Markets Driven vs Driving Markets Approach

April 19, 2018 Philosophy

Discuss the conflict between the “market driven” and “driving markets” approach of Microsoft. Which approach do you consider Microsoft utilizes? Customers first? Or innovation driven? Justify. By Viola Mosweu & Nkosana Nkomo Microsoft employs two approaches in being market oriented-a market- driven approach and a driving markets approach. Market driven refers to a business orientation that is based on understanding and reacting to the preferences and behaviors of players within a given market structure.

Driving markets, on the other hand, implies influencing the structure of the market and / or the behavior(s) of market players in a direction that enhances the competitive position of the business, in this case Microsoft. Jaworski, Kohli & Sahay (2000:45). Microsoft during this time accepted the current behavior of players (e. g. , how, when, why customers purchase a particular offering).

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Initially Microsoft accepted the market structure(or industry structure or value chain(Porter, 1985)which is a set of players and roles played by them) as given and did not eliminate and /or modify the roles of existing industry players because Bill Gates and Paul Allen in the mid 1970s developed the BASIC computer language for the Altair 8800 an IBM machine and the introduction of the MS-DOS operating system on the IBM personal computer(Microsoft Corporation, 2000:18-20) and the debut of Microsoft word for MS-DOS 1. 0.

It was this philosophy of accepting the market structure and behavior as given that predicated Microsoft to learning, understanding, and responding to stakeholder perceptions and behaviors within the technology market structure. This was a company focused on maximizing short-term return on investment. In gaining the status of being market-driven, Microsoft had to engage its customers, listening to their needs, taking a long hard look at end-markets and paying attention to customers’ demands before proceeding to develop a technology platform or products was the Microsoft market-driven approach to product development and management.

Market-driven companies produce sustainable products with visibly notable targeted value. The biggest reward is that a market-driven product helps establish market leadership and revenue-growth potential. (Steinhardt, 2010). Market-driven management is a cross-functional effort involving all levels of a large organization and all members of the small-business team. It is aimed at ensuring that all activities of the small-business team are coordinated to meet specific needs of targeted customer groups.

With its focus on the five “Cs”–customers, competitors, capabilities, costs and cross-functional efforts–it involves all aspects of the small business in reacting to the market that is being served. (Zinnecker, 2010) It was not until the early 1980s that Microsoft began changing the shape of the market structure and behavior by pursuing a driving markets approach while being rooted in the market driven approach that gave it impetus to become a domineering small company. Driving markets entail changing the structure or composition of a market and/or the behavior(s) of the market.

Microsoft changed the market structure by fundamentally changing the roles it performed in being a developer into being a manufacturer. In 1983 Microsoft shipped its first mouse (Microsoft corporation, 2000:44) and the Microsoft Graphical User Interface (GUI) (Microsoft corporation, 2000:22;68). This became the initial point in changing the composition and or roles of players in the market and or behavior(s) in the market. More important, driving markets is a multiplicative function of two key dimensions: (1) the number of changes effected in the market, and (2) the magnitude of those changes. (Jaworski et al).

Of note the Microsoft IPO in 1986 which was to generate sufficient investment to pursue the changes it believed customers were desirous of but couldn’t find in the products being offered at that time. It was the market driven approach that enabled Microsoft to know this and exploit the opportunities faster than other could even dream of. They introduced Microsoft office 1. 0, visual basic, windows NT, Windows 95, Internet explorer, Office 97, MSN Gaming Zone, Change of leadership from Bill Gates to Steve Ballmer, windows 2000, windows vista, office 2007, windows server 2008 and visual studio 2008 and now its latest product windows 7.

At each stage Microsoft began anticipating market needs and behaviors by analyzing business and end user processes, challenges and problems of end user and programming problems by developing a improved but not a perfect product that attempted to ease some of the difficulties of computing until such a point where customers begin anticipating the new product will replace the previous one with improved and salient features that make the experience of computing an enjoyable one.

The magnitude of the changes were magnificent such as that in 1978 a small company was able to exceed $1 million sales mark, IN 1983 OVER 100 MILLION MICE WERE SOLD, the IPO price for its shares was $21. 00 per share, 1 million sales of windows NT in 4 days, 10 million plus MSN gaming members and so on. Currently, Microsoft has a market orientation in which the two approaches are complementary since both approaches represent a market orientation that entails a focus on customers, competitors and broader market conditions (Kohli and Jaworski 1990).

The two approaches are complementary, not substitute in relation to Microsoft because they are simultaneously attempting to protect cash generating old technology and attempting to build a business for the future with a new technology. According to Abell (1993) this is a dual strategy because Microsoft is confronted with balancing the need to manage the present business opportunities while concomitantly planning for the future (Hamel and Prahalad, 1994)

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