Using any one of these approaches, can you ascertain whether Microsoft has a competitive advantage over Apple? Why or why not? From which approach is Microsoft looking the best? Explain. What was Microsoft’s strategy before Nadella was appointed CEO in 2014? What is it now under his leadership? Do you agree that Nadella has formulated a promising business model? Why or why not?

Case Study- Microsoft MGT 4800

When a company is in turnaround mode, it has experienced a prolonged period of competitive disadvantage and needs to undertake significant changes in its strategy and/or business model to regain its competitiveness. Over time, Microsoft’s competitive advantage turned into a competitive disadvantage, lagging Apple by a wide margin (see Exhibit 5.3). In 2014. Microsoft appointed Satya Nadella as its new CEO. He wasted no time moving Microsoft’s strategic focus away from its Windows-only business model to compete more effectively in a “mobile first, cloud first world,” the mantra he used in his appointment e-mail as CEO. Under his leadership. Microsoft made the Office Suite available on Apple iOS and Android mobile devices. Office 365. its cloud-based software offering, is now available as a subscription service. Software applications can be accessed on any
device, any time, with online storage, combined with Skype’s global calling feature. Nadella still needs to work hard to ensure Microsoft’s future viability. however. Although Windows and Office were cash cows for so long, currently still generating some 40 percent of revenues and 75 percent of profits, both continue to decline. The problem Nadella now faces (due to Microsoft’s “monopoly” position) is that the gross margin of “classic” PC- based Office is 90 percent, while the gross margin for Office 365 is only around 50 percent. Satya Nadella, Micro Nadella’s strongest departure CEO. from the Windows-centric strat- Sean Gallup/Staff/Ger.) Microsoft already uses GitHub for its own service development and hopes that GitHub developers in turn now will be more likely to write new software for Azure, Microsoft’s cloud computing services. In this space, Microsoft also has already made significant strides. Its Azure cloud business reported $23 billion in sales in 2018, second only to Amazon’s AWS with $27 billion in sales. In five years under Nadella’s leadership as CEO, Micro- soft has enjoyed a successful turnaround and a stock market valuation that almost tripled from $301 billion in 2014 to $896 billion in 2019, thereby creating $595 billion in shareholder value (see also Exhibit 5.3).52

Questions
1. This chapter introduces several approaches to assessing a firm’s competitive advantage. Using any one of these approaches, can you ascertain whether Microsoft has a competitive advantage over Apple? Why or why not? From which approach is Microsoft looking the best? Explain.

2. Microsoft CEO Satya Nadella has made drastic changes to Microsoft’s strategy. What was Microsoft’s strategy before Nadella was appointed CEO in 2014? What is it now under his leadership? Do you agree that Nadella has formulated a promising business model? Why or why not?

3. Looking three to five years into the future, who do you expect will have a competitive advantage: Apple or Microsoft? Explain.