Compare the Business Models and Areas of Strength of Apple, Google, and Microsoft

Since its inception, the Internet has grown leaps and bounds into an extensive information infrastructure. From its early days as a government research tool, it has developed into a public and cultural phenomenon globally. With estimated two billion users in 2009, the Internet stands out as an exclusive global economy of unequalled magnitude (Arthur 2012). By 2015, Laudon and Laudon (2000, p 315) project that the e-commerce industry will be worth over $400 billion serving as a marketplace for virtually everything one might want. The internet is propelled by an unyielding influence of technological and conceptual inventions by innumerable multinational companies and individuals. For example, the number of internet users accessing the service through mobile Smartphone and tablet computers is increasing rapidly (Schimmer, Muller-Stewens and Sponland 2010, p.5). For several decades now, Microsoft, Google and Apple are some of the most successful firms in the internet business. Their business models and competitive strategies largely define the contemporary information economy and internet business. Each of these firms has a unique business model as well as areas of strengths.

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A business model in my point of view consists of interlocking elements such as customer value proposition, profit formula, key resources, and key processes, that when taken together, create and deliver value. For instance, Apple took up a good technology and wrapped it in a great business model. Its true innovation was to make downloading digital music easy and convenient. To do that, the company built a groundbreaking business model that combined hardware, software, and service. This approach worked like the famous Gillete blades where apple essentially gave away the blades to lock in purchase of the razor – the high-margin ipod. That model defined value in a new way and provided game-changing convenience to the consumer. Moreover, Apple has historically relied on a set of partners to produce its products and, over time, has innovated its supply chain process as well. On the other hand, Google Inc initially adopted the pay-per-click business model for the search engine, and eventually expanded its application to targeted audiences. The focus was to build user loyalty and technical superiority, attracting venture capitalists such as Kleiner Perkins Caufield & Byers and Sequoia Capital. Sequoia had already made profitable investments in Apple computer, Oracle, Atari, and Cisco. Sequoia brought the business discipline needed for Google to become dominant. The model was based on selling key search words to advertisers using a combination of bids and clicking-through charges. The unique and specialized advertizing model of Google AdWords revolutionized the marketing business model. AdWords is a pay-per-click system that ranks or orders search results for sponsored links. How much the advertiser ultimately pays depends on bidding on per-click rates based on keywords, and on a quality score.

 

Equally, Microsoft established in 1975, is the world’s leader in personal computers operating systems and desktop productivity software. Windows, its operating system, runs on about 90% of the world’s two billion personal computers (Laudon and Laudon 2000, p. 315). Recently, Laudon and Laudon note that it has developed its own search engine, Bing, which has grown to about 10% of the search market (2000, p. 315). Its business model is based on continuous product improvement and innovation. It purchases existing technology and improves it to fit its own ideas – it has frequent product upgrades and increased applications development. It also Microsoft is reputed for its obstinacy, an important element for earning profits with a neoteric business model. Although it has not been successful in mobile computing, Smartphone software & hardware, and cloud-based computing software apps, the firm sees the enormous potential for development of applications in these areas.

 

Apple’s main strength is its capabilities in both software and hardware development. It is the leader in mobile software applications offering over 250,000 apps for its devices (Laudon, K., Laudon, J and Brabston 2012, p. 45). It designs and produces its own unique products from scratch, which distinguishes them from those of its competitors. Its operating systems, software and applications, are bundled with its products. Through this strategy, Apple has been able to provide complete solutions to its clients; this builds customer loyalty making many to favor its products and allowing it charge premium prices. Google’s main strength is its dominance in advertising with their search engine serving about 90% of the search market (Brookshear, 2012). It acquired Android, Inc., the developers of Android operating system, which has helped it enter the mobile device and applications market. Google has also acquired Motorola to strengthen its competitiveness in mobile Smartphone industry. Similarly, the company’s acquisition-of-rivals strategy to remain dominant has so far helped it counter its rival’s expansion. For instance, Hill and Jones (2012, p 67) highlight this through Google’s acquisition of AdMob, a mobile advertising company, when Apple was almost closing an acquisition deal with the company. On the other hand, Microsoft’s hugely successful Windows and Office sustains it while it experiments to identify the right strategy to succeed in new high-growth businesses.

Question 2: Why is Mobile Computing so Important to these Three Firms? Evaluate the Mobile Platform Offerings of Each Firm?

The mobile device industry has grown exponentially over the last decade. With the advancement in technology, it is now possible to integrate numerous additional functions and capabilities of the mobile devices. Mobile devices with advanced functionality and ubiquitous internet access are increasingly taking the place of conventional desktop computing as the most popular form of computing. Schimmer, Muller-Stewens and Sponland (2010, p. 9) estimate that the global mobile e-commerce market generates about $210.8 billion in revenues annually. Among the most popular internet activities performed on mobile devices are entertainment, games, news and e-mail. Gartner, a research firm, forecasts that, over the next three years, mobile phones will exceed personal computers as the way in which most individuals access the internet (Arthur 2012, p. 45). Correspondingly, the computer industry swiftly has perceived the demand to develop smaller computers with more wireless capabilities. Currently, mobile devices are used for 5% of all searches on the internet; in the next three years, they are projected to account for 23.6% of searches (Laudon, Laudon and Brabston 2000, p. 56). Due to this enormous market potential, the three tech titans – Microsoft, Google and Apple, want to tap into the mobile computing to maximize their profits, expand the market potential, work effectively, and satisfy their customers. Each, armed with different market positions and core capabilities, ventured into mobile computing to transform their current offerings for the innovative uses in the mobile age and gain competitive advantage to be the market leaders in the industry.

 

Each firm entered the mobile market in different ways and has different mobile platform offerings. Apple entered through developing its own high popular devices with its own software while Google and Microsoft entered as software providers with different integration strategies. Apple’s offerings include the iPhone, iPod and the iPad. It produces these Smartphone and tablet PCs under tightly controlled proprietary standards. The customers use applications downloaded from its App Store. Apple retains the exclusive say over the services and content its mobile users can access on their Apple devices. The firm’s iMac, iPod and iPhone, have been hugely successful. IPhone claimed a 5.2% of the global Smartphone market in 2007 increasing to 10.7% in the subsequent year (Hill and Jones 2012, p. 79). Further, they note that the revenues accrued to the firm from the sale of iPhone and related products were $123 million and $1844 billion respectively (Hill and Jones 2012, p. 80).

 

Google’s mobile platform offerings include mobile operating systems and lately, it has expanded to mobile devices. The firm acquired Android, Inc. the developer of Android operating system and its first smartphone run on this OS was invented in the market in 2008 (Brookshear, 2012). The OS is an open source platform with no proprietary obstacles. Google aggressively supports manufacturers of mobile devices and currently, it has entered into partnerships with HTC, T-Mobile and Motorola to produce handsets that operate on its Android platform. Brookshear documents that Google’s Android platform had a 2.8% market share in 2009, and it has since increased steadily. In 2010, it became the top selling smartphone platform in the United States making 33% of all smartphones sold (Schimmer, Muller-Stewens and Sponland 2010, p. 18).

In 2005, Microsoft launched Windows mobile 5, a windows operating system targeting all mobile devices including mobile phones and Personal Digital Assistants (PDAs) (Hill and Jones 2012, p. 98). The Windows software platform for mobile devices increased the company’s revenue from mobile and embedded services, but it was still a tiny fraction of total revenues. In its diversification strategies, Microsoft offers online gaming platforms such as Xbox live and MSN games but due to low demand, it was forced to shut down some of the MSN services. In 2006, the company’s operating system claimed a 5.6% market share in the smartphones following its partnership with HTC, a mobile manufacturing company (Schimmer, Muller-Stewens and Sponland 2012, p. 12). Later, an improved version of the Windows mobile platform, Windows Mobile 6, was launched as well as MSN mobile for customers using Windows-run mobile phones. However, these gains were temporary as Microsoft experienced a decline in the market share of its Windows Mobile platform after Google launched the Android OS.

 

Question 3: What is the Significance of Applications and app Stores to the Success or Failure of Mobile Computing?

Applications and App stores are particularly critical in the success or failure of mobile computing. Mobile computing is about the apps, and many businesses are developing and integrating apps in their daily operations. The app is becoming a popular way to interact with one’s customers. The competition among global tech titans such as Google, Apple and Microsoft is progressively becoming complex (Arthur, 2012). A winning strategy in mobile computing will not be only limited to developing platforms and devices, but also, importantly, applications to successfully run the devices. It is evident that that provision of personalized service will be essential for success. Through tightly controlled proprietary designs such as in the case of Apple, the company is guaranteed of some revenue from its app stores. The firm, for instance, Apple earns 30% of all revenues earned from the sale of apps (Laudon and Laudon 2012). Even free apps bring customers into the apps stores where they can be potential buyers of other apps and services, which are offered at a fee. For instance, according to Arthur (2012) Apple reports indicate that over 1.5 billion users have downloaded applications from its apps store. The advertising sector is also another area that benefits from apps and app stores. Google, Apple and Microsoft are all gearing towards integrating ads into various applications that are available in their app stores. Hill and Jones (2012) add that messages sent to mobile devices may also direct users or pass information about other websites or download data over the devices, which all translate into more revenues for the firm depending on the type of service. Apps and app stores significantly enrich the experience of using the mobile devices and without them, the future of mobile computing cannot be as bright as it is forecasted currently.

 

Question 4: Which Company and Business Model do you think will prevail in this Epic Struggle?

In the future, it is not obvious which firm among Google, Microsoft and Apple will prevail in this epic struggle. This is because these firms are continually developing and adopting innovative strategies and competitive moves that endeavor to maintain its market position and also create a head start in other areas where the has not ventured. The Internet industry is a highly competitive arena and one firm’s move is countered or matched by the rivals keeping them all abreast in the market. Each has its unique strengths, which are likely to help then maintain their competitiveness and positions in their respective arenas. Apple, Google and Microsoft will most obviously adjust their strategies and capabilities and endeavor to outdo each other in the different perspectives of the internet business. In the future, other factors such as timing, specificity in strategies and implementation of the each firm’s policies will strongly influence the success and determine which of them prevails over its rivals.

 

However, the path that Microsoft has outlined for the future of the industry fits its own path quite nicely. Its success in the Windows applications market is assured or at least difficult to challenge. By keeping the desktop PC users in a windows environment, Microsoft has eliminated any risk of serious competition in an entirely new era. The company has also effectively reduced the impact that 1-2-3 and Word Perfect can have in the near term, having windows versions of a word processor and spreadsheet first. Microsoft will doubtless make many refinements without establishing a strategy that can undermine its own applications. At its Microsoft Management Summit the company presented itself as an enterprise-class systems management company that reaches beyond just Windows environments, rivaling computer associates’ unicenter, IMB’s Tivoli, and others. Moreover, even though Apple appeared invincible, the development of Microsoft’s Windows operating system and several product failures led many to predict the failure of one of the computer’s industry’s most prominent companies.

 

Conclusion

The huge growth of the Internet and its forecasted potential has led to fierce triangular struggle and competition among the three radically different titans – Apple, Google and Microsoft. Each is fighting a series of pitched battles for control and dominance in different sectors of the digital business. Their main areas of competition are in the software, hardware and advertising ranging from the conventional personal computers to contemporary mobile devices. The reward for the firm that prevails will be enormous prosperity and revenues, and the opportunity to utilize that power to build a fresh set if tollgates on another part of the landscape or displace an existing rival. Their rivalry and competitive moves significantly change for the experience of the users and industry as a whole. In the future, the firm that prevails among Apple, Google and Microsoft will largely control the access, content and the way in which users use, interact with computers and conduct business.

Reference List

Arthur, C. (2012). Digital wars: Apple, Google, Microsoft and the battle for the internet.London: Kogan Page Publishers

 

Brookshear. (2012) ICT foundations management. Australia: Pearson Custom books.

 

Hill, C.W.L. and Jones, G.R. (2012). Strategic management theory: An integrated approach. Mason, OH: Southwestern Cengage Learning.

 

Laudon, K.C. and Laudon, J. P. (2000). Management information systems: organization and technology in the networked enterprise. Upper Saddle River: Prentice Hall.

 

Laudon, K.C., Laudon, J.P. and Brabston, M.E (2012). Management Information systems: managing the digital firm, 6th edition. Ontario: Pearson Education Canada.

 

Schimmer, M., Muller-Stewens and Sponland, P. (2010). The battle between apple, Microsoft and Google: strategic lessons from a converging internet industry 2000 – 2010. Switzerland: University of St. Gallen.

 

 

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