Question

The Yahoo/Microsoft partnership, while the Silicon Valley talk, has employees concerned at Yahoo about more layoffs in the Yahoo search department. The deal teams of two of the biggest technology companies against Google for the lucrative control of the internet search market. Analyst believe that, in the short term, Google would has little to worry about but in the long term they may depending on how advertisers respond to the idea of a larger #2 in the search advertising market.

Google, currently, has 65% of the market while Yahoo has almost 20% and Microsoft at a distant third with less than 10%. The managing editor for CRN Magazine considers this absolute steal for Microsoft in that Yahoo wins the ability to stay an independent company with a huge new friend. Reporters say consumers won’t notice changes right away but the partnership will benefit consumers over the long run because it doesn’t hurt to have a very strong #2 in search. With consumers receptive to the move, analysts believe that it will boost Bing’s exposure to Yahoo’s audience giving Microsoft its desire for a greater share of Internet advertising. Yahoo is reserving the right to retain control of the user interface which will control the look and feel of how the search results will be presented but the technology is all done by Microsoft. Analysts predict a tie in to remind people that Bing is what’s providing the results which is key to branding for Microsoft.

Question: What corporate-level cooperative strategies do you think we can expect between Microsoft and Yahoo? Explain. Provide your rationale. Choices are diversifying strategic alliance, synergistic strategic alliance, or franchising.

Answer 1

Google owns 65% of the market while Yahoo has almost 20% and Microsoft with less than 10%. The Yahoo/Microsoft partnership will help Yahoo win the ability of staying an independent company with the backing of a Microsoft. Also, the partnership might help propel it into a #2 spot in search.

Yahoo and Microsoft should follow be a synergistic strategic alliance as Microsoft Bing would get Yahoo's audience for a greater share of Internet advertising and Yahoo would reserve the right to retain the control of the search engine's user interface backed on the techology provided by Microsoft.

The major benefit of a strategic synergistic alliance would be the sharing of risks between the partners. A strategic alliance can help them gain knowledge and expertise. Further, both partners can contribute market knowledge, skills, brands, and assets resulting in a set of resources that is more valuable than if the partners had kept them separate. The strategic synergistic alliance can be used to take advantage of a favorable brand image that has been established by one or both of the partners (Yahoo in case of search engines and Microsoft in terms of the technological support provided).