Strategic Management of Microsoft Corporation

This report provides a comprehensive evaluation of the strategic management of Microsoft Corporation, including PESTLE analysis, Ansoff matrix, Porter's Five Forces, Porter's Diamond, and Mc Kinsey 7S model. It discusses the political, economic, social, technological, legal, and environmental factors affecting the company. It also explores the different strategies used by Microsoft, such as market penetration, product development, market development, and diversification. Additionally, it analyzes the competitive rivalry, bargaining power of customers and suppliers, threat of substitutes, and threat of new entrants. Finally, it examines the firm strategy, structure, and rivalry, factor conditions, demand conditions, and related and supporting industries using Porter's Diamond model.

STRATEGIC MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................4
PESTLE ANALYSES.................................................................................................................4
ANSOFF MATRIX.....................................................................................................................5
PORTER'S FIVE FORCES.........................................................................................................7
PORTER'S DIAMOND..............................................................................................................8
MC KINSEY 7S MODEL FOR MICROSOFT........................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Microsoft Corporation is a multinational technology company, which was being founded
by Bill Gates and Paul Allen on April 4, 1975. The company has been known for its Microsoft
Windows line of the operating system. In this report, there has been a strategic management
evaluation of the company. Strategic management means an ongoing planning, monitoring,
analyses and assessment of the organisation to meet its goal and objectives. Strategic
management helps in the change in the business environment which is constant in the current
working world. This is a comprehensive report on the declared and undeclared strategy of
Microsoft. The company strategy has been evaluated on the global and local basis. I have used
different theories in the report to explain the strategy. These theories have been briefly explained
for Microsoft Corporation and I have included the recommendation where ever the company is
lacking in the strategic management.

MAIN BODY
PESTLE ANALYSES
POLITICAL FACTORS
These factors plays an important role in determining the long term profitability of Microsoft
Corporation, both in the local and global market. The company is operating in more than 500
countries, so in different countries there will be different political challenges that Microsoft
Corporation will be facing. These factors include political stability and software services sectors
in the country's economy, interference of government in the software sector services, anti trust
laws and regulations in the business software services etc., these factors can seriously impact
Microsoft Corporation's profits in the longer term.
ECONOMIC FACTORS
These factors include both the micro economic factors and macro economic factors. Microsoft
Corporation should keep in mind the inflation rate, saving rate, interest rate, foreign exchange
rate etc., while looking at the macro economic factors and domestic competition in the country of
operation when looking at micro economic factors. Comprehensively while studying economic
factors in PESTLE the company should analyze the efficiency of the financial market,
infrastructure of the company, skilled workforce available since Microsoft Corporation will
require skilled task force for its operations and business cycle stages.
SOCIAL FACTORS
Microsoft Corporation is been impacted by the society's culture and the way doing things impact
the culture of the organisation in an environment. The belief and attitudes of the population plays
an important role in how the company's market in operated. Social factors includes the
demographics and skill level of the population, as Microsoft Corporation will require more of
the skilled employees for its operations, culture i.e., gender roles, social conventions etc.,
entrepreneurial spirit and broader nature of the society, attitudes of the local towards the health
and environmental issues. These all will affect Microsoft Corporation in the longer term.
TECHNOLOGICAL FACTORS
Technological factors are the most important factor for Microsoft Corporation as this has been a
fast disrupting industry across the board. Over the last decade the company has faced many

challenges regarding these changes in the technology. Microsoft Corporation should adopt these
technological changes or this will disrupt the operations and the company will not be able to
survive in the market. Technological factors includes the technological development by the
company's competitors, the impact of technology on the product offerings etc.
LEGAL FACTORS
Since Microsoft Corporation is operating in variety of the countries, the firm should evaluate the
legal framework and institutions of each and every country in which it is operating, This
evaluation will help the company in saving its cost and time, as if the company has properly
evaluated the legal framework it can manage its staff to follow these rules and regulations. Legal
factors includes the anti trust laws for business software service sectors, copyrights, patents,
discrimination laws etc, data protection law, etc.
ENVIRONMENTAL FACTORS
Different markets have different norms and standard regarding the environment, these factors
can again impact the long term profitability of the organisation. For example a lot of European
companies give health tax breaks to the company operating in the renewable sector. Some of
these environmental factors which can impact the Microsoft Corporation are weather, climate
changes, laws regulating environment pollution, waste management recycling etc., these factors
will affect the company's image if the company breaks any of these regulations.
ANSOFF MATRIX
This strategy helps Microsoft Corporation in planning the strategy regarding the product and
market provided to its customers. These business growth strategies are market penetration,
product development, market development and diversification.
MARKET PENETRATION
This strategy includes selling existing product of the to the company's existing market. Microsoft
Corporation has used this strategy to sell its Windows software and devices and other products
in around 100 of there Microsoft stores worldwide as well as through there online sites and
authorized retailers. This technique uses aggressive marketing methods to try and gain more
market share by stealing there competitors customers, the company advertise there product to the
maximum possible manner. Market penetration is the least risky method since the company
knows what the customer needs and wants are, the company can easily grow if there competitor

have reaches there capacity limits. Although market penetration have limits, once Microsoft
Corporation reaches its saturation point in a particular market the company need to use another
method if they wants further diversification.
PRODUCT DEVELOPMENT
This strategy in the Ansoff matrix involves developing new products to sell in the existing
market. Microsoft Corporation have spent more than US $1.5 billion in the research and
development in 2018. The company have 3 engineering groups to develop its product and
services. These groups include Applications and Services Engineering Group, this group focuses
on the broad applications and service core in the production, education and other information.
The 2nd group includes Cloud and Enterprise Engineering Group, which focuses on cloud
infrastructure, server, database, enterprise resource planning, development tools, and other
business process applications and services for enterprises. Lastly the 3rd group include Windows
and Devices Engineering Group, this focuses on hardware development and associated online
market places. Through these groups the company develops its new products and services.
MARKET DEVELOPMENT
This strategy in the Ansoff matrix involves identification of new market for the existing product
of the company. Microsoft Corporation always look for any opportunity to enter into a new
marketplace for the need of its product in the market. For example, HoloLens was made firstly
available in 10 countries only which included US, UK, Canada, Australia and Germany. As the
demand for this product increased in the global scale the company explored new markets.
Through market development the company finds new customers for its product. The
development of the new markets for the product may be a good strategy if the firm's core
competencies are related more to the specific product than to its experience with a specific
market. This is a riskier diversification.
DIVERSIFICATION
This strategy includes the development of the new products in the new market. This is
considered to be the most risky diversification technique as the company don't have any idea
about the product and market. Microsoft Corporation occasionally uses this type of strategies.
Entering the cloud business in 2006, the same year as its rival Amazon launched Amazon Web
Services can be mentioned as the most notable example of diversification strategy engaged by
Microsoft. The company requires large amount of investment if they want this type of

diversification as this will require research and development for new product and they also have
to study the customer behaviour. The company should go for this type of strategy only when they
are sure that they will be compensated for the high risk.
PORTER'S FIVE FORCES
A Five Forces analysis of Microsoft Corporation shows that competition is the external factor
with the highest intensity in the computer technology industry environment.
COMPETITIVE RIVALRY
This is the most important force which Microsoft Corporation must keep in mind while
analyzing the strategic management. Microsoft Corporation faces a fierce competition from the
external environment. The company have moderate switching cost as the customer will think
twice before switching to another product as they might not get the required quality, though the
diversity of the firm and aggressiveness has a strong force, this is because the strong force that
significantly affects the company's industry environment. This leads to a strong force of
competitive rivalry which makes it the priority issue in the strategic decision making.
BARGAINING POWER OF THE CUSTOMERS
Microsoft Corporation has a moderate force of the bargaining power of there customers. This is
because the low substitute availability as for example the customers find difficult to use nin
computer network solutions that are effective and efficient, so this leads to a weak force from the
customer to bargain with Microsoft, another factors is moderate switching cost as the customer
will think twice before switching to another product as they might not get the required quality,
high quality of information available to the customers, this factors empowers the bargaining
power of the customers as the information about Microsoft Corporation is widely available so
the customer will know if there is any change.
BARGAINING POWER OF THE SUPPLIER
This force determines the supplier bargaining power for Microsoft Corporation. The factors
which affect these conditions are moderate size of supplier which enables Microsoft Corporation
to impose a significant but limited influence on there business. Another factor is the population
of the supplier is moderate too, this too creates significant but limited influence on there
business, the last factor is moderate overall supply is this force could increase its overall supply
decreased. This all factors leads to overall bargaining power of the supplier being moderate over
Microsoft Corporation.

THREAT OF SUBSTITUTE
Any of the substitute product will lead to reduction in the market share of the company. In
Microsoft Corporation the factors which can influence the threat of substitute are the low
performance of substitute such as non online and manual products which tend to perform lower
as compared to Microsoft's products, the low availability of the substitute since the global
adoption of Microsoft products reduces the availability of substitute so this weakens the threat of
substitute, another factor is the moderate switching cost as the customer will think twice before
switching to another product as they might not get the required quality.
THREAT OF NEW ENTRANTS
In this force the company focuses on the influence of the new entrant in there industry. The
intensities of external factors that lead to the moderate force of the threat of new entry against
Microsoft are high cost of brand development, there is a high cost required to setup the
business , so this lead to reduction in this threat. Another factor is moderate cost of doing
business and moderate switching costs, these two factors poses moderate threat of substitute. So
overall threat of substitute for Microsoft Corporation is considered to be moderate.
PORTER'S DIAMOND
This model was being given by Michael Porter, and this was given so the multinational company
like Microsoft Corporation will be able to understand what are the advantage that the company
have over there competitors.
FIRM STRATEGY, STRUCTURE AND RIVALRY
This factors explain how the company strategy, structures and the rivalry affect the strategic
management of Microsoft Corporation. The domestic rivalry is instrumental to the international
competitiveness, since it force the multinational companies like Microsoft Corporation to
continue to develop unique and sustainable strength and capabilities. If the company is not able
to innovate and develop in the new market it might lose there market share and if they do not
develop in the long term then they might get out from the market. So, continuous innovation and
development is therefore necessary for Microsoft Corporation. The company should therefore
devise there strategies according to these innovation. The structure of the company should
remain similar which may help in creating a brand image.

FACTOR CONDITIONS
These includes the natural, capital and human resources available for Microsoft Corporation.
Factor conditions are different in different countries some countries are rich in some resources
while other might not be. For example where ever Microsoft Corporation will expands it needs
good human resource which means they will require skilled work force as there operations
required so. Therefore, if this factor condition is not met Microsoft will require to think twice as
they might have to supply there work force for work be get done. There is also a need for
continuous development of these factor conditions to meet the requirement of Microsoft. So
countries with strong factor conditions will attract the multinational companies, like that of
Microsoft.
DEMAND CONDITIONS
The home demand are greatly affected by the favorable industries growing within a country.
Microsoft Corporation have an opportunity if there is a large market but this also means that
there are more challenges to be faced. If the local are demanding then this leads the company to
push its efforts to grow, innovate and improve there quality. The company need to satisfy the
striving demand of the customer, and if these demand are not satisfies then shortly the customer
will look for alternative for the product that is being offered by Microsoft Corporation. Demand
conditions helps the customers to get quality products as there will be competition among the
rivals to satisfy the customer and give them the exact product and of the required quality.
RELATED AND SUPPORTING INDUSTRIES
The presence of the related and supporting industries provides Microsoft Corporation with the
local customers needs and demands so that Microsoft Corporation can be able to provide what
the customers exactly want. The local supplier and customers help Microsoft Corporation to
understand what product will work out in the market. Through the feedback there can be more
innovation to provide more efficient and better quality goods. Without these supporting
industries the company will require more time to analyze the market conditions. However, once
these factors are in place, the entire region or nation can often benefit from its presence. So
Microsoft Corporation must take advantage of these factors so that they can properly implement
there strategic policy with proper knowledge of the market.

MC KINSEY 7S MODEL FOR MICROSOFT
Microsoft Mc Kinsey 7S model shows how seven elements of businesses can be aligned to
increase effectiveness. The 7s of Mc Kinsey are strategy, structure, systems, shared values,
skills, style and staff.
STRATEGY
Microsoft Corporation business strategy is mainly classed as product differentiation. The
company has tried to develop technologically advanced product and they charge premium cost
for that. The current strategy focuses on the “cloud first, mobile first”, growth. The company is
doing mergers and acquisition to explore the business and grow in the market as fast as possible
this will help in gaining the first mover advantage for Microsoft Corporation. There main focus
is in satisfying the longer term goals.
STRUCTURES
Microsoft Corporation follows a divisional structure, this structure was introduced by CEO Satya
Nadellaa in the year 2015 as a result of restructuring. Initiative. The different divisions are being
perform different functions. For example Microsoft engineering group is divided into three
divisions: Cloud and AI Group, Experiences and Devices and Artificial Intelligence and
Research. The structure of Microsoft are highly dynamic in nature for the ever evolving market
of the company.
SYSTEMS
There are system in place that helps Microsoft Corporation in smooth running of the
organisation. These systems include the recruitment and selection of employees at the correct
positions , team development and orientation system, transaction processing systems, customer
relationship management system, business intelligence, system, knowledge management system
etc. these are some processes been in place in the Microsoft Corporation so that there is no
problem in running of the organisation activities.
SKILLS
These are the ability that the employees of Microsoft Corporation possess to complete the task
given to them. The employees skills must be tested from time to time and when ever required
they should be trained to match the requirement of the current market conditions. If the employee
have the required skills the work given to them will be completed with efficiency and
effectiveness.

STAFF
This element is concerned with the type of employees that will be needed and how they are
recruited, trained, motivated and rewarded. If the right employee is chosen for the job both the
employees and the organisation will be satisfied, and so they are trained to perform there job and
automatically they will remain motivated. There pay and other incentive should be clearly
discussed. If wrong staff is chosen there will be large staff turnover.
STYLE
This factor represents the way Microsoft Corporation is managed by the top level managers and
how they communicate to the lower level management. In other words the management style of
company's leader. The style of Microsoft Corporation should be managed properly, as this can
lead to miscommunication in the organisation leading to delay in the work.
SHARED VALUES
This is the core of Mc Kinsey 7s models. These includes the norms and standards that guide
employee behavior and company actions and thus, are the foundation of every organization.
Microsoft Corporation customers firmly believe that Microsoft Corporation is always going to
release the most innovative products and that they themselves will be more innovative, creative
and cool for using them. These shared belief must authentically be communicated in the
company through every marketing channel.

CONCLUSION
In this report there has been a brief discussion about the strategic management of the
company Microsoft Corporation. For this discussion I have used the different models which has
analyzed the internal as well as external factors affecting the strategic management decision
making of Microsoft Corporation. The models that I have used in my reports include firstly the
PESTLE analysis for analyzing the external environment, then I have discussed Ansoff matrix,
then the Porter five forces has been used for Microsoft Corporation to analyze its competitive
position, then the report present Porter's diamond, and at last the Mc Kinsey 7S model shows
how seven elements of businesses can be aligned to increase effectiveness. Thus, this was a
comprehensive report and there are suggestion being in the report for any loopholes that I found.

REFERENCES
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(Ansoff, 2018)
(Bryce, 2017.)

(David and David 2019)
(Ginter, Duncan and Swayne, 2018)
(Hill, 2017)
(Hitt and Duane Ireland, 2017)
(Lasserre, 2017)
(Meyer, Neck and Meeks, 2017)
(Morden, 2016)
(Morschett, Schramm-Klein, and Zentes, 2015.)
(Moutinho and Vargas-Sanchez, 2018)
(Noe, 2017)
(Trigeorgis and Reuer, 2017)
(Trigeorgis and Reuer, 2017)