Evaluating Microsoft's Environmental Threats (Chapter 3)

 Chapter 3 - Evaluating Environmental Threats

This chapter discusses how to identify and neutralize environmental threats and introduces some models. Interestingly enough the book uses Microsoft as an example for the Structure-Conduct-Performance (SCP) model. They describe Microsoft as a monopoly with the following SCP model:

Structure (industry)
- One firm

- Costly entry

Conduct options

- Use market power to set prices

Performance

- Competitive advantage

Since the SCP model was given in the book, I'll will use Michael Porter's Five Forces model for the environmental threats of Microsoft.

1. Threat of Entry

- There is a moderate treat of a new entry against Microsoft due to potential success of a lower switching cost. 

2. Threat of Rivals

- There is a strong threat from rivals against Microsoft. Many companies such as apple are trying innovative ways to produce computers and software that is easy to use and attractive to consumers.

3. Threat of Substitutes

- There is a weak threat for substitutes against Microsoft's current products. The firm performs very well in the industry and continuously advancing technology to reduce the treat of being substituted.

4. Threat of Suppliers

- There is a moderate threat against Microsoft due to supply conditions. Overall there is a decent size and population of suppliers that could create a force on Microsoft but to a limited degree.

5. Threat of Buyers

- There is a moderate to low treat against Microsoft due buyers. There are cost reasons to switch companies, but the overall high satisfaction and low substitution risk lower the treat of the buyers.