The Microsoft business model allowed the company to operate as a monopoly as it provided its own applications and to be the sole provider of the Windows application. Being an improvement of the initial application built by IBM, the company managed to build a wall around itself as it does not involve other competitors in its operations. This also poses a challenge in that when some of the company’s programs are deemed obsolete, they result in huge losses for the company. The company has made its business model flexible in that through upgrades and modifications to the existing products, the company gets to earn continuously from its customers. However, the company faces potential challenge in that the returns gained from upgrades are minimal. In addition to this, the company also faces competitions, especially from Google. Google has introduced many features into the market that makes it potentially competitive towards Microsoft (Kuratko, 2009).
Studies have indicated that the business model used by Microsoft enables the company to earn high profits, there are significant challenges. The model requires customers to incur licensing fees for every product used online. This proves to be expensive for some of the customers making them to opt for alternative products. The high competition experienced by the company has led to the drifting of sales in the company. This has in turn led to reduced productivity and reduced profitability in the company. Although most studies explain that the model was previously profitable for the company, the model has since been changed leading to lower profitability (Samson and Daft, 2011). Fluctuating costs by vendors and suppliers also poses a challenge to Microsoft Company.
Kuratko, D. F. (2009). Entrepreneurship: Theory, process, practice. Mason, Ohio: South-Western Cengage Learning.
Samson, D., & Daft, R. L. (2011). Management. South Melbourne, Vic: Cengage Learning.
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