Housing Market

I read an AP article talking about the housing market and its current conditions. It says that the the past 6 months (March-August) has been the worst stretch (based on number of homes bought) in the housing market since record-keeping began. Due to the poor economy, many buyers are reluctant to make what is seen as a "big risk" purchase like a home.

Using the Porter's 5 forces model we have discussed in class, we see what makes the house selling industry so poor right now. Due to the incredibly low demand, buyer power is increased drastically. The article talks about someone who was able to buy a house for $35,000 less than the appraised price for the house they are buying. Situations like this are everywhere. Those selling homes are so desperate to make a sale that they are willing to accept offers for much lower than they should.

Also, the main substitute to buying a home is renting. Because there are so many people with property that they are not able to sell, it is easier than it has been to rent and is increasing the popularity and demand for renting. Thus, the availability of this substitute also negatively affects the housing market.

It is interesting to use the Porter's 5 forces model to analyze an industry and you can quickly pinpoint certain factors that play a big part in creating the success (or lack of it) in an industry.

Microsoft

I read in the WSJ an article entitled "Microsoft's Successful Move Toward the Cloud." It talks about Microsoft Office 365 and its features that allow users to work in the "cloud," meaning that they do their computing online, with their work being saved online, etc. As we discussed in class, Microsoft has made their money by finding a deep profit pool in the software industry that has allowed them to be very successful, while others, such as IBM and other computer manufacturers have had difficulties.

The article specifically mentions that Microsoft realizes that the growing trends towards computing in the "cloud" and the popularity of tablets such as the Ipad and smartphones are weakening their previous strong position in the software industry. As more and more software applications become delivered over the web and through devices such as the Iphone and Ipad, the use of Microsoft operating systems will decline. It seems like Microsoft's latest push towards computing in the cloud is their attempt to find a new profit pool that will deliver continuing profits that shareholders of the company have come to expect.

I see this as a very good example of a company that has thrived on finding their own niche in the computer industry continually striving to stay one step ahead of the game and hold their market share. We'll see how things turn out for Microsoft, but one thing is for sure: their understanding of the principle of profit pools and their dedication to constantly finding new profit pools will continue to benefit them in the future.

WSJ article: http://blogs.wsj.com/digits/2011/06/28/wall-streets-views-microsofts-successful-move-toward-the-cloud/?KEYWORDS=office+365