1. MICROSOFT ZUNE
Microsoft aimed to challenge and beat Apple, whose iPod line held an
enormous market share. Three hard disk players ranging from 30 GB to 120
GB were released, alongside six flash players.
Its overall market share in the U.S. remained low, well below Apple and also
lagging the SanDisk Sansa and Creative Zen.
Microsoft announced the closing of MSN Music in 2006 immediately before
announcing the Zune service without PlaysForSure support.
Microsoft’s Zune was a portable media player that was first launched in November 2006.
Zune is a discontinued line of digital media products and services marketed by Microsoft from November 2006 until its discontinuation in June
2012.
2. WHY ZUNE FAILED ?
Bad Timing
• The Zune came much too late, as the iPod had already rapidly become the go-to source for
portable entertainment.
Lack of Innovation
• The Zune did not had any unique or extraordinary features, While it wasn’t a bad device, the
Zune just didn’t have features that set it apart enough from the iPod.
• With the iPod’s already wide popularity, there was no real incentive for consumers to choose a
Zune over an iPod.
Insufficient Marketing
• The marketing team targeted their campaigns toward a specific audience, perhaps those who are
anti-mainstream and want to stand apart from the crow.
The marking for the Zune seemed to fail at setting the Zune apart from the iPod for consumers in a concrete way.
3. M ARKETING STRATEGY OF ZUNE
MICROSOFT DECIDED ON A “LOSS-LEADING” STRATEGY.
• Meaning they will lose money on creating and selling the product and hope to gain their
profit with accessories, content sales and renting music through their online store.
• Zune Marketplace store features subscription rental media services which have been a
flop in the past and current online services such as Napster, Rhapsody, Pressplay, Yahoo
Music and much more.
• Music renting services for digital music players have all been huge failures, yet Microsoft
continued to base their software and services packaged around the Zune with this format.
• Unfortunately they had to discontinue their product ‘Microsoft Zune’. But Alternative
methods to a “loss-leading strategy” could have easily produced more profit for
Microsoft, and could have lowered the prices for the Zune.
5. POTTER’S 5 FORCES
THREAT OF NEW ENTRANTS
In this aspect of the Five Forces analysis, the focus is on the influence of new
entrants on the computer hardware and software industry environment.
High cost of brand development
• The high cost of developing the brand of a technology business weakens the effects of
new entrants on companies like Microsoft Corporation.
Moderate cost of doing business
• the moderate cost of developing such a business presents considerable chance for new
entrants to find success in competing in the computer hardware and software market.
Moderate switching costs
• The moderate switching costs also partly contributes to the potential success of new
entrants in competing against firms like Microsoft.
6. POTTER’S 5 FORCES
THREAT OF SUBSTITUTES
Threat of substitute products or services for Microsoft is low. Because of some factors:
Lack of direct substitutes
• Range of products offered by Microsoft include operating systems for computing devices,
servers, phones, and other intelligent devices.
Low buyer propensity to substitute
• The level of buyer propensity to choose substitute products or services to Microsoft’s products
and services can be assessed as low.
Absence of switching costs to substitutes
• There is generally low buyer propensity to choose substitute products and services.
• The absence of switching costs to substitutes may increase their threat to a certain extent.
7. POTTER’S 5 FORCES
BARGAINING POWER OF BUYERS
Microsoft needs to continue satisfying customers, who significantly determine the company’s
performance.
Low substitute availability
• Customers face difficulties in finding non-computer-network solutions that are as effective and
efficient as the company’s products.
Moderate switching costs
• This intensity of switching costs, customers have a considerable tendency to shift from the
company’s products and start using other firms’ products
High quality of information
• The external factor of the high quality of information further empowers buyers in terms of adequate
information that they can use to compare Microsoft’s hardware and software products to competitors.
8. POTTER’S 5 FORCES
BARGAINING POWER OF SUPPLIERS
Bargaining power of Microsoft suppliers is low. Following factors play an important role in
the formation of supplier bargaining power:
Great numbers of suppliers
• There are large numbers of suppliers around the globe and Microsoft is the biggest customer in
terms of purchase volume for the majority of its suppliers.
Low supplier switching costs
• The multinational technology company can replace the majority of its suppliers for little or no
cost for the business. Such a situation has an evident adverse impact on supplier bargaining
power.
Cost of supplies relative to selling price of products
• For Microsoft, the cost of supplies relative to selling price of its products is low and this can be
highlighted as another factor that decreases supplier bargaining power.
9. POTTER’S 5 FORCES
RIVALRYAMONG EXISTING COMPETITORS
Moderate switching costs
• Moderate switching costs have a corresponding moderate influence on Microsoft’s
business.
• For example, customers have a moderate tendency to shift to other firms’ products.
High aggressiveness of firms
• The high aggressiveness of firms leads to a strong force that significantly affects the
company’s industry environment.
• These technology firms are aggressive in terms of their rate of innovation and their
marketing campaigns.
High diversity of firms
• Microsoft must also consider the strong force based on the high diversity of firms.
• For example, the company innovate products that compete based on a wide variety of
features showcased in other firms’ products.
Rivalry among existing firms is fierce in technology and consumer electronics industry. Following factors intensify the level of rivalry in the
industry:
