Microsoft: Included with the purchase of the hardware

III – 1.1.2 Included with the purchase of the hardware

The most distribution channel used by Microsoft in order to sell the Operating System is through hardware(desktop or laptop computers as well as mobile devices such as cell phones).
You have of course here then several ways of distributing the final product but it depends of the partnerships you made with the hardware manufacturer.
For example the final product can be sold through: supermarket, special stores, online, partnership with public institutions such as schools etc...
It may surprise you but the way Microsoft is distributing his Operating System is totally illegal because in fact when you buy a computer it is always sold with Microsoft Windows included in the price. The distributor is hardly ever giving you the possibility to opt for a different Operating Systems. The only way to do so is to build your own computer, to go to court or to find very specific computers.
We could think that this distribution is fair because there is no alternative for the consumer but what about:
if you want to go for Linux rather than Windows, why should you pay 179€ more for a software that you do not want and/or that you do not need, Linux being free that is a chance but in some cases it is not so you are paying for two Operating Systems;
if you already paid an Operating System, the classic example is when you have another computer that you do not use anymore, you could easily uninstall your software from one to install it in the new one;
if you receive the software from a donation or if you only want the hardware for any kind of reason;

As you can see the way Microsoft is distributing his product is very special and should be analyzed very well in order to understand how Microsoft can be nowadays so profitable.

I mentioned previously a very interesting distribution channel that I would like to emphasize, the one of government and public administration such as schools.
This is a very strategical way of distribution. People have two ways to be familiar with the operating system: or they buy/use the computer or the product within their own circle(family, friends)or they are familiar to the computer/product outside their own circle(companies, schools...).
In the first case they have more or less the choice they want but in the other case it is more or less imposed by the company or institution.
As I said this is a very strategical approach because the strength of the operating system is the dependence it is going to provide on the long run. More particularly if you have been raised with this technology. For example when Microsoft has a partnership with a school and sell 500 computers with Microsoft Windows on it, it is not only 500 licenses that it is selling but the number of students who will use those computers and so raised with this technology who will buy Microsoft products and be dependent of them. The more people use the technology the more they get addicted and the least they are going to be ready to try another one.

Microsoft: Strengths and weaknesses of individual distribution

III – 1.1.1.1 Strengths and weaknesses of individual distribution

Weakness:
As I said previously selling individually this product has a very low demand because the operating system is always sold with the computer and will maybe cover the whole life of the hardware. The problem is that Microsoft has to provide this solution anyway to its customers. A small market but divided a bit everywhere means a lot of money to allocate to a marketing campaign and of course a strong repercussion on the final price of the product.
If price is high then(and moreover in the software industry) people will look for substitute products which means in some cases: Piracy.
The best example we can find on the Internet is the one of the introduction of Windows Vista in China.
Two weeks after his introduction in China only 244 copies have been sold whereas Microsoft spent millions and millions of dollars in advertisement.
http://keznews.com/2726_Microsoft_Only_sold_244_copies_of_Genuine_Windows_Vista_in_China
The reasons of this small amount of those copies sold are in fact two:
- The first one is the price of the software. Microsoft sold it initially to 201$ but then discounted until 66$ and this for two reasons: Chinese people cannot afford a such price and in Chinese culture Chinese people are ready to pay a high price for the hardware but not for the software(notion of service is different);
http://www.pcworld.com/article/135463/microsoft_cuts_vista_price_to_66_in_china.html
http://www.mydigitallife.info/2007/08/06/microsoft-annouced-windows-vista-price-slashing-for-china-market/
- The second one is the Chinese copy culture, a recurrent economic problem.
In most of the streets you can find a copy of the operating system.
http://news.softpedia.com/news/Windows-Vista-On-Sale-in-China-45008.shtml

Strength:
As Microsoft's chairman says “let them pirate software developed by Microsoft -that increases the overall number of Microsoft software users and some of them may eventually convert into paying customers.”
It is even profitable to Microsoft in one way because “Indeed, in China's back alleys, Linux often costs more than Windows because it requires more disks.” so Piracy is in one hand giving less profit to Microsoft Windows but on the other hand is making rid off one of his main competitor.
http://labnol.blogspot.com/2007/07/we-love-microsoft-software-piracy-in.html

Microsoft: Individual distribution

III – 1.1.1 Individual distribution

I do not have the exact figures regarding how much does the individual distribution of Microsoft Windows is regarding to the one including with the selling of the software. But taking in account that the change of an operating system is driven by the obsolescence of the hardware and that the operating system has always been sold with the computer, then there are good chances that individual selling are representing only a small piece of the whole cake.
Regarding this individual distribution it can be divided into three parts:
You can buy the product at any stores which is distributing the Operating System(specialized stores, supermarket...). Contrarily to Apple with the Apple stores Microsoft does not have his own physical outlet; http://www.bestofmicro.com/actualite/25967-Microsoft-Apple-Store.html
You can buy it online. For information Microsoft online personal stores just opened, it seems that it is the way Microsoft prefer instead of providing physical stores http://windowsteamblog.com/blogs/windowsexperience/archive/2008/11/13/introducing-the-microsoft-store.aspx
https://emea.microsoftstore.com/de/
You can receive it as a donation, this is the case for Microsoft in Africa for example; http://online.wsj.com/article/SB122332198757908625.html?mod=googlenews_wsj

Microsoft: Distribution channels for Microsoft Windows

III – 1.1 Distribution channels for Microsoft Windows

The Operating System Microsoft Windows can be sold in two different ways:
Individually;
Included with the purchase of the hardware;
If the first one seems obvious the second one is a bit unexpected and actually illegal according to the law.

Microsoft: Microsoft Live Search: Search engine

II – 1.3 Microsoft Live Search: Search engine

Before November 2004 Microsoft was dependent on other companies technologies regarding their search engine. But after this period Microsoft developed his own product by itself.
Live search is an online web search engine available at http://www.live.com/ . It is a service which is in direct competition with other big search and worldwide well known engines such as Google(created in 1998), Yahoo(created in 1994) and Baidu(created in 2000).
Microsoft Live Search is the fourth most used search engine in the world after Google, Yahoo and Baidu.
What makes this search engine very interesting to study is that it is definitely not following his competitors for its distribution channels. Which actually is quite amazing because Microsoft has for reputation to be a follower regarding innovations on technology(except for the operating system).

Microsoft: Microsoft Windows: Operating System

II – 1.2 Microsoft Windows: Operating System

Microsoft Windows is the famous Operating System(cf. Glossary) which made the success of Microsoft.

This product is dominating the market of computers(desktop and laptops) with an incredible 90% of market shares(2008).

Economist are speaking about a monopole of the market. This situation is moreover enforced by the fact that his two main competitors are not really playing on the same market: Mac OS(from Apple) seems to be focus on a niche and Linux(specialized in Web Server Operating System) is more targeting advanced users.

In order to understand better this monopole we have also to take into consideration that most of the computers sold in the world are sold with Microsoft Windows. In customers mind it is even sometimes unthinkable(unfortunately for its competitors) that a computer cannot be sold without Microsoft Windows.

Microsoft: Microsoft Corporation

II – 1.1 Microsoft Corporation

Microsoft has been created in April the 4th 1975 by Bill GATES and Paul ALLEN. It is nowadays a multinational computer technology corporation which develops, manufactures, licenses, and supports a wide range of software products for computing devices.
Its best selling products are:
- Microsoft Windows(Operating System);
- Microsoft Suite Office;
Microsoft is also present on the hardware market with some accessories for computers such as mice and keyboards as well as in the video game market since 2001 with the Xbox.

In 2008 Microsoft counts 89,809 employees over the world located in 105 different countries.
The famous Bill GATES has been the CEO of the company from his creation until 2000 when he decided to take some distance by taking the position of chairman. The current CEO of Microsoft is Steve BALLMER.

As we can imagine Microsoft has a wide range of products and services. In order to make this presentation as focused as possible on the topic I decided to choose two products provided by this company:
One is the famous Operating System: Microsoft Windows, all versions included: Windows 2000, XP, Vista... as well as editions for example: Windows Vista Starter, Windows Vista Home Basic, Windows Vista Home Premium, Windows Vista Business, Windows Vista Enterprise, Windows Vista Ultimate...
and the other one is the Microsoft web search engine: Live Search.

I chose Microsoft Windows in order to have a product which fits well the requirement for the examination of the Distribution Policies course and Live Search because I needed to continue my research regarding the world of search engines for my final master thesis.