by Ryan W
Chapter 1 Blog Post
By Ryan White
IS 130 Section 5 8am
In an article from PC World entitled “Does $500 Million Dollars Mean That Windows 7 Phone Will Flop?,” Barbara Hernandez compares the results of previous launches of Microsoft products in order to offer insight into Microsoft’s entry into the cell phone market (2010). Microsoft has always spent a large amount of capital when promoting new products. With Windows XP and the Xbox gaming console, the marketing plan paid off; Windows XP became the top selling operating system, and the Xbox became a top seller bringing Microsoft into the video gaming market. However, Microsoft had its flops. Windows Vista, Office 2010, and the smartphone Kin cost Microsoft $1,580,000,000 and failed to product results. In a market dominated by the iPhone, Microsoft’s marketing team has a rough road ahead of them and $500 million may not be enough.
Entry into a new market should be evaluated. The Five Forces Model created by Michael Porter states that evaluating entry into a new market should include: Buyer power, supplier power, threat of substitute products or services, threat of new entrants, and rivalry among existing competitors (Baltzan & Phillips, 2011). First, when consumers have a variety of choices, their buying power is high. When the iPhone first entered the market, consumers had to buy the iPhone from AT & T and Apple. Therefore, Apple had little competition, and the buying power of the consumer was low which, ideally, a company wants. Second and conversely, supplier power is high when buyers have few choices to buy from. In the case of Apple, buyers had limited choices. Third, the threat of substitute products or services is high when there are many substitutes. A company will want substitutes at a minimum. Fourth, the threat of new entrants is high when a competitor can easily enter the market place. Finally, rivalry among competitors is high when competition among competitors is cutthroat.
Given Porter’s criteria, should Microsoft enter the market? Since buying power and supplier power are interrelated, Microsoft has Apple and Google to contend with. Ideally, Microsoft would have wanted to be in the forefront of market. Instead, it comes into a market controlled by the iPhone and Droid phones, thus, affecting the buying and supplier power of Microsoft. Concurrently, Apple and Google have successfully put their cell phones on the market while Microsoft hasn’t. Thus, the threat of substitutes is high for Windows 7 phone. However, entry into this market is not easy for businesses. It requires capital for development, and Microsoft has capital at its disposal. Lastly, the competition between Apple, Google, and Microsoft isn’t fierce. The three companies have always coexisted. Microsoft’s Windows 7 Phone fulfils only two of the five of Porter’s Five Forces Model. Thus, Microsoft’s success in the market is unlikely.
Baltzan, P., & Phillips, A. (2011). Information Systems. New York: McGraw-Hill/Irwin.
Hernandez, B. E. (2010, August 27). Does $500 Million Mean Windows Phone 7 Will Flop? Retrieved August 27, 2010, from www.pcworld.com: http://www.pcworld.com/businesscenter/article/204331/does_500_million_mean_windows_phone_7_will_flop.html?tk=twt_bizcenter