TIM

Brandon Lang

TIM 105

Prof. Desa

11/2/2018

Midterm Examination

Thursday	Friday	Saturday	Sunday	Monday
Midterm received in class and reviewed	Start working on question 1, read through Microsoft case study, taking notes and beginning structured problem solving process	Finish question 1 and begin question 2 to conduct a full company analysis and create functional maps	Finish question 2, begin working on question 3 in creating HOQ	Finish question 3, read through midterm to check processes and results, turn in

1. Integrated Technology, Product/Market, and Competitive Strategy for Microsoft

Step 1 - Define the problem

Read through the “Microsoft 1995” case study, collecting data to use in a systematic analytic framework to develop an integrated business, development, technology, product, market, and competitive strategy and goals for the next three years (1995-1998).

Step 2 – Create a plan for solving each sub-problem

· SP1: Write out and define a framework for Microsoft

· Company Analysis

· Outline business goals and objectives

· Outline technology and product market strategies

· Define development goals and objectives to align strategies

· Create functional maps of the markets

· Industry Analysis

· Structural analysis of the industry

· Existing competitive strategies of Microsoft

· Analyze Microsoft’s position in the industry and relationship to competitors

· Assessment of the Evolution of Microsoft’s company strategy

· Use functional maps of Microsoft’s position in its market and industry to asses the evolution of the company’s competitive strategies

· Decide on what Microsoft’s future competitive strategy should be

· SP2: Apply the defined framework to Microsoft’s existing and proposed technologies and products

· SP3: Create a clearly structured approach that has 3-5 recommendations for what business, technology, and product/market strategic focus should be for the next year at Microsoft

· SP4: Identify 3-5 initiatives that that Microsoft actually took since 1995 and compare my recommendations produced in SP3

Step 3 - Execute the plan

· SP1: Write out and define a framework for Microsoft

Company Analyses

· Business goals and objectives

Business Goal/Objective	Value
Return on Investment (ROI) = net profit/total assets	$1453 / $7210 = 20.15%
Market Share (%)	57%
Revenue	$5937000
Profit Margin = income/revenue	$1453/$5937 = 25.5%

· Technology and product market strategies

· Core technologies that give Microsoft an advantage over competitors:

· Created the first operating system (OS) with a compressed form of BASIC

· Microsoft 95 is one of the most successful software launches in history

· Provides wide suite of applications such as Excel, Word, Processing, and PPT

· Microsoft’s approach to product and technology development:

· Technology Strategy:

· Working together with other large tech companies such as IBM and Macintosh

· Using the momentum built from the success of MS-DOS to expand into new markets

· Improving the quality and technicality of Microsoft’s product offerings compared to their competitors

· Product Market Strategy

· Produce “User Friendly” products that were easy to use

· Focus on getting customers to return to buy more Microsoft products

· Add features not provided by competition

· Invest heavily in R&D

· Bundle applications instead of selling them individually

· Focus on marketing and sales

· Microsoft focuses on markets including:

· Software applications

· Networking

· Physical Hardware Components

· GUI Interface

· Operating Systems

· Personal Computers

· Developmental Goals

· Analyze customer needs, market trends, and patterns

· Develop products before competitors can

· Producing products that are more technologically advanced than competitor’s products

· Hire quality employees

· Focus on being a “utility” company

· Receive revenue through producing services for the PC industry

· Functional maps of the markets and industry that Microsoft is associated with

Year	Technology/Event	Product	Market	Business Goal
1975	Created condensed version of BASIC for MITS Altair			Produce software that allows a computer to be on every desk
1980	Designed new OS	PC-DOS	OS
1984	Joint development with IBM	OS/2	OS	Gain experience in application development
1984	Created Word processor and spreadsheet with Mac	Word, Excel	Software Applications	Enter new industry
1990	Word becomes preferred app for IBM computers			Increased revenue to $24 per machine
1993	Release of updated product	Windows, NT, MS Select	OS/Software	Increase ease of access to Microsoft products for users and compete with Novell
1995	Release of updated products	Windows 95, CD-ROM application titles	Software, reference	Giving customers increased access to Microsoft products
1996	Release of updated products	Cairo	Software	Compete with Apple and IBM
1990’s				Microsoft outsells Lotus

Industry Analyses

· Structural Analyses of the OS and Applications industry (Porter’s Five Forces)

Force	Analysis
Rivalry from Competitors	· IBM had 5% of the market share in 1995 · Apple had 8.5% of the market share in 1995 · UNIX had 5% of the market share in 1995 · Borland · Intuit · Soft Key International · Lotus · Broderbund Software Inc. · Sierra On-Line
Barriers to Entry	· Novell in computer industry · Lotus released WordPerfect, creating enough demand to be called the first “killer application” · Smaller Independent Software Vendors were plentiful
Threat of Substitutes	· Apple System 7.5 · IBM OS/2 · Novell made DR-DOS which was cheaper than MS-DOS
Power of Buyers	· Microsoft made 50% of its revenues from PC producers · Microsoft Office Suite became popular among PC buyers
Supplier Power	· Gates designed a new OS for IBM’s PC in 1980 · Microsoft and IBM collaborated on OS/2, raising $100 million for Microsoft and gaining 85% of the market share · In 1990, they sold $24 per unit
Complementors	· Microsoft acquired Softimage to help them with improving Microsoft’s fonts · Microsoft bought PowerPoint to expand its product line

Existing Microsoft Competitive Strategies

· Competitive Strategy

· Microsoft emphasizes using a differentiated strategy

· Creates products that aren’t like those produced by its competitors and

· Maximize revenue for the company

· Microsoft pursues meeting customer needs in products that aren’t currently provided by the market

· Microsoft sets out to set their company apart from their competition and to maximize satisfaction of customer needs through meeting their needs and expectations and meeting technical specifications

· The company seeks to produce products that are superior to existing offers, including Microsoft’s own products

· The company capitalizes on improving the speed, stability, and technical of their offerings

· Relationship between Microsoft and other companies in its industry

Force	Key Determinants	Strength	Analysis	Recommendation
Rivalry amongst Competitors	· Market concentration · Brand identity · Customer loyalty	Medium	Largest competition includes IBM, UNIX, Apple	Focus on differentiation strategy
Barriers to Entry	· Economies of scale · Customer loyalty · Capital input requirements	Medium	New companies will likely find it difficult to create new offerings and business processes that can compete with established entities, however it can be done as exampled by Lotus	Produce products which are more technically advanced than anyone else
Threat of Substitutes	· Price and performance of substitute products · Switching costs · Customer loyalty	Medium-High	Novell achieved 10% market share with DR-DOC	Continue pursuing market dominance so as to minimize incentive to switch to substitutes and decrease their ability to gain reputations
Power of Buyers	· Concentration of buyers · Volume of buyers	High	Companies such as IBM produce hardware that is only compatible with Microsoft OS	Keep mutually beneficial relationships with buyers and maintain market dominance
Supplier Power	· Concentration of suppliers · Volume of suppliers · Switching costs	Low-Medium	No supplier holds significant power over Microsoft	Maintain beneficial relationships with suppliers
Complementors	· Volume of complementors · Brand identity	Low-Medium	There is not threat of complementors; they only benefit Microsoft	Continue pursuing beneficial relationships with complementors

· SP2: Apply the defined framework to Microsoft’s existing and proposed technologies and products

· Microsoft turned to a differentiation strategy after their cost leadership strategy proved unsuccessful

· Increase revenue

· Improve company reputation

· Increase market share

· Take note of customer needs and demands to improve product attractiveness

· Align technology and product market strategies with customer needs and expectations

· SP3: Create a clearly structured approach that has 3-5 recommendations for what business, technology, and product/market strategic focus should be for the next year at Microsoft

Recommendations for business, technology, and product/market strategies for Microsoft and what they should focus on for the next year in 1996:

1. Expansion of Personal Computing

Microsoft, although having done a good job of expanding into new markets, should look to further specialize its product offerings. One such specialization they can pursue is producing complex consumer applications which seek to improve user convenience like a home computer application that maps roads and gives directions, an interactive to do list and scheduler, and email plugins. The goal of this pursuit is to increase Microsoft’s standing in the application industry and meet the needs of customers that customers didn’t realize they had.

2. Upgrade Operating System

Microsoft should look to improving and building upon their existing OS instead of producing new ones from the ground up. Given the strong reputation amongst consumers and competitors that Microsoft has developed through the success of their OS, they should run on their product’s continuing momentum and expand and improve their OS faster than their competitors can theirs’. Improvements could include improving running time, bug fixes, increasing feature offerings, decreasing price, etc..

3. Establish Open Application Market

Microsoft could look to expand the volume of applications and increase application use through creating a free-market system for application software. As computer enter the homes of more and more consumers and people learn how to use them, more and more people know how to program and can make their own applications. So, if Microsoft were to create an open market where people could produce and download or even purchase each other’s applications, they could incentivize skilled programmers to create new applications that could run strictly on Windows OS, expanding the system’s capabilities. This would also allow Microsoft to analyze the customer needs of their market so that they can tailor their next generation of Operating System to appeal as best as it can to their consumers.

· SP4: Identify 3-5 initiatives that that Microsoft actually took since 1995 and compare my recommendations produced in SP3

· Initiatives Microsoft has taken since 1995:

· Release of Windows 98: Microsoft released an improved OS in the late 1990’s that allowed information to be more accessible both locally and on the internet. This was their last MS-DOS product offering, which included a host of software applications including FrontPage Express, Outlook Express, Windows Address Book, and more.

· Release of Windows 2000 Professional: Microsoft released a business focused OS in 1999 which included the best aspects of Windows 98 and Windows NT. In addition, the release of the OS had improved reliability, strengthened security, as well as increased visual aid to help those with disabilities.

· Release of Windows ME: Microsoft released their graphical operating system in 2000, with the release including hardware support improvements. The software application included Digital Media such as DVD Player, Movie Maker, and Media Maker) as well as networking technologies like Dial-Up.

· How my recommendations compare to what Microsoft actually did

The recommendations that I produced lined up mostly with what Microsoft actually pursued. Since 1995, they followed my recommendation that they capitalize on the momentum of the popularity of their existing OS through improving it and building up the company’s reputation. Each of their OS releases has included wide ranges of improvements including applications offered, their hardware compatibility, and even their networking technology. Microsoft has done excellently in achieving technical superiority over their competitors’ product offerings, diversifying their line of software applications and including them is OS offerings such as Microsoft ME, as well as generally maintaining a differentiated portfolio of offerings that serve to meet and exceed customer expectations and needs.

Step 4 - Check your work (reflect on the results; discuss…)

1. Is your work correct in every detail?

Yes

2. Are my assumptions reasonable?

Yes

Step 5 – Learn and generalize

Through working to complete this problem, I have increased my knowledge of Microsoft in terms of its history and business strategy as well as its position within different industries. Through changing their strategy from that of being a cost leadership company—which essentially failed—to using a product differentiation strategy, Microsoft has been able to position itself through tactics such as pursuing technical advantage, addressing customer needs, and improving company reputation to become the massive industry leader that it is now. Microsoft has since continued to improve it OS and will likely continue to do so successfully in the coming future.

2. Aggregate Project Plan for Enterprise Software

Step 1 - Define the problem

The company needs to know how best to spend its time and efforts on. In particular, it has to know how the company can stay below its allocated budget, how to decide what projects to pursue, and how much money it can save after the optimal combination of projects is chosen.

Step 2 - Create a plan for solving each sub-problem

· SP1: Figure out the optimal project mix to pursue with a budget of $90 million.

· Use 6-step Decision Analysis to estimate project payoff and Estimated Monetary Value (EMV)

· Identify as project E1, E2, P1, P2, or R&D

· List building blocks

· Create Influence Diagram

· Turn the ID into a Decision Tree by adding all branches

· Fold back the DT to get the payoff for each choice

· Choose option with maximum payoff

· Perform Sensitivity Analyses of 10%

· List cumulative cost and EMV for the project

· Use selection decision variable

· Solve optimization problem

· SP2: Determine the best group of projects to pursue through solving the integer-programming problem.

· SP3: Figure out what management should do with he remaining funds after the project selections have been made.

Step 3 - Execute the plan

· SP1: Figure out the optimal project mix to pursue with a budget of $90 million.

· Project E1

· List building blocks

· Create Influence Diagram

· Turn the ID into a Decision Tree by adding all branches

· Fold back the DT to get the payoff for each choice

· Choose option with maximum payoff

The best option for project E1 is to conduct the technical feasibility study and to develop the product after, as this would maximize the payoff.

· Project E2

· List building blocks

· Create Influence Diagram

· Turn the ID into a Decision Tree by adding all branches

· Fold back the DT to get the payoff for each choice

· Choose option with maximum payoff

The best option for project E2 is to conduct the technical feasibility study and to develop the product after, as this would maximize the payoff.

· Project P1

· List building blocks

· Create Influence Diagram

· Turn the ID into a Decision Tree by adding all branches

· Fold back the DT to get the payoff for each choice

· Choose option with maximum payoff

The best option for project P1 is to conduct the technical feasibility study and to develop the product after, as this would maximize the payoff.

· Project P2

· List building blocks

· Create Influence Diagram

· Turn the ID into a Decision Tree by adding all branches

· Fold back the DT to get the payoff for each choice

· Choose option with maximum payoff

The best option for project P2 is to conduct the technical feasibility study and to develop the product after, as this would maximize the payoff.

· R&D

· List building blocks

· Create Influence Diagram

· Turn the ID into a Decision Tree by adding all branches

· Fold back the DT to get the payoff for each choice

· Choose option with maximum payoff

· SP2: Determine the best group of projects to pursue through solving the integer-programming problem.

· Step 1: List Potential Projects:

· R&D

· P1

· P2

· E1

· E2

· Step 2: List project costs and EMVs

Project	Cost ($ in Millions)	EMV ($ in Millions)
E1	10.75	49.48
E2	10.75	59.71
P1	26.25	188.831
P2	21.25	232.156
R&D	54.5	355.02

· Step 3: Introduce project selection variable

Δi

If Δi=1, perform the project

If Δi=0, reject the project

· Step 4: Find the cumulative costs of performing all projects

· Cost=Ct

· Ct=Δ10.75+Δ10.75+Δ26.25+Δ21.25+Δ54.5

· Ct=$123.5 M

· Step 5: Find the cumulative EMV of all projects

· EMV=Vt

· Vt=Δ49.48+Δ59.71+Δ188.831+Δ232.156+Δ355.02

· Vt=$885.197 M

· Step 6: Introduce capital budget constraint

· Budget Restraint=Cr

· Cr=$93 M

· Step 7: Pose optimization problem

· Maximize cumulative EMV:

· Subject cumulative costs to the budget constraint:

· Step 6: Solve optimization problem with table look up

After creating an aggregate project planning table and solving the integer programming problem, the best combination of projects to pursue while staying under budget is R&D, P2, and E2. This combination maximizes the cumulative expected payoff with an EMV of $646.89 million and a cost of $86.5 million and ensures that the budget is being spent in an optimal manner.

ROI for each project:

· E1: 49.48/10.75=$4.6 M

· E2: 59.71/10.75=$5.55

· P1: 188.831/26.25=$7.19

· P2: 232.156/21.25=$10.93

· R&D: 355.02/54.5=$6.51

· SP3: Figure out what management should do with the remaining funds after the project selections have been made.

If the company pursues the project combination of E2, P2, and R&D, it would earn $646.89 million and spend $86.5 million, leaving $6.5 million. The best options would be to save the money for more diverse projects after next year or for short term investments in the near future.

Step 4 - Check your work (reflect on the results; discuss…)

1. Is your work correct in every detail?

Yes

2. Are my assumptions reasonable?

Yes

Step 5 – Learn and generalize

Working on this problem has reinforced my understanding that every decision made by large companies has costs and benefits involved. With projects that cost millions or even billions of dollars especially, theses decisions should be extremely well thought through, with multiple forms of decision analyses being used so that they can make the optimal choice.

3. House of Quality (HOQ) for video game consoles

Step 1 - Define the problem

Create a report that helps my company successfully enter the gaming industry with its new “EXbox.” In doing so, identify who my competitors are and what technologies they use, how to successfully develop a game console, and how to measure customer needs and expectations.

Step 2 - Create a plan for solving each sub-problem

· SP1: Identify competitors and their respective products in the video game console market in the late 1990’s and dissect one using a FAST diagram.

· SP2: Use FAST diagram and additional research to list key consumer needs and product specifications.

· SP3: Develop process for creating the HOQ.

· SP4: Benchmark the “EXbox” against 2 competing products.

· SP5: Develop a list of target specifications for customer needs for the “EXbox.”

· SP6: Develop a list of target technical specifications for the “EXbox.”

Step 3 - Execute the plan

· SP1: Identify competitors and their respective products in the video game console market in the late 1990’s and dissect one using a FAST diagram.

· Competitors:

· Sega – Sega CD

· Nintendo – Nintendo 64, NES, NES 2

· Sony – Playstation

· Atari – Jaguar

· FAST Diagram for Nintendo 64

· SP2: Use FAST diagram and additional research to list key consumer needs and product specifications.

· Consumer Needs

· Low cost

· Desirable game lineup

· Easy to use

· Good controller

· Able to use more than one controller

· Compatible with multiple TV’s

· Technical Metrics

· Memory

· Game type

· Resolution

· Processing power

· Audio

· Color

· SP3: Develop process for creating the HOQ.

· Step 1: Make a structured and prioritized list of customer needs for the product and assess the importance of each need.

· Refer to SP5.

· Step 2: Make a list of technical metrics and assess the importance of each metric.

· Refer to SP6.

· Step 4: Correlate the technical metrics to each other.

· Scale:

· • Strong Positive

· ○ Positive

· Δ Weak

	Memory	Game Type	Resolution	Processing Power	Audio	Color
Cost	•		•	•	Δ	○
Game Lineup Desirability		•
Ease of Use				Δ
Controller Quality		○
Ability to use more than one controller	Δ			○
TV Compatibility			○		•	•

· Step 5: Observe dependencies between technical metrics and correlate them

· Scale:

· ++ Strong Positive

· + Positive

· - Negative

· -- Strong Negative

	Memory	Game Type	Resolution	Processing Power	Audio	Color
Memory	++		+	+	+	+
Game Type		++
Resolution			++	++		-
Processing Power				++	-	-
Audio					++
Color						++

· Step 6: Benchmark against competing products

· Refer to SP4

· Step 7: Produce House of Quality Diagram

· SP4: Benchmark the “EXbox” against 2 competing products.

· Consumer benchmarking (1-5)

Customer Needs	NES	Nintendo 64	EXbox
Cost	3	3	3
Game Lineup	4	4	3
Ease of Use	4	4	4
Controller Quality	5	3	5
Ability to use more than one controller	3	4	4
TV compatibility	5	5	5

· Technical Benchmarking (1-5)

Technical Metrics	NES	Nintendo 64	EXbox
Memory (MB)	4 MB	4 MB	4 MB
Game Type	Cartridge	Cartridge	Disc
Resolution (pixels)	512x448 pixels	640x448 pixels	700x700 pixels
Processing Power (MHz)	3.58 MHz	62.5 MHz	70 MHz
Audio (KHz)	32 KHz	44.1 KHz	50 KHz
Color (bits)	16 bit	21 bit	20 bit

· SP5: Develop a list of target specifications for customer needs for the “EXbox.”

Need	Importance (1-10)
Low cost	8
Desirable game lineup	9
Easy to use	6
Good controller	7
Able to use more than one controller	7
Compatible with multiple TV’s	6

· SP6: Develop a list of target technical specifications for the “EXbox.”

Metric	Importance (1-10)
Memory	7
Game type	8
Resolution	9
Processing power	8
Audio	8
Color	9

Step 4 - Check your work (reflect on the results; discuss…)

1. Is your work correct in every detail?

Yes

2. Are my assumptions reasonable?

Yes

Step 5 – Learn and generalize