying activity for home computer products as well as some businesses for tax reasons. Launching Works with a delay of two months right in the middle of the busy season would not be favoured by retailers. iii) There is a risk that Microsofts rivals, Software Publishings and Borland, may also launch a new product in the timelines of mid-September and hence missing the launch date will mean losing out on the leadership position for Works.
Alternative 3: Meet US deadline but launch foreign versions late Another option for Microsoft is to launch the US version by mid-September i.e. before the heavy buying period and then launch the foreign versions with the required two additional features 1-5 months later. Advantages

1. Since, the major buying activity is during Nov-Dec months and US is an important market for Microsoft it is imperative that it launches the US version well before its competitors to have the first-movers advantage. 2. The international English version would be launched in 1 month. US, England, Canada, and Australia constitute 93.97% of the forecasted monthly sales. Hence, Works would be released to a major portion of the market before any of its competitors 3. The requirements of the country managers would be met. The additional features would be incorporated so as to satisfy the demands of the consumers of the foreign market. Disadvantages
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Case Study Microsoft Works

Section C Group 11

1. They foreign versions would be delayed which might allow the competitors to launch their product earlier than Works 2. Labour and direct overheads costs would increase by $250,000 (5 months extra). Moreover, there would be an opportunity cost for every month worked on Works
The major competitors for Works are First Choice by Software Publishing and Sidekick by Borland. Both these companies have very low sales in foreign lands as compared to Microsoft: 2.6% share in the market w.r.t sales for Software Publishing ($26 million) and 3.7% ($36 million) for Borland. Hence, logically it can be assumed that both these companies would target the US market first and even if they do launch the product in foreign countries before Microsoft they wouldnt be able to grab a huge chunk of the market share. Moreover, the foreign countries constitute only 6% of the forecasted sales of Works. Hence, a delay in the product launch in foreign countries would not impact Works profit as a delay of the English version would. Positioning: Works should be positioned as an easy-to-learn software so as to compete with the easy to learn and inexpensive First Choice and low prices Sidekick software of its competitors. Moreover, this positioning would prevent the cannibalisation of its other products Multiplan, Word and Excel which are already present in the market. Works should be targeted at the low end IBM PC or PC clones, home/hobby segment and breadth customers to prevent cannibalization of its present products. The home % for different countries for Germany and France is very high as compared to the other foreign countries. France Home Total % of share 19 71 26.76056338 Germany 46 70 65.71428571 Holland 8 32 25 Italy 1 27 3.703703704

Country US England Canada Australia/NZ France Germany Italy Netherlands Sweden Spain

Forecasted Monthly Forecasted Monthly Selling Suggested Sales of English Sales of Localized Price for Retail Price Version Version Microsoft 6000 1000 500 380 0 200 50 80 100 50 0 0 0 0 650 500 160 200 200 200 195 215 215 215 254 273 244 224 234 234 97.5 107.5 107.5 107.5 127 136.5 122 112 117 117

Total Sales (Engligh Version) 585000 107500 53750 40850 0 27300 6100 8960 11700 5850

Total Sales (Localized Version) 0 0 0 0 82550 68250 19520 22400 23400 23400

Total Cost Net Total Cost Net Price Profit(Localiz (Localized) Profit(English) (English) ed) 108000 18000 9000 6840 0 3600 900 1440 1800 900 0 0 0 0 11700 9000 2880 3600 3600 3600 Total Profit 477000 89500 44750 34010 0 23700 5200 7520 9900 4950 696530 0 0 0 0 70850 59250 16640 18800 19800 19800 205140

Moreover, the cost for localizing Works is $84,000 per country and the carrying cost is $50,000 per month. Hence, for 6 countries it would be $504000 which results in a loss in the first month. But if the forecasted sales PGP 2011-13 Page 4

Case Study Microsoft Works

Section C Group 11

are similar for the upcoming months Works would soon be creating profits. The profit for the International English software launch is far greater than the localized profit. Therefore, it would be profitable to launch the US and the International version on time even if it results in a delay for the localized launch Organizational Differences Regarding Design of Works Strategy 1: Launch unchanged USA version according to plan in Mid September. Launch the international English version one month later. Strategy 2: Launch the modified USA version with the 2 changes, but delay the American launch date by 2 months. Launch the international version one month later. Strategy 3: Launch unchanged USA version on time. Modify the international version and incorporate the 2 changes. However, launch of international version will be delayed by 5 months.

Strategy 1 Country Managers Not in favour

J. Bluementhal

In favour

Strategy 2 Strategy 3 Pitched hard for this since they felt that the product would fail Not averse without this modification. Strongly Disagreed since Microsoft would miss the Neutral holiday season in USA which is very profitable

The country managers are autonomous and know their countries requirements. At the same time, Jabe Bluementhal, the senior program manager, is correct in his assessment about the peak season. Both sides are equally important in their roles. Strategy 3 seems to be the one where the disagreement is minimum. However, programmers are in short supply and another 5 months development on Works will lead to shortage in the development of other products. Organizational differences regarding positioning of Works Positioning 1: Easy to learn, all in one software targeted at homes and small businesses. Positioning 2: Positioning it differently from Word and Multiplan

B. Jacobsen (Product Manager) Ida Cole (Director, IPG)

Positioning 1 Positioning 2 In favour. Argued that it should be synonymous to a Swiss knife easy Not in favour to use, cheap and multi functional Not in favour due to fear of Not in favour cannibalization and lack of home users and small business customers in Europe
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