Microsoft's Performance and Competitive Advantage (Chapter 2)

Ch. 2 - Firm Performance and Competitive Advantage

This chapter gives detail and measurements on how to determine if a firm is doing well. The ability to create more economic value than rivals is competitive advantage. Next the chapter gives many quantifiable measurements and calculations to determine a firm's competitive advantage. Finally the chapter touches on stakeholders and how various stakeholders' may judge performance differently.

Microsoft:

When speaking about competitive advantage, Microsoft tends to have a sustained competitive advantage, especially in the software and personal computer segment. Of course there are moments of temporary disadvantage when the rival companies such as Apple are able to grab at some economic value. 

There were many quantifiable measures to determine competitive advantage. Microsoft's economic profit calculation for 2020 is shown below:

Net operating profit after taxes (NOPLAT) - 46,746 million

Cost of capital - 11.92%

Invested capital - 95,583 millions

Economic profit = 46,746 – 11.92% × 95,583 = 35,352

This figure from Stock Analysis on Net highlights Microsoft's sustained advantage over the years but also a temporary disadvantage seen in 2018.