Microsoft (MS)
This is about a small technology company started by two college drop outs in 1976, Gates and Allen from the Seattle area, who are developing software for new mini-computers a. The business environment, or what problem is this trying to solve or why it is needed?
With the development of mini-computers (Tandy, Commodore PET (personal electronic
Transactor) Atari) there is a growing need and market for operating systems and applications for mini-computers. Today hobbyists are piecing together components to build mini-computer and meet their need for a smaller computers. Hobbyists and techno-geeks need software programs to do stuff on these computers. There is some stuff available, but it is limited and not easy to use- so most have to do their own programming. While this is fun for programmers, there are limited applications that the average technologically inclined person can use, and so there is not much that one can do with min-computers. More importantly, because there is limited memory capacity, the code needs to take up little memory and needs to be very efficient. Hobbyists represent also represent a limited market. If MS could develop more user-friendly programs, more users would be able to use mini-computers; MS could sell more software, and make more money. Currently MS develops basic and other languages for mini-computers. But MS would like to create business product division license to bigger companies. While MS has done okay, MS has not hit a home run. e.
Product design / development
MS strategy is to make using mini-computers easier for the non-technical people to use.
MS will design it so the user just needs to stick a floppy disk into a floppy drive and the just start it up. The DOS disk will automatically read the disk and book up the operating program to run the computer. The average user does not really care about the computer operating systems. MS just need give them a few instructions like how in insert and remove the floppy disks, and to teach them a few commands so they can run
VisiCalc (spreadsheet) and Word Perfect.
MS plans on using standard
5 ¼ inch floppy disks that have been around for the last 3-4 years, used by Apple and Wang, and invented by Shuggart. With the Floppy Disk drives already developed, MS just need to figure out how to ship the software with the mini-computer by the manufacturer
– MS don’t need to sell retail and spend any money on marketing.
The problem is that MS have not been able to develop this type of program. However,
Gates knows this dude over at Seattle Computer that developed this program called
QDOS, for quick & Dirty Operating System that does all the things MS wants. Since
Seattle Computer doesn’t have all the resource (i.e. think money) and connections like
Gates does, Gales thinks MS can buy it off of them and rename it DOS call it something sophisticated like Diagnosis Operating System, even through it doesn’t diagnosis any.

b.
How will you market?
Gate’s mom, who sits on a number of corporate and charity boards, knows the chairman IBM who sits on a board with her. She is able to connect MS with the IBM executives making the decisions on the type of operating system for their new minicomputer, code name “Personal Computer,” or PC for short. If MS can cut a deal with large, reputable computer company, that would be huge. Second,
Gates’ Dad is big corporate attorneys that can represent MS during negotiate. The Gates attorney instructs MS to retain the rights to DOS. MS should only sell a license for IBM to used
DOS, not sell it. That way, MS can also sell MS-Dos to other PC knock off makers.
Since users don’t really care about operating systems, but applications, MS will let other companies kill each other like VisiCalc & Lotus, Word Perfect, but MS will make $$ on every mini-computer sold. MS strategy is to make using mini-computers easier for the non-technical people to use c.
What is your operation plan, (how will you execute this idea)?
Very little. Manufacturing of floppy disk is very standardized, MS buys equipment from
Shuggart, which is available on the open market and used by a dozen companies. MSdos is design as open system to run on multiple computers. d.
A little financial information (sales, price, operating, overhead, and marketing expenses)
So far, MS have been able to finance our start up with million-dollar trust money left by grandfather and loans from my rich parents. But now MS need to set prices to make lots of money
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DOS Retail price: $99
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Licensing Price: $95,000 for unlimited OEM (Open Ended Manufacturers)
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Market potential 20 million copies

Revenue: $2 Billion a year, which is a lot of money in 1982
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Expenses: $10 million / 128 employees o Cost pennies to make the disk and about $1 for each package box o Staff to write technical manuals, (basically a dictionary of commands) o Administration support staff o Hire the best programmers, limited competition o Rent, computers

Post Scripts
June 25, 1981 Microsoft incorporated. In July 1981 Microsoft brought all the rights to
QDOS and in August 1981 Microsoft sign a licensing deal with IBM
Microsoft also happens to have been the beneficiary of one of the most spectacular blunders in the history of business: the licensing deal for DOS.
No doubt Bill did everything he could to steer IBM into making that blunder, and he has done an excellent job of exploiting it, but if there had been one person with a brain on IBM's side, Microsoft's future would have been very different. Microsoft at that stage had little leverage over IBM. They were effectively a component supplier. If IBM had required an exclusive license, as they should have, Microsoft would still have signed the deal. It would still have meant a lot of money for them, and IBM could easily have gotten an operating system elsewhere.