Strategic Management of Microsoft

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This paper discusses the strategic management of Microsoft, including its vision and mission, products and services, marketing segmentation, distribution strategy, PESTLE analysis of UK, Porter's Five Forces analysis, and recommendations for the company.

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Running head: STRATEGIC MANAGEMENT
STRATEGIC MANAGEMENT
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Overview of the company:.....................................................................................................3
The Vision and Mission.....................................................................................................4
Products and Services Offered...........................................................................................5
Marketing Segmentation, Targeting and Positioning.........................................................5
Distribution Strategy..........................................................................................................5
PESTLE Analysis of UK:......................................................................................................6
Political factors...................................................................................................................6
Economic factors................................................................................................................6
Social Factors.....................................................................................................................7
Technological factors.........................................................................................................7
Environmental factors........................................................................................................8
Legal factors.......................................................................................................................8
The Porter Five Forces Analysis:...........................................................................................8
Industrial Rivalry...............................................................................................................9
Bargaining Power of the Buyers........................................................................................9
Bargaining Power of the Suppliers....................................................................................9
Threats of New Entrants...................................................................................................10
Threats of Substitutes.......................................................................................................10
Value Chain Analysis:..........................................................................................................10
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Microsoft Operations:......................................................................................................12
Strategic Clock of Microsoft:...............................................................................................14
SWOT Analysis:..................................................................................................................15
Strengths-.........................................................................................................................15
Weaknesses-.....................................................................................................................16
Opportunities-..................................................................................................................16
Recommendations:...................................................................................................................17
Conclusion:..............................................................................................................................17
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Introduction
The construction and application of initiatives and goals which are adopted by the top
management of the organization on the basis of resource availability and by the information
from the internal and external environmental analysis is known as strategic management
(Hitt, Ireland and Hoskisson 2016). It offers an overall path for organizations and comprises
of the objectives, plans and policies for the purpose of achieving the set goals. The strategic
management also includes the practice of resource allocation (Wheelen et al. 2017). It
involves the activities of constructing goals, analysing competitive external environment,
assessing internal environment of organizations, evaluation of the strategies and confirming
management suitability for the set strategies and goals (Ansoff et al. 2019). It helps in
identifying the market opportunities and threats and also contribute towards the identification
of strengths and weaknesses of organizations. The purpose of the paper is to identify and
assess business strategies of Microsoft by the application of various strategic tools. The
strategic tools selected for this paper are SWOT, Porter's analysis, PESTLE analysis and
Value chain analysis. The paper will discuss about the business strategies adopted by
Microsoft with the changing business environment. In this paper, the implications of the
strategic analytical tools will be linked with the business strategies of the company. The
paper will be concluded by presenting strategic recommendations for the company in order to
sustain efficiently in the changing business environment.
Discussion
Overview of the company:
The multinational technology company American company Microsoft specialize in
manufacturing, developing, licensing, supporting and selling personal computers, computer
software and consumer electronics. The core products and services includes Internet

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Explorer, Microsoft Windows line, Edge web browsers and Microsoft Office suite. The
company is considered as one of the best and largest makers of software in terms of revenues
and value in the market. Bill Gates and Paul Allen were the founder member of the company,
which was started in the year 1975. The present CEO of Microsoft is Satya Nadella. The
company has involved in continual improvement strategies for changing the manner in which
people work, live and the way in which people connect with technology (Microsoft.com
2019). In United Kingdom, the company is incorporating technological advances in the
process of developing newer ways for interaction between people and technology at home
and/or work, development in the area of cloud computing during the process of
transformation in public and education services.
The Vision and Mission
The tagline of the company is “Your Potential, Our Passion”. A vision is a long term
objective or image that the company wants to achieve in the future. The corporate vision of
Microsoft is to help the individuals and the business all over the world in understanding their
full potential. The mission statement presents the reason for the existence of the company.
The mission statement is to empower every individual as well as all the organization to
achieve more (Narikae, Namada and Katuse 2017). The mission and vision of the company
helps in guiding and motivating the employees of the organisation.
Products and Services Offered
Microsoft is a unique company having sheer number of products that helps in earning
huge revenue. The most important products that the company offers are Microsoft Windows,
Microsoft Office Suite, Office 365, LinkedIn, SharePoint, Visual Studio, Outlook, Exchange,
SQL Server, Windows Server Client, Xbox, Microsoft Bing, System Center, Dynamics,
Skype and Windows Azure. The company also provides with consulting and product support
service.
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Marketing Segmentation, Targeting and Positioning
The company wants to have a global reach and hence the segmented region is the
global market place. The company uses a mixture of both demographic as well as behavioural
strategies. The gender includes both male and females of 16 years old and above. It basically
aims the students, employees and the professionals. The targeting strategies used by the
company are both differentiated and undifferentiated strategies. The company has to use
differentiated targeting strategies for its smart phone sections. The positioning strategies
followed by the company are multi segment positioning and standby positioning. The
company targets a number of consumers at the same time by offering them with different
types of products and services (Schlegelmilch 2016, pp.63). The standby positioning strategy
of Microsoft on the other hand helps in the development of the products and the services
offered by the company that can wait for the changes and can be demanded in the future.
Some products are positioned either for commercial use or for personal use.
Distribution Strategy
The company sells their products to the ultimate consumers by using the following
three strategies:
1. OEMs – The Microsoft software is preinstalled on the servers or the devices that the
company sells to the consumers for example the Windows operating system is pre-
installed in most of the laptop devices.
2. Direct – The Company sells directly in order to reach the variety of customers
specially the small and the medium customer segment.
3. Distributors and resellers – License solution partners, value added resellers and other
retailers license the products and services of Microsoft indirectly.
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PESTLE Analysis of UK:
Political factors
Political stability was considered to be one of the strongest in the world due to its
attractive policies regarding Foreign Direct Investment. The country have offered large
investments opportunities for the global businesses. The tax rate of company’s profits was
around 19 percent, which experienced a reduction in the year 2016. The tax rate of United
Kingdom for the year 2020 will reduce up to 17 percent. However Brexit is believed to
reflect major impacts on the political structure of United Kingdom. The political stability
helps Microsoft to develop itself by further investments and by improving performance. The
government support helps the company to increase the technology sales by taking support
from the government.
Economic factors
The 5th largest economy in terms of nominal GDP is United Kingdom. Although the
country experienced a recession in the year 2008 but the government adopted various
strategies for mitigating the negative impacts. The country faced certain challenges in the
year 2017, the prices in shops rose due to the weakening of pound resulted in high costs of
imported goods. Although, the price of the products rose but the wage structure was not
altered. The minimum wage rate in United Kingdom was 7.50 pounds per hour in the year
2017 (Mazrekaj, Shabani and Sejdiu 2016, pp.80). The wage rate was increased to 7.83
pounds from the month of April in 2018. The Microsoft Company has the opportunity to
increase its sales by penetrating into the developing countries. The rise in the disposable
income in the developing countries will help Microsoft in increasing its revenue through
more sales.

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Social Factors
United Kingdom is believed to have a large consumer market. The population of
United Kingdom for the year 2019 is 66.85 million and is expected to grow up to 74 million
by the year 2039. In United and practices, which presents opportunities for business to offer
innovative products and services? United Kingdom is considered as one of the best countries
in terms of higher education. The country experienced a rise in the cost of living status and in
areas of higher education. Kingdom, 81.4 percent of the total population comprises of urban
population. United Kingdom possess a multicultural background. It is one of the top ten
educated countries and ranks 3rd in terms of overall best countries. There has been a rise in
the cost of the living and higher education. Microsoft can design and innovate newer products
to support the leisure preference of the people of UK. The increased demand for the
Microsoft products and services should be properly handled by setting up of a proper
customer service desk.
Technological factors
UK is technologically much advanced but yet it stays behind USA, Japan, India and
South Korea. New technologies are formed on a daily basis by the business organisation in
order to provide better services to the consumers. Huge amount of investments are being
done on this sector and the UK technology sector has attracted many fresh and young talents.
There has been an investment of £28bn in technology since 2011, which is higher than the
investment in France and Germany. The company can rapidly innovate its smart phone
devices. The company must also tighten the security issues as online payments are taking
place frequently now a days, where safety and security is always needed.
Environmental factors
Several initiatives have been taken by the country to improve the environmental
condition and increase the sustainability. Initiatives are taken by the local community, the
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government, newspaper companies, as well as the charities in order to reduce the negative
impacts of the business on environment. A very abrupt climatic condition prevails in the
country that affects the tourism sector that contributes around £ 127 billion per year in the
economy (Easton and Sommers 2018). Microsoft must enhance the sustainability programs as
most of the customers are inclined towards those company who are taking social
responsibilities. The company can take the initiative of recycling the parts rather than wasting
it.
Legal factors
The country follows several laws and regulations. The Employment Act 1996 deals
with the employees and protects the employee rights. The Equality Act, Maternity and
paternity leave, minimum wage, Limited Liability Partnership, holiday pay, sick pay,
Children and Family Act are also followed. The company must follow certain rules and
regulation in order to maintain the goodwill in the market. The issues of copying of the
technologies can be reduced by strengthening the patents and the copyrights. Energy efficient
computer technologies can be used in order to protect the environment as well as reduce the
consumption.
The Porter Five Forces Analysis:
The porter five forces helps the business firms compare itself with the competitors
and thereafter help it in determining the key strengths and the weaknesses. The analysis is as
below:
Industrial Rivalry
Larger the competition, lesser will be the power of the organisation and vice versa.
The industrial rivalry of Microsoft is very strong. The switching cost is moderate. There is a
strong aggressiveness of the firms and the firms are highly diversified. The competitors of
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Microsoft are Apple, Google, IBM, Oracle, Salesforce, SAS, HP, Sony and SAP. The main
competitors are the Apple and Google who keeps on innovating and investing a huge amount
on the research and development.
Bargaining Power of the Buyers
The bargaining power refers to the power of the consumer to affect the price of the
products and services offered by a company. The more the number of the buyers the lesser
will be the bargaining power of the buyers and vice versa. Microsoft hardly has any perfect
substitute. The switching cost of the product is also high. The bargaining power of the buyers
in case of Microsoft is therefore low as there are large numbers of buyers and the switching
cost is also high. Almost every person in the developed countries now uses a computer or a
laptop and installs Microsoft products and services in it. This states that the buyer base is
really very high for Microsoft and hence the buyers cannot affect the prices.
Bargaining Power of the Suppliers
The bargaining power of the suppliers refers to the power of the supplier to affect the
prices of the raw materials. The more the number of the suppliers the lesser will be the
bargaining power and vice versa. The bargaining powers of the suppliers are moderate as the
switching costs of the raw materials are moderate and the numbers of suppliers available are
also low. There are several fresh talents in the technology field but experienced talents are
also requires. The country lags behind in technology with respect to few countries and hence
the technological sector requires improvement. This makes lesser option available for the
company as it tries to make use of the best technologies in its products.
Threats of New Entrants
Threats of new entrants mean if new companies enter into the market by seeing the
attractive profits of the competitor companies, then the company will face a threat from the

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new company. The power of the company will be reduced if there are a number of companies
entering into the market. The new entrants reduce the strengths of the existing company.
There is a moderate threat in case of Microsoft. The threats are because of the high cost of set
up and brand development. The cost of doing the business is also very high as the company
requires daily innovation, research and development and huge investments. It is not easy for
any new firms to come and compete in the technology sectors but the prevailing companies
have the chances to take an advantage. This implies that the threat of new entrants is low in
case of Microsoft.
Threats of Substitutes
The larger the number of the substitutes, the lesser will be the power of the companies
and the lesser the number of the substitutes, the greater will be the power of the companies.
The substitutes can reduce the market share of Microsoft. There are no perfect substitutes of
the company and even if there are certain substitutes, the performance is very low as
compared to Microsoft. The threat of substitute, in case of Microsoft is therefore very low.
Value Chain Analysis:
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Value Chain framework of Microsoft
(Source: Hacklin, Björkdahl and Wallin 2018, pp.82).
The value chain analysis is a tool that helps in determining the internal strategies of an
organisation. It helps in the identification of the primary and support activities. It is the
analysis of all those activities that transforms the inputs into the outputs. The analysis of the
value chain of Microsoft will help the company in increasing its competitive advantage. The
value chain is divided into – Inbound logistics, Operations, Outbound Logistics, Marketing
and Sales and Service (Mudambi and Puck 2016, pp.1076). The value chain also includes the
demand chain and the supply chain. The supply chain focuses on the reduction of the costs
whereas the demand chain focuses more on the customer needs and preferences. Microsoft
believes in a demand drive supply network concept (Donovan 2015, pp.5).
Inbound Logistics:
Microsoft possess multiple supplier contracts internationally which allows Microsoft
to facilitate an efficient flow of complicated supply chain process. The company has its own
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set of code of conduct, which allows the company to align the company’s values with the
suppliers’ activities. It follow a strict code of conduct and a method of supplier selection,
which is compulsory for all the suppliers entering into the business. The existence of strategic
connection or relationship with the suppliers, economies of scale and the detailed in-depth
knowledge of the supply-chain management operational activities through the selling
software like Microsoft Dynamics AX are the major sources of the value for the company’s
Microsoft inbound logistics (Luszczak 2019, pp.2).
Microsoft Operations:
The business processes and productivity comprises of the services and product in
regards with the communication, informational services and productivity. This segment
includes a wide range of platforms and devices like Office Consumer, Office Commercial,
Dynamics and LinkedIn. The intelligent cloud of Microsoft comprises of private, hybrid and
public cloud services and products which portrays the ability to access modern business. The
segment includes server products like Windows Server, SQL, System Centre, Visual Studio
and Enterprise services like Microsoft Support Services and Consulting Services (Jain and
Hazra 2018). The Personal Computing segment of Microsoft consists of services and
products which contributes towards coordinating interests and preferences of the consumers,
IT professionals and the developers in various sizes. Except the smartphone of Microsoft, all
the other devices are manufactured and assembled in third-party contract basis. The
manufacturing system of the company is efficiently designed as the plants are situated across
the planet which helps in ensuring connection with the suppliers as well as it reduces the cost
of transportation and the negative impact over environment. The outbound logistics
framework of Microsoft includes the resellers and distributors, OEMs (Original Equipment
Manufacturers), online sales activities and the stores. The resellers and distributers of the
company’s products and services includes retail stores, retail outlets, License solution

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partners and web developer agencies (Boia et al. 2016, pp.618). OEMs serves as an important
section for Microsoft as it includes the software pre-installation facility to various devices
such as Dell, Lenovo, HP and Asus. Microsoft offers online sales services with the help of
Office 36, OneDrive, Outlook.com, Windows store and Skype. The stores of Microsoft are
located all across the world and the stores consists of technical advisors for offering
assistance regarding the features and usage of products de (Jong and Flowers 2018, pp.23).
The marketing and sales division of Microsoft is the most important functional area. The
company utilizes the method of licensing for selling services and products. One of the main
sources of the method of value creation of Microsoft sales and marketing activities comprises
of the utilization of licensing sales method which contributes towards decreasing sales cost as
well as the company involves in the process of viral marketing (Boia et al. 2016, pp.618).
The expenses of marketing and sales of Microsoft increased for around 13 percent in the year
2018 in comparison of 2017, the reason was majorly because of the expenses of LinkedIn and
Twitter as well as the investments implemented in the commercial sales ability (Daniel,
Neves and Horta 2017, pp.114). The services of Microsoft is majorly concentrated on the
post-sales support/assistance provided to the consumers. It attempts at efficiently maintaining
the higher level of the customer services both in the stage of pre-purchase and post-purchase.
One of the section of the customer service offering or programmes includes online Malicious
Software Removal Tool as well a disability answer desk in the online platform for the
purpose of supporting consumers with disabilities (Narikae, Namada and Katuse 2017).
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Strategic Clock of Microsoft:
Strategic Clock of Microsoft
(Source: Tashchiyan, Sushko and Grichin 2015)
The goal of the company is to have affordable pricing structures for its hardware and
software to enable effective computing experience for disabled people. It reflects the factor of
affordability by facilitating user friendly usage characteristics (Dou and He 2017, pp.609).
These factors leads to establishment of strong customer base.
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SWOT Analysis:
The strength and weakness can be deduced from internal analysis as well as the opportunities
and threats of the organization can be deduced from external analysis.
Strengths-
Microsoft is one of the leading software companies in terms of the global presence,
especially in the area of cloud computing. The annual revenue generated in the year
2018 from the commercial cloud such as Office 365, Dynamics 365 and Azure is
around 23.2 million dollars (Seland 2016, pp.6).
Microsoft consists of a dominant position in regards with the market share among all
other competitors. In the year 2018, the rank of the company in terms of market value
was 4th with the valuation of 750.6 billion dollars (Easton and Sommers 2018).
Microsoft owns a market share with a gain of 3 percent among five large cloud
services providers, among IBM, AWS, Oracle, Microsoft and Google (Chao and
Kavadias 2017, pp.5).
The company has a wide market reach as it operates in around 190 countries. After
the implementation of advanced version, Windows 10, the company experienced over
700 million installations all over the world (Chatterjee 2017, pp.47).
The company is constantly growing by introducing various new SKUs (Stock
Keeping Units).
The market capitalization of Microsoft is huge, around 776 billion dollars (Easton and
Sommers 2018).
The products and services like the software are user friendly.

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Weaknesses-
The main weakness of Microsoft is the inefficiency in introducing innovation into the
growth of the hardware product offerings. The lack of innovation in the hardware
product category can harm the competitive edge of Microsoft (Pisano 2015, pp.44).
The arising issues in PC market due to the dependence of vendor’s fluctuating pricing
and currency structure.
The company is far behind in the segment of internet browsing in comparison to
Firefox, Google and Safari. The browsing offerings like Edge and Microsoft IE was
not even considered in the list of ‘most popular web browsers 2018’ (Krotov 2017,
pp.831).
Unsuccessful acquisitions such as with WebTV, link-exchange acquisition, the
company experienced a massive failure in regards with unprofitable investments.
Opportunities-
The expansion of the cloud business segment as it is experiencing positive response
and demand.
The company has an opportunity in the areas such as game technology and Artificial
Intelligence, which act as a competitive edge for the business (Amelec 2015,
pp.1406).
Acquisition and Partnerships- To gain high market share in most of its product
segment, it can involve in strategic acquisitions and partnerships. Although the
Microsoft-Nokia acquisition was successful (Violeta and Camelia 2016, pp.727).
Threats:
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The workforce diversity facts and statistics of Microsoft in the year 2018 reflected
discouraging results as the rate of minorities and women employment was very low
(Dhillon and Gupta 2015).
Aggressive competition from hardware and software giants like Apple and Google
(Lessambo 2018).
The abundance in availability of the smartphone, hardware and software offerings
Recommendations:
Inclusion of strategic innovation techniques for facilitating the growth of hardware
segment as well as the software section by incorporating Artificial Intelligence
technology (Hacklin, Björkdahl and Wallin 2018, pp.82).
Enhancing the understanding the changing demographics and preferability of
consumers.
Introducing exclusive product segment for responding to the competition of Apple
and Google.
The company can invest in strategic partnership projects, which will enable the
efficient market dominance of all the segments (Microsoft can acquire business which
specializes in innovating hardware products).
The company should restructure the HR policies regarding recruitment and inclusion
as it will allow the company to attract skilled people and incorporation of diversity in
workforce reflects the positive work environment and culture of organizations
(Maldonado, Vera and Ramos 2018, pp.745).
Conclusion:
Therefore, it can be concluded from the paper that Microsoft is a well-reputed
company specializing in hardware and software offerings but the company has the scope of
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improvement for achieving the increasing competition in the similar segment. The company
have to respect the demographic and psychographic changes for shifting its focus from
affordability to innovation.
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