Make sure you use the extension zip when creating the archive.
check out this script: https://github.com/appronto/scripts it uses 7zip's exe as well.
Extract the widget to the new dir
adjust your widget
Just copy the UpdateArchive_DRAG_MPK_HERE.cmd and the exe in the widget dir and drag the existing mpk over the script.
if you create custom widget please use the boiletplate/yoman of Mendix: https://github.com/mendix/generator-mendix
@saiteja this is a default Windows warning message making sure you do not change an extension by mistake. However, if you properly ZIP and not 7zip (7z) the folder and then change the extension to MPK you will get the message but if you choose yes, all will be fine and your extension will be changed.
As Pim mentioned it is, however, advisable to use one of the scripts to make this process a little bit faster.