Strategic Management: Analysis of Microsoft's Business Strategies

This report analyzes the strategic management practices of Microsoft, including their business strategies, approaches, and the evaluation of strategic and theoretical models. It also examines the impact of various internal and external factors on the organization's global expansion.

Strategic Management

EXECUTIVE SUMMARY
This report highlights the various inner and outer factors which has influenced the organization's
business, their analysis with application of fundamental issues arising in business strategies and
approaches. The evaluation of strategic and theoretical models and methodologies against the
observation of the practices being followed by Microsoft for its global expansion.

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Origins and approaches to strategies:..........................................................................................3
Complexity of relationship between the organization and its environment:...............................5
Microsoft's Global Business Strategies ......................................................................................7
Application of Strategic Ideas in Practice.................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Strategic management is system of constant planning, controlling, monitoring and
assessments of all that important factors to meet organization goals and objects. Strategic
management is responsible for providing specific direction to company. It also forces company
for becoming active rather than reactive.
Microsoft corporation is a global brand, which dealing in software services and technical;
services. It provides different computer software to the world like MS-Word, MS-Excel, MS-
Power Point etc. the company provides it services in overall world. This study explains the origin
and various strategies which are used in Microsoft like Porter's Five Force's. These study also
analysis different factors which may impacting on Microsoft environment. These study also
includes international and global strategic thinking of company and applications of strategies
ideas.
MAIN BODY
Origins and approaches to strategies:
Microsoft is a multinational technology based company. It is founded in April 4, 1975 in
New Mexico, US. It develops computer systems, software, electronic and personal computers. Its
popular software products includes Microsoft word, Microsoft excel, internet explorer etc.
Microsoft use different strategies for managing and improving the business i.e. “ cloud first,
mobile first”, growing through merger and acquisitions, focusing on augmented and virtual
reality and promoting “ tech intensity”.
Porter's 5 force's:
It is a tool that analyze and identify five competitive forces that design an organization.
Also, help firm for identify the strength and weakness. This model can be use at any level of
industry to search for attractiveness and profitability. This model, helps to inform why various
business are capable to sustain in contrasting levels of profit. This model is used to measure
competitions, profitability, attractiveness of an industries and market. Theses forces are: Competitive strength of other industry: This model helps Microsoft for identify the
numbers of competitors in market and quality to undercut an organization. It also helps
company to identify the numbers of similar products and services their competitors
supply in market. Microsoft company distributors and customer can overcome
competition if they are able to offer better deal, services and lower prices to their

customers. Antonymous, when organization rivalry is reduced, industry has great
opportunity to charge high rates and set terms to achieve high gross sales and
profit(Ansoff and et.al., 2018). Threat of new entrants in industry: The Microsoft performance and profit is also effect
by the new entry in market. The less money and time it costs for a challenger in industries
market and also be an effectual competitor. An organization with powerful obstacle to
entry is a charismatic attribute for organization that let them to charge great amount and
negotiate in better terms. In Microsoft threat of new entrants is low just because of strong
barriers of competitors and for expensive software. Brand loyalty also play vital role in
company. Therefore, in hardware sectors many industries are grown and capture the
small market, but they are still unstable or small scale industries. Thus, the threats of new
entrants in Microsoft. Power of suppliers:This force address that how well suppliers can drive up the value of
inputs. Power of suppliers is affected by the numbers of suppliers, goods and services,
inputs and how company to switch one supplier to another. In case of Microsoft,
company don't have many suppliers. The suppliers of the Microsoft supply only hardware
products like tablets, game consoles etc. Because software is a system and it is produce
and design in the house. The suppliers of the company feel prestigious as a label of
Microsoft. The suppliers of industries are not in positions to bragging the price, because it
is already fix by the company. Therefore, in Microsoft bragging power of suppliers is low
(Meyer, Neck and Meeks, 2017). Power of Buyers: This is the ability of customer to drive price down. It is affected by
how many buyers and consumer of company have. In Microsoft, the power of buyer is
moderate. Because, the consumers which are using the products and services of Microsoft
will not easily transfer to the software and services of competitors although it provides
same quality products and services. The reason behind this is the switching cost, as the
consumer of Microsoft they are used to software of company and can use it very
effectively and efficiently. Thus , the customers of company are fluently use the services
even if the company slightly increase the price. But it is not applicable the service of
hardware, consumers switching cost is very low and numbers of products are available in

market. Overall, bargaining power of buyers are average in company(Moutinho and
Vargas-Sanchez, 2018).
 Threat of substitute: Substitute of products and services are used in place of company
goods and services that poses threat in organization. In Microsoft threat of substitute is
low. Because substitute of software are automatic writing and evidence keeping, which
are become outdated now. Hardware substitute such as tablets, are use for writing, for
keeping records also carry camera, it is performed all functions. So, Microsoft don't have
any kind of threat of substitute(Ginter, Duncan and Swayne, 2018).
Illustration 1: Porter five forces
(Source: Porter five force model (Porter analysis) on Microsoft, 2017 )
Complexity of relationship between the organization and its environment:
It is provided great details about challenges of Microsoft company and will face in
prevailing macro environment other than competitors forces. There are some forces which affect
the relationship between Microsoft organization and its environment:
The very first factor which affect the organization and environment of Microsoft, is
Political factor. Microsoft operating their business in a dozen countries and exposure itself to
different types of political environment and risk. Microsoft is closely analyzed following forces
before entering in new market, they examine the political stability in country economy. They
also examine the level of corruption in especially in technology sectors. Company also identify
legal framework, taxation rates in country, trade and tariff related to technologies, business
software and services related anti-trust laws, minimum wages and overtime cost in different

countries, employees benefits as per country norms etc. That all political factor impact on the
culture of Microsoft. The next which is directly affecting the organization and its environment is
economic factors. The macro economics forces like savings and interest rates, inflation rates,
foreign exchanges are determined the economy of Microsoft. There are some economic factors
which are company consider in software and service industry i.e., different types of economic
systems countries has and their stability in market, government intervention in market and the
technology, also affected by the exchange rate of host county, skills workers in technology and
software business, lab our cost and productivity and different types of rates like inflation,
unemployment, economic growth, discretionary etc(Lasserre, 2017).
The another factor which impact Microsoft organization its environment is technological
factors. In these forces effects technologies and macro economic of computer technology
industry. Company needs to combine following technical factors like rapid or quick changes in
mobiles, increasing volume of online transportation and automation in organization. This types
of opportunity are base on high demands of mobiles. Microsoft itself also conduct analysis of
technical factors like impacts of technology on product offering, impact on cost structure of
company, impact of value change and technological diffusion rate etc. this all factors are
responsible for technical changes in environment of firm. Microsoft climate also affected by the
environmental changes in country. Microsoft deals in dozens market in world and each and every
market has different environment standards and norms. It is the policy of Microsoft management
that they are determined all the environmental changes before entering in new markets which
affect their business. These factors are is weather, change in climate, laws regulating
environment pollution, air and water pollution rules, recycling, waste management for technical
sectors, CSR activities etc(Hitt and Duane Ireland, 2017).
The next factor which impact on Microsoft performance is social factor of certain
country. The culture of society and way of doing things are affect the business of Microsoft.
Because in these factors peoples belief and attitudes are major factors and play great role in
market that how Microsoft will understand the need and demands of customers in market.
Microsoft also examine the country social factors like demography and skills of people, structure
of society, education level of peoples, culture, attitudes and leisure interest of society. The last
factor which affect the relationship between organization and its environment, is legal factor.
Before entering in new market Microsoft carefully examine the legal structure of company,

because it can lead to theft of company secrets. Microsoft also examine the anti-trust law and
discrimination law before investing in new country. The company also analysis patent,
copyrights and intellectual property law because these laws are very necessary for Microsoft
company. The another legal factors which are identified by the organization is the employment
law, data protection, health and safety norms in country and consumers protection laws. These
laws are relevant to the company important and confidential data, health and safety measure of
their company employees which securities are provided by company itself.
So, they are the basic forces which affect the culture, environment of Microsoft company.
By following these forces company can improve the quality of products and services, also
improve the profitability of firm in market(Hill, 2017).
Illustration 2: Pestle analysis
(Source: Microsoft Corporation Pestle analysis, 2017 )
Microsoft's Business Strategies
Microsoft is a developer of hardware and software products worldwide which has gained
a capitalisation of market of nearly $200 billion, with its targeted markets in almost every
country. For being a digital corporate organisation it adopted various global strategy in recent
years. For which new strategy was announced by the CEO, so that the company works together,
which was named as 'Microsoft Strategy'

It emphasis its necessity for survival in the market and providing economic justice to the
consumers by growing diversely in the global market. For achieving closer alignment with the
less developed market for improving the speed of penetration, it diversifies itself globally.
Microsoft's business Strategy includes three elements which are:
 Cloud- First, Mobile-first: This business strategy adopted by Microsoft has proved to be
the great stand towards the competitive advantage in the global market and also more
emphasis is done on business' cloud division. Microsoft's strategy 'Mobile First ' is
adopted for better flexibility and versatility of technology for which due attention was
needed. By September 2019, Microsoft has beaten Amazon in 10 months revenues of
cloud. Microsoft has earned USD 20.5 billion revenues, and whereas revenues earned for
that period by Amazon amount to USD 15.5 billion.
 Promoting 'Tech Intensity': Recently, It has adopted new business strategy for focusing
more on Tech intensity. This is a blend of mindsets of different cultures and proceses of
business which helps in development of the company and increasing its capabilities
digitally and also helps to overcome the hurdles and giving feedback and creating
opportunity from the same. The ultimate objective and goal behind 'Tech Intensity' by the
company is making Azure world's computer, by adding increasing number of corporates
with this platform(Morden, 2016).
 Growing through Mergers and Acquisitions: Microsoft engages itself in corporate
restructuring activity through entering into mergers and acquisitions so as to increase its
working capabilities in wide range of products and services for offering values to its
customers. In recent years it has completed 20 acquisitions of a wide range of companies
dealing in software, hardware, video games, etc.
1. Focusing on Augmented and Virtual Reality: Satya Nadella, CEO of Microsoft has
given vital place to this strategy for global development, as a majority of its targeted
consumers are focused on virtual gaming. By positively implying the short-term as well
as long-term perspective it can become the main source for gaining advantage with the
competitors on global scale, through augmented and virtual reality, alike to its control
over market in case of Cloud Segment(Frynas and Mellahi, 2015).
McKinsey 7S Model adopted by Microsoft reflects the seven elements of business which can be
aligned for increasing efficiency and effectiveness in the organisational work. Here, the hard

elements of the strategy includes structure, strategy, and system whereas soft elements represents
shared values, skills, style, and staff.
 Strategy: Microsoft focuses more on product differentiation. For the same, it
manufacture and produces the products and services which are technically advane in
nature and does not sell them below premium costs. Farthest,, its foremost business
strategy is concentrated on 'cloud- first' and 'mobile- first' for which they are choosing
mergers and acquisitions which hill help them in growing and exploring business
opportunities globally.
 Structure: The CEO Microsoft has introduced its organizational structure in recent years
through the initiative of restructuring. Its corporate structure is built up in such a way
which is highly developing and dynamic in nature so that it can meet the ever changing
demands of targeted market place.
 Systems: These By adopting various systems which includes recruitment of employees,
their selection system, team development through training and orientation program,
management system, processing system, management of customer relationship system,
business intelligence and others, they can smoothly run their business. Satya Nadella who
became the CEO of the company in 2014, has worked towards the reducing the pressure
on administration at various levels and for simplification of structure and system of
organisation for systems for increasing the flexibility and creativity of
organisation(Morschett, Schramm-Klein, and Zentes, 2015).
 Shared Values: The shared values includes the governance, ethics, vision, mission,
Identity, and corporate culture of Microsoft. Links to global markets local businesses for
restructuring, developing the products and services technically worldwide are the visions
which are being achieved by Microsoft resulting in secured and increased significant
performance.
 Skills: These includes the skills related with the man force as well as with its
organisation. Microsoft is more concerned with technical readiness and workforce
planning when it launches a new product as it requires careful workforce and capacity
planning.
 Staff: This element is in context with the employees of Microsoft, their competencies,
skills, training programs, description of job for which the company has adopted the

'Performance Culture Model' as the efficient approach for getting success in the targeted
market and also conducting surveys at different levels to ensure that they are
competitively strong and developing. They also focuses more on training programs so
that right training can give more skilful and efficient employees.
 Style: It is all about leadership and management style. Satya Nadella believes in power
of positive leadership as it is the only one style which helps in influencing workplace
culture and to make employees feel inspired, motivated by the ultimate purpose and
work ready with others to achieve common objectives and goals by their efficient actions.
In his very short time CEO, has managed and driven excellent growth and profits on
global level(Steiss, 2019).
Application of Strategic Ideas in Practice
Microsoft adopt Ansoff Matrix which is a very efficient planning model for marketing
which guides in selection related to product, services and markets and also helps in performing
globally. Through an integrated way it uses the strategy options and ideas of the matrix.
 Market Penetration: In this strategy, to existing products are being sold to existing
markets. Microsoft uses this strategy by selling its software of windows and devices in
120 of its Microsoft Stores worldwide and also through online marketing and channels
with the help of authorised distributors. Microsoft Rewards loyalty Programs are being
used by multi national companies for pursuing their market penetration strategies.
 Product Development: By developing the new and innovative products and selling
them in the existing market. It mostly engages in product strategy in context to
development of product systematically. The product development team focuses on
windows platform, hardware development, cloud infrastructure, enterprise resource
planning, etc.
 Market Development: Market Development is associated with discovery of new market
for the existing products. Wherever the probability for development of products and
services are recognised, it enters that new market. For example: HoloLens first, was made
initially available in only 11 countries. As the demand for it gradually increased in the
global market, the organisation made HoloLens available to an ancillary 21 markets with
low purchasing power starting from November 2018.

 Diversification: Microsoft uses multiform strategy occasionally as it is the riskiest
strategy and involves of new products technological development to sell to diverse
markets. For Example: In 2006, entering in the cloud business, which was the same year
as Amazon launched its Web Series, though this bet proved to be successful for
Microsoft. And by 2019, Microsoft exceeded from Amazon in 10-month revenues earned
from cloud, through which it became an undisputed market leader in the global scale.
Specifically, while Microsoft earned USD 20.5 Billion, whereas Amazon's revenues
totalled to only USD 15.5 Billion for the same session(Trigeorgis, and Reuer, 2017).
This was a full analysis of Microsoft's Ansoff Matrix which demonstrate the application
of the critical strategic framework in organisation. Microsoft should adopt product Development
Strategy as it will prove to be more beneficial globally. It develops most variety of its products
and services through engineering groups which includes Application & Service Group of
Engineering, which focuses on applications of various technologies in production,
communication, education, research and development, information, etc. Cloud & Enterprise
Group which focuses on infrastructure, server, database, resource planning, development and
management tools and various services for Microsoft. And Windows Group which focuses on
devices and windows platform, hardware development of all types, and associated online
marketplaces(Ethiraj, Gambardella and Helfat, 2016).
Illustration 3: The Ansoff Matrix Model
(Source:Microsoft ansoff matrix,2019)
CONCLUSION
The above study of Strategic Management highlights the various aspects which
Microsoft has adopted various approaches and strategies while understanding various
complexities arising from business and its environment. Integrated business strategies and their

application for expanding the business globally are also being mentioned. This study also
demonstrates the various approaches applied which includes Porter's Five Forces, Mc Kinsey 7s
Model, PESTLE and Ansoff Growth Matrix. Also, this report includes the investigation of
Microsoft's performance in relation with the marketing strategies adopted and their efficiency.

REFERENCES
Books and Journals
Ansoff, H.I and et.al., 2018. Implanting strategic management. Springer.
Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2016. Replication in strategic
management. Strategic Management Journal. 37(11). pp.2191-2192.
Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press,
USA.
Ginter, P.M., Duncan, W.J. and Swayne, L.E., 2018. The strategic management of health care
organizations. John Wiley & Sons.
Hill, T., 2017. Manufacturing strategy: the strategic management of the manufacturing function.
Macmillan International Higher Education.
Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic
management research. The Blackwell handbook of entrepreneurship. pp.45-63.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Meyer, G.D., Neck, H.M. and Meeks, M.D., 2017. The entrepreneurship‐strategic management
interface. Strategic entrepreneurship: Creating a new mindset. pp.17-44.
Morden, T., 2016. Principles of strategic management. Routledge.
Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Strategic international management (pp.
978-3658078836). Springer.
Moutinho, L. and Vargas-Sanchez, A. eds., 2018. Strategic Management in Tourism, CABI
Tourism Texts. Cabi.
Steiss, A.W., 2019. Strategic management for public and nonprofit organizations. Routledge.
Trigeorgis, L. and Reuer, J.J., 2017. Real options theory in strategic management. Strategic
Management Journal. 38(1). pp.42-63.
Online
Porter five force model (Porter analysis) on Microsoft, 2017[ONLINE] available
through:<https://www.porteranalysis.com/porter-five-forces-model-porter-analysis-of-
microsoft>
Microsoft Corporation Pestle analysis, 2017[ONLINE] available
through:<http://panmore.com/microsoft-corporation-pestel-pestle-analysis-recommendations>
Microsoft ansoff matrix,2019[ONLINE] available
through:<https://research-methodology.net/microsoft-ansoff-matrix/>

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