Strategic Analysis of Microsoft: Tools and Models

This report provides a strategic analysis of Microsoft using tools such as PESTLE, SWOT, Porter's Five Forces, and McKinsey. It discusses the internal and external factors impacting the company and its performance. The report also highlights Microsoft's strengths, weaknesses, opportunities, and threats. The analysis covers various aspects including political, economic, social, technological, legal, and environmental factors. The report concludes with recommendations for Microsoft's strategic growth.

Strategic management
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EXECUTIVE SUMMARY
In this report it has been described about strategic analysis of Microsoft and how it helps
in evaluating internal and external factors. Besides that, it has been explained about various
models and tools of strategic analysis such as pestle, swot, porter five force and McKinsey. Here,
Microsoft revenue has increase due to change in trend of work from home. But due to various
legal case brand image is hampered. Weakness is Apple is more innovative as compared to
Microsoft and they can adopt razor model to counter any illegal use of software and hardware by
other companies. The firm follow divisional structure and system included are TPS, CRM, KMS,
etc. Moreover, skills of employees is highly advance along with competency.
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Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY..................................................................................................................................4
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13
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INTRODUCTION
Strategic analysis refers to process in which an organisation evaluates and analyse
environment in which they operate. This cover both internal and external factors which impact
on business growth and development. Moreover, with help of analysis it becomes easy for them
to develop strategy for their growth. However, on basis of that it decisions are taken as well. A
company requires different types of strategies to expand. It is necessary to do so that proper
decisions are taken in it. In order to do analysis there are various tools and techniques that is
available (Bickel, and Kryvinska, 2017). The tools differ from one another as it provides varied
info to business. However, analysis helps in evaluating performance of firm in the market. In this
report it will be described about strategic analysis of Microsoft. so, for that different tools and
models will be used such as pestle, swot, porter five force, etc.
MAIN BODY
Microsoft Corporation is a leading organization in context of enterprise software and service.
Over the years, organization has redefined the way of doing or running enterprise within
information technology (Bruijl, 2018). Microsoft company will use strategically address the
issue of failure or success highlighted through Five forces analysis. Michael porter has been
developed this model to identify external factors and significant to the overall business
environment or culture.
In context of revolutionary aspects, five force that help to shape an effective strategy. This
is the reason why Michael Porter’s observed the five different forces. It is not only impact on the
entire organization profitability but also identifies the competition level in marketplace. It also
developed understanding where how Microsoft deals with other competitors in business world
(Gerard, 2018). The Porter’s five analysis can be divided into different ways: Threat of New
entrants, bargaining power of buyers, bargaining power of supplier, Competitive rivalry and
Threat of substitute.
Porter’s five force of Microsoft
It is based on the model that help for analysis of Microsoft on competitive rivalry as
strongest force affecting on the business. Porter’s five force is based on the holistic approach or
framework in context of strategic decision. Sometimes, it is completely away from just analysing
the present competition of Microsoft and its alternative competitors. Typically, porter’s model is
mainly focused on the Microsoft whereas how they can build a sustainable competitive
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advantage in software as well as hardware industry. In Microsoft, manager is not only use this
analysis model but also develop strategic position in market. Therefore, it supports to explore
profitable opportunities in global world.
Organization will be implementing the effective strategies to boost competitive
advantage. For Example- Microsoft Corporation must increase the research and development
process along with improve current product services. In order to increase the competitiveness
against competitors items.
Competitive Rivalry- Microsoft enterprise needs to remain maintain their position in
marketplace. This type of force will help for identifying effects of enterprise on each other. In
context of Microsoft, it will have moderate switching price/cost, which always influence on the
entire business. For Example- existing consumer have moderate capacity to shift from one
product to another (Max, 2018). It is not easy for customer to shift from one firm to another.
Companies are focused on upgrading their system when using computers, software and hardware
items. Nowadays, higher aggressive firm will help to increase the strong force that directly effect
on the business environment or culture. Microsoft is consider as strong force organization that
have a high diversity. For Example:- Microsoft Company will implement innovation in their
product that compete based on the variety of features.
Bargaining power of buyers- Microsoft is a leading organization that help for continue
satisfying the need or requirement of potential client. In this way, it can easily identify the
overall performance of organization. Many consumers are used computer hardware, software
that evaluated in this aspect of forces (Gerard, 2018). There is moderate bargaining power of
buyers. For Example- Customer face problem in finding the better solution regarding computer
networks. In this way, it has chances to switch from one firm to another. The moderate switching
cost or price will create considerable force on the Microsoft enterprise.
Bargaining power of suppliers- The five force analysis must outline influence of different
suppliers in term of computer software, hardware. In Microsoft, there is moderate size, current
population of suppliers which enable them to impose significantly. Sometimes, it has limited
influence on business (Gerard, 2018). For Example- In Microsoft, the moderate size of suppliers
in term of hardware or software. It will be changed the price or cost according to business
adjustment. The moderate supply will be creating significant force of Microsoft that will
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decrease supply. The bargaining power of supplier as essential strategic term in the innovation of
technology environment.
Threat of Substitutes- in context of Microsoft, substitutes can be reduce the market share and
also effect on the business operation and function. As per analysis, it is determined the important
aspect of five forces analysis. The substitutes depend upon the manual mechanism process and
other online. It often to have decreased the performance when compared with products of
Microsoft (Gerard, 2018). There is a weak external factor in threat of substitution against
organization. For Example- While adoption of modern technology that help to reduce the current
availability of substitutes and further improve experience. Another way, Moderate switching
price/cost is always support for providing the facilities of substitution. As per analysis, it is a
weak force of threat in substitution.
Threat of New Entrants- Microsoft is focused on the influence of new entrants on hardware,
software industry. In today’s world, the primarily intensities of external factor that increase to
moderate force within threat of new entrants. In context of Microsoft, there is high cost /price of
developing the brand in marketplace through modern technology. In this way, there is weak
effect of new entrants on company such as Microsoft Corporation. The moderate price/cost of
developing business so that identifying the chances for new entrants. In order to find out the
success in competing software as well as hardware market (Gerard, 2018). For Example- The
moderate switching price in which contribution to achieve success of new entrants and
competing against from competitors brands in marketplace. In this way, it can be identified that
external factor have a moderate contribution towards competitive firms. Therefore, it will be
identifying the issue or problem affecting the overall Microsoft business in marketplace.
Pestle analysis
Every company requires to do strategic analysis so that effective and relevant strategies are
developed. Along with it, the analysis provides useful info about various things such as market
trends, customer needs, competitor strategy, etc. The important of strategic analysis is that it
helps in taking effective decisions. Besides that, useful info is gathered of internal and external
environment. In addition, company identify opportunity to expand in other market and also
threats are determined. Thus, strategic decisions are taken in order to minimise threats. Besides
that, it is found that there are several components of it such as tools, strategic purpose, value,
vision , goals, etc. Therefore, overall things are identified in it. Similarly, for present report
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Microsoft strategic analysis will be done. This will help in analysing their performance in terms
of efficacy. Hence, for that different tools will be applied in it which is as below
Pestle analysis – this is a tool which evaluate external environment of firm. With that it will be
easy to evaluate impact of factors and performance of Microsoft in regard to it. Besides that,
dynamic of market can be identified. In this there are 6 factors which are defined as (Pestle
analysis of Microsoft, 2018)
Political – this consists of factor such as political stability, trade laws and regulation, tariff, etc.
imposed by nation on trade, etc. So, any change in this factor highly impact on firm operations.
This is because trade laws are changed, tariff is imposed, etc. (Brinkkemper, 2017). As
Microsoft operate at global level but due to lobbying of government it has impacted on their
image. In last 2 years they have paid $10 million. This is due to anti trust issues faced by them.
Also, there is blame on Microsoft for creating monopoly as people were finding difficult to
uninstall browser.
Economic- It contain factors such as economic growth, GDP, currency rate etc. this highly
impact on business growth and operations. Microsoft is known for its operating software Word.
However, due to recession in 2008 they lay off 5000 staff. It highly affected on their revenues.
So, they are not able to overcome from it. But many countries are developing so their economic
growth is stable. Moreover, most people are using laptop that has boosted growth of company.
Social- In this there are factors related to taste, needs, culture, etc. of society that impact on
company operations. Any change in these led to produce new products, services, etc. Now,
laptops, mobile, etc. have become an essential part of life of people. Besides that, due to Covid
19 work from home is emerging trend for all companies. so, it has affected in positive way on
Microsoft profits. Furthermore, there is high rise in sales of computer and laptop in which Word
processor is used (Hong, and Park, 2020).
Technological- This is related to advancement in technology. So, Microsoft is a tech firm and
highly innovative. They launched feature of start button that became popular. Besides firm is
continuous improving its OS. The advancement in technology has enabled in developing
windows 10. Thus, it has given high customer experience. But Apple and Google are highly
innovative than Microsoft. Hence, it has led to decline in revenue to 35%.
Legal- These factors contain laws and regulation, employment law, etc. that needs to be
followed by company. So, each country is having different laws. Microsoft felt into legal issue
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when its 8600 staff filed a complaint for gender discrimination. In this court found that company
did discriminate female employees. Besides, another legal issue was person sued firm in which
system was destroyed when upgraded. Thus, these both highly impacted on brand image of firm
in negative way.
Environment – The factors are environmental laws that needs to be adhered by each firm. Also,
it includes CSR practices as well. Microsoft was ranked 1st in 2019 for environment friendly. The
company is also 100% carbon neutral. They collect tax known as carbon tax and invest that in
conserving environment. Along with that, company has set target to spend $50 million in 5 years
on technology to deal with environment (Kreiss, and McGregor, 2018).
Swot – this tool is used to identify strength and weakness. Also, it determines what are
opportunity and threat. So, Microsoft analysis is explained as below
Strength
Brand loyalty- It is one of biggest strength of firm as they are leading providers of software,
hardware, services, etc. Moreover, they operate in over more than 100 nations. Also, it focuses
on licensing, developing, etc. Microsoft has been leading OS over the years and software
provided that resulted their share more than 90% for PC. This is the reason few brands are
capable to compete with Microsoft.
Product portfolio- It offers variety of products such as software, hardware, etc. that are licensed.
Besides, firm obtain profit by developing software and offering wide services to people at global
level (Kurilova, and et.al., 2019).
Distribution system- they are having a strong network of distribution that enable in providing
product quickly to people. It contains supplier, distributors, etc.
Brand Reputation- Microsoft brand is considered as the 5th most valuable brand within the world
as per Interbrand. $ 57.8 Billion.
Weakness
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Criticism over security flaws- The Microsoft product known as Windows OS has been criticised
for being so weak against several attacks of viruses. Windows is also least protected as compared
to other OS such as Apple
Lack of innovation- Firm has huge R&D resources and great opportunities in order to enter new
markets with more innovative products but they were failed in it. Apple is more innovative as
compared to Microsoft
Mature PC markets- Recently Microsoft entered in mobile industry and heavily relied on its OS
and software sales for laptop computers. Within these sectors the market for such products has
matured.
Dependence on hardware manufacturers- Firm is large MNC but at the same time does not
produce its own hardware and rely on hardware manufactures in order to develop goods that
operate on Windows OS. Within marketplace if cheap and popular alternatives OS is there then,
hardware manufactures focus on other products (Lopez Giron, . and Vialle, 2017).
Opportunities
Shift to razor and blade concept- The firm can shift to this model in order to counter any illegal
use of software and hardware by other companies. With that they can earn more revenue.
Strategic alliance – In order to expand in new market, Microsoft can do strategic alliance with
other firms or companies. With that it will be easy for them to earn high profits in different
markets.
Cloud based services- Microsoft can enter in cloud services that is emerging as a new market.
hence, they will be able to gain large customer base as well.
Mobile advertising- Microsoft can attract more customers through advertising on mobile. It can
focus more on this marketing which will result in creating good image of firm. In this way new
market can be tapped by company.
Growth by acquisitions- Microsoft could begin acquiring new start ups as firm have huge
reserve of cash that can bring new technology and new competencies to the firm
Threats
Competition- Microsoft faces stiff competition from other tech firms that are Apple and Google.
So, it may highly affect on their market share and revenue (Morales, 2017).
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Changing the customer habits and requirements- Consumer shift from buying stand alone and
Buying laptop PCs to buying tablets and smartphones, the marketers where Microsoft has the
only modest market share.
Open source projects- Various new open source projects are introduced within market and some
of them became successful for example Open source projects and new Linux Operating system.
It is also noticed that projects from open source are free and is an alternative to the expensive
products of Microsoft.
Potential lawsuits- Firms has already sued for several times as these types of lawsuits are
considered as expensive as they need money and time. And Microsoft continues to operate
within same way so, there may be rise in more law suits (Patel, 2017)
McKinsey- this model helps in analysing organisation effectiveness and how internal factor is
aligned. Likewise, for Microsoft it is mentioned as
Strategy – here, Microsoft strategy is defined as different products. They develop innovative
products and sell it at high cost. usually, firm focus on mobile and cloud first. They are acquiring
other firms to expand market share.
Structure- It can be evaluated that Microsoft structure is divisional having division of cloud and
AI, R&D and devices. There are other 9 divisions as well in it. Satya Nadella is CEO of firm and
monitor entire organisation.
System – In this there are different system which is necessary. They include TPS, CRM, KMS,
etc. that is integrated in Microsoft. The CEO is emphasised on reducing bureaucracy within firm.
This is done in order to adopt flexible business environment.
Shared value- It includes core value of company. Microsoft value is honesty, integrity and
openness. They focus on self criticism and continuous improvement of employees. So, it has
enabled in creating positive culture in it (Sulindawati, and et.al., 2019).
Style- This S refer to the leadership style being adopted by firm. So, in Microsoft
transformational style is being applied. CEO work with employees to bring in change and follow
vision. He inspires other manager and encourage them. This has enabled in shaping culture of
company and its growth.
Staff- It refers to staff working in organisation and their skills and knowledge. Thus, in
Microsoft diversified staff is working and they possess advance and high level knowledge.
Furthermore, staff is highly talented and experienced as well. The capabilities is varied in them.
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Skills - the skills of employees is creative. they are staff is highly talented and experienced.
Moreover, competency level of employees is high.
Therefore, it can be analysed that Microsoft strategic performance is not as effective as
MNC. The firm is involved in many cases such that has impacted on its brand reputation.
Furthermore, OS developed by them is lacking in many areas (Wang, and et.al., 2020). Thus, it
requires them to do innovation in it so that it can gain competitive advantage. They are having a
strong network of supplier by which products are quickly delivered.
CONCLUSION
From above discussion, it has concluded that Strategic analysis plays important process in
term of business growth and development. It help for Microsoft evaluate and analyse current
environment or culture of business. In this report, it has been discussed about the both internal
and external factors, which is directly impacts on business growth and development.
Basically, it can be used the PESTLE and SWOT framework for analysing internal as well
as external. By using this analysis it becomes easy for them to develop strategy for their growth.
This documentation has summarised about the different types of strategies to expand business in
global marketplace. As per consideration of different tool or platform that provides varied
information of business. However, analysis helps in evaluating performance of Microsoft in the
market. In this report it can be identified the strategic analysis of Microsoft and applicable
different tools and models.
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REFERENCES
Books and journals
Hong, S.H. and Park, M.J., 2020. Dynamics of marketing automation adoption for organisational
marketing process transformation: the case of Microsoft. International Journal of
Electronic Customer Relationship Management, 12(3), pp.205-224.
Kreiss, D. and McGregor, S.C., 2018. Technology firms shape political communication: The
work of Microsoft, Facebook, Twitter, and Google with campaigns during the 2016 US
presidential cycle. Political Communication, 35(2), pp.155-177.
Kurilova, A., and et.al., 2019. The impact of strategic outsourcing on the interaction market in
entrepreneurship education. Journal of Entrepreneurship Education, 22(4), pp.1-11.
Lopez Giron, A.J. and Vialle, P., 2017. A preliminary analysis of mergers and acquisitions by
Microsoft from 1992 to 2016: A resource and competence perspective.
Morales, O., 2017. Factors that lead to retention of acquired engineers at Microsoft in Silicon
Valley.
Patel, S.R., 2017. Microsoft''s Paradigm Shift: Strategically Reinventing the Brand, Supporting
its Vision for Growth, and Strengthening Its Competitive Position.
Sulindawati, E., and et.al., 2019. The Implementation of a Village Financial Administration
Teaching Model through Microsoft Excel Program. International Journal of Innovation,
Creativity and Change, 5(6).
Wang, K., and et.al., 2020. Microsoft academic graph: When experts are not
enough. Quantitative Science Studies, 1(1), pp.396-413.
Bruijl, G.H.T., 2018. The relevance of Porter's five forces in today's innovative and changing
business environment. Available at SSRN 3192207.
Max, K., 2018. Three Business Plan Models to Help a Start-up with Strategic Analysis: Lessons
from using SWOT, Porter’s Five Forces, and Price Equalizer to write a business plan.
Gerard, H.T., 2018. The Relevance Of Porter’s Five Forces In Today’s Innovative And Changing
Business Environment.
Bickel, L. and Kryvinska, N., 2017, August. Comparative Analysis of Two Operational
Developments within IT Companies' Servitization-Microsoft and HP. In 2017 IEEE 5th
International Conference on Future Internet of Things and Cloud (FiCloud) (pp. 249-
256). IEEE.
Brinkkemper, S., 2017, October. Should We Be Thanking Microsoft, Apple and Google for
Their Contributions to Open Source Software?. In Software Business: 8th International
Conference, ICSOB 2017, Essen, Germany, June 12-13, 2017, Proceedings (Vol. 304, p.
205). Springer.
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Online
Pestle analysis of Microsoft, 2019 [online] Available through : <
https://www.mbaskool.com/pestle-analysis/companies/17999-
microsoft.html#:~:text=Microsoft%20PESTLE%20Analysis%20examines%20the,the
%20business%20of%20the%20brand.>
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