Microsoft Core Competencies

1. SEMINAR 3

2. Managing Core
Competencies in Software
Organizations
BY ANNI GUPTA
BY DEEPAK KUMAR

3. The idea of core competence
was introduced into management
literature in 1990 by C.K. Prahalad
and Gary Hamel.

4. Agenda
 Competencies defined
 Why competencies ?
 The diversified corporation
 Case Study
 Identifying Core Competencies
 Summary

5. What are core
competencies?
 Core competencies are the skills,
characteristics, and assets that set your
company apart from competitors. They are
the fuel for innovation and the roots of
competitive advantage.

6. Example
It has its own brands of database
management systems

7. Why Competencies?
 Even good marketing wont make a “me too” firm
competitive in the long run.
 Competencies are enhanced with time.
 Make or buy decisions are simplified.
 Non-competencies can be supplemented with
strategic alliances and licensing agreements.

8. The Diversified Corporation as a large tree
Trunk and Major Limbs = Core Products
Leaves, Flowers and Fruit = End Products
Root System = Core Competency
provides nourishment, sustenance and stability

9. From Core Competencies
to Core Products
Core Competencies Core Products End Products
Build world
leadership in the
design and
development of a
particular class of
product
functionality
Embed
competencies in
core products.
Maximize the
world
manufacturing
share in core
products -> shape
the evolutions of
end products
First, build up
advantages in
component
markets. Then,
leverage off
superior products
to build brand
share

10. MICROSOFT : Case Study
Product Lines
Microsoft software products are divided into eight
main families.
These include Windows, Servers, Business Solutions,
MSN, Office, Developer Tools, Games and Xbox,
Windows Mobile.
The other software products and services are
divided into four main categories. These include
Home and Entertainment, Hardware, Finance,
Books and Training.

11.  Among these end products, two operating
segments, Client and Business Solutions,
contributed to the majority of the company’s
revenue.
Client Solutions consists of
premium edition operating
systems, including Windows XP
Professional, Media Centre
Edition, Tablet PC Edition etc.
Business Solutions include
Microsoft Office, Microsoft
Project etc.

13. MICROSOFT Competencies
Microsoft clearly recognizes their core competencies that
bring them high revenue.
According to Microsoft, the objectives of the Microsoft
competencies are to help business partners differentiate their
skills and expertise to customers, extend their market reach.
This is inline with the concept of core competency.

14. Conclusion
Microsoft is able to identify its core competencies
to develop a well-structured business partners’
competencies guide. Microsoft continues to rip
benefits from its core competences and invests a
high percentage of their revenue in R&D each year
to remain competitive.

15. Identifying Core Competencies–
And Losing Them
 At least three tests can be applied to identify core
competencies in a company. They are:
 core competencies provide potential access to a variety of
markets
 make a significant contribution to perceived customer
benefits of the end product
 should be difficult for competitors to imitate
 Core competency can be lost…
 through outsourcing (Honda vs. Chrysler)
 by giving up opportunities to establish competencies of
existing businesses (color television perceived as a mature
product)

16. So What?
 If you don’t know what your core competencies
are, you may spin off a business unit that contains
your most competitive skills, employees, or core
products.
 Long term strategy involves constant innovation.
Core competencies provide a market position
that allows a company to influence what
products will be available in the future.

17. Summary
 Learn your competencies
 Develop your competencies
 Structure your organization around your
competencies
 Involve core products in all end products
 Outsource non-competencies with strategic
alliances and licensing.