Microsoft Corporation's Strategic Pathways: A Case Study

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BUSINESS STRATEGIC MANAGEMENT
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Executive summary
In this particular study, the case of Microsoft has been taken where several strategic pathways
which can be taken by the company has been explored. With the help of several analysis,
that has been performed in this report, it has been suggested that the company should try to
focus more on its consumers through a differentiation strategy. It would be able to do this by
conducting higher research through which product development can be done. However
different theories will be discussed in this study. Ansoff matrix and generic strategy will be
analysed for suggesting risk management policies. A set of recommendation is also provide
for guiding the organisation.
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Table of Contents
Introduction................................................................................................................................4
Main analysis.............................................................................................................................5
Conclusion................................................................................................................................15
Recommendations....................................................................................................................16
Reference List..........................................................................................................................17
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Introduction
Strategic management is a random process of planning, assessing, and supervising essential
plans that are required for the success of the organisation. An organisation can be able to
achieve its goals and objectives by managing its resources strategically. Management is the
process of integrating functions and activities of an organisation into whole. Strategic
planning is the key for resolving strategic tasks that are beneficial for organisational growth.
The study will be advantageous for understand how to manage an organisation strategically.
This analysis will be performed on Microsoft Corporation.
Microsoft Corporation is a multinational company, which has headquartered in Washington.
This organisation sells computer software, personal computers, and electronics. Paul Allen
and Bill Gates founded the organisation in 1975. Annual revenues of Microsoft Corporation
are $110.36 billion (microsoft.com, 2019). This organisation is the leader of the technology
market in current times. This company has increasingly diversified operating system market
and it has made a large number of corporate acquisitions.
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Main analysis
In this study, PESTEL and SWOT framework will be used for identifying the external and
internal factors that can affect Microsoft. Management of this organisation will be able to
develop new strategies if they can be able to identify such opportunities and threats properly.
This will also help to modify products and services of this company.
PESTLE analysis
Elements Description
Political Recent political condition of Brexit will
influence business operation of Microsoft
negatively. Microsoft uses cloud-computing
system for providing customers with the
services. The business will require
frictionless data flow across the borders for
maintaining business operation. Brexit may
influence this as per technology trade bodies
(Clarke et al., 2017). The organisation may
also lose some their EU workers, which will
slower productivity.
Economical Brexit has introduced unstable economic
condition to the citizens of UK. Economic
recession has been increased by 4% in this
country (theguardian.com., 2019). Microsoft
uses affordable pricing strategy and the
product prices may also be increased as the
inflation rate has also rise to 2.7%
(theguardian.com., 2019). Buying attitude of
consumers can be influenced negatively. It
has stated that the economy of UK will
shrink by 8% and GDP of this country will be
reduced by 2% so that the company may not
be able to generate profitability
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(theguardian.com., 2019).
Social The current population in UK is 66.89
million (ons.gov.uk, 2019). Most of the
customers are becoming tech-savvy
nowadays. UK citizens have a high standard
living standard. New entrepreneurial
businesses are also growing in this country.
Microsoft has achieved customer trust. This
shows that the company will be able to sell
more computers in this country market.
Technological It is stated that 88% customers uses internet
for business development (statista.com,
2019). Digital sector has started to accelerate
faster and the turnover of technological
companies has grown by 4.5%. Customers
are also being aware of technology. Other
competitive brands such as Google, Yahoo
are using consumer centric technologies for
attracting customers. However, Microsoft
will be able to lead the market by developing
artificial intelligence. It is also stated that UK
government has agreed to invest £100 million
for R&D process so that this company has
the opportunity of improving their services
more (Abdel-Kader et al., 2018).
Environmental It is stated that air pollution has been
increased in UK. More than 40 towns have
exceeded the pollution level set by World
health organisation. Government of this
country has also taken several measures for
reducing carbon emission. Other
organisations in UK are using renewable
energy sources. Microsoft Corporation is a
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technological company, which needs power
without interruption so that the company
should use renewable energy sources for
fuelling itself. It will also help the
organisation to develop brand name reduce
costs.
Legal There are several employment legislation
published by UK government which should
be followed Microsoft. Employment
legislation such as Equality act 2010,
employment rights act 1996 and working
time regulation 1998 (cipd.co.uk, 2019).
Microsoft has achieved reputation for serving
customers with high quality services.
Violation of such laws will damage brand
image of this brand, which will also cause
customer switch.
Table 1: PESTEL analysis of Microsoft Corporation
(Source: created by the learner)
This can be observed clearly form the above table that the organisation will face challenges
while managing cloud-computing system. This organisation has achieved customer trust,
which will help them to expand business more. According to a report, 27 million people of
UK use Microsoft so that it can be observed that more customers are being tech-savvy
(microsoft.com, 2019). In recent times, economic condition of this country has become
unstable and economic recession has increased. This can reduce total sales of this company.
SWOT analysis
Strengths
 The organisation has achieved brand
loyalty and customer trust
 This company employs around
134,944 people worldwide
(microsoft.com, 2019)
Weakness
 It is stated that the investment and
acquisition of this company is poor
 Lack of innovation has affected this
brand negatively
 Microsoft Edge Browser
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 This organisation has expanded
business worldwide and gained global
customer base
 Effective leadership by the CEO,
Satya Nadella
 Microsoft has a large portfolio and
services portfolio compared to other
competitors
 This company has been able to grow
cloud businesses effectively
application is in a weak position
(Patel, 2017)
 Controversies regarding safety issues
are affecting the corporate image
Opportunity
 The organisation has the opportunity
of attracting more customers by
introducing latest technological
products in the market
 It has gained worldwide recognition,
which will unlock opportunity of
building a strong customer base
 This organisation also has opportunity
of focusing on the segment of smart
phones
 There are also opportunity of
enhancing cyber security and achieve
customer trust
Threats
 Threats from competitors has
increased in recent times as
competitors are using advanced
technology for business development
 Anti monopoly and other law suits
will pose threats for this organisation
 Economic crisis and political
condition may pose threats for the
company
Table 2: SWOT analysis of Microsoft Corporation
(Source: created by the learner)
External and internal factors are interrelated with each other. This has been observed in the
external analysis that the organisation has threats of losing consumers. Recent economic
condition of this country has become unstable and it has been shrunk by 8% so that
customer’s attitude will be influenced negatively. One of the biggest strength of this
organisation is that it uses cloud-computing system. The organisation may face challenges
while managing cloud services across borders. Investment in the R&D technology has helped
other competitive brand to improve their products and services. This has increased
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competition in the markets of UK, which is posing threats for Microsoft. Satya Nadella is an
efficient leader of this organisation who has started human centric development for
addressing requirements of customers (Ibarra et al., 2018). Other strength of the organisation
is effective leadership, which will unlock opportunities of attaining loyal customer base.
Legal issues such as violation of laws will create negative controversies. Controversies will
pose threats for the organisation. In this way, internal and external factors are interrelated.
Two theories will be discussed and it will be compared in this section for understanding
strategic management more briefly.
Prescriptive theory
A prescriptive model states how a new software system can be used for accomplishing the
objectives of an organisation. In prescriptive theory, only the top management develops the
rules and strategies. Employees have to follow such rules and strategies even if it is not being
fruitful at all. This theory refers to some of the guidelines that are followed for attaining
organisational goals. Management of any organisation shapes activities as per the strategies
for goal accomplishment (Pisano, 2017). This theory may not be fruitful for strategic
management as employee morale can be affected by autocratic decision-making on strategies.
Descriptive theory
Descriptive theory refers to the set of propositions that are beneficial for describing
something. The management of an organisation describes objectives properly to their
subordinates so that they can be able to understand it clearly. Managers do not state
employees what steps should be taken for accomplishing such objectives (Miller, 2017).
Employees suggest new ideas for developing working plan. This is also helpful for
developing quality of work as employee starts to work on his or her own interest.
Comparison
Prescriptive theory refers to the set of objectives that is developed by autocratic decision-
making process. Employees may not be able to understand this objectives and working
procedure properly so that their performance level may be affected. It is very important for
the management to develop transparent strategies and guide employees to perform
effectively. Descriptive theory is beneficial for strategic management as the employees can
be able to understand objectives clearly. Managers try to guide the employees for performing
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better and enhance performance level. For example, a manager may punish any employee for
poor performance as per prescriptive theory but the descriptive theory states that the manager
will try to understand why the employee is not being able to perform. The manager will
describe the objective and achievement procedure briefly so that employee performance cam
be enhanced. Thus, it can be stated that descriptive approaches will be helpful for developing
working quality of employees and manage organisation strategically.
Porter's five forces is an external form of analysis through which five elements within outer
environment of an organisation are evaluated. With the assistance of a framework like this, a
company is able to better plan for its future and know what strategic pathways to take in
order to not falter. The five aspects of this theory has been illustrated hair down below
Figure 1 - Porter's five forces
(Source: Rothaermel, 2015)
Threat of new entries (High) - Entering the software industry is extremely hard as a high
level of asset is needed for entering such a market and operate at the level which Microsoft
does (Jeston, 2014)
Supplier Power (Low) - Given the reputation and goodwill which Microsoft has in the
market, it is extremely hard for suppliers to negotiate with the company. This is because the
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business is in a position where it knows that it has several options when it comes to supply
and can substitute them very easily.
Buyer Power (Low) - Customers have an extremely low degree of power when it comes to
the products of Microsoft in terms of negotiation. This is because if the consumers leave the
enterprise for other products it always has other customers from whom it can make a profit
(Hill et al., 2014)
Threat of substitutes (High) - There are numerous products in the market, which are a direct
competition to the products of Microsoft, which include commodities such as the Mac OS,
Safari browser and others. Products such as these give the consumer an option to choose from
other companies and decrease the uniqueness of Microsoft.
Competitive rivalry (High) - Companies such as Linux, Apple and others pose a huge threat
to the working of Microsoft and decrease its chances of productivity. Mobile companies like
apple impose high prices to draw in consumers with high-income Linux attempts to
implement low-cost strategies to undercut Microsoft (Lientz and Rea, 2016).
Ansoff matrix
Ansoff matrix is a strategic framework through which a company is able to determine the
direction at which it will head to gain a competitive advantage in the market and grow its
business reach (Panayotou, 2016). There are four aspects in the theory all of which are
elaborated hair down below:
Figure 2 - Ansoff matrix
(Source: Shenkar et al., 2014)
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Market penetration - This is a method through which a company is able to use is existing
products to penetrate further within its target audience.
Market development - Through the utilisation of this method, a company is able to explore a
new location where it does not have an existing target audience (Rothaermel, 2015).
Product development - With this strategy, the company utilizes various research methods so
that it is able to produce new services and products.
Diversification - From all the above pathways this is the riskiest of all, as a new product is
attempted to be launched in a brand new location where the company does not have an
existing audience (Kipley et al., 2012)
In the case of Microsoft, the strategy, which should be implemented by Satya Nadella, should
be product development. The company has a lot of scope when it comes to technology; one
of the areas, which the company has not explored fully, yet is the Smartphone industry.
Currently, the company has the opportunity to create a capable mobile phone that would be
able to provide all the desktop services of windows pre-installed onto a phone.
The impact of following up with a strategy like this would enable the company to, attain a
huge market share in the mobile industry. This is because the company already has enough
goodwill so that people would rely on the product in a shorter period. Furthermore, the
company would also be in a position where it can hire diversifying employees with different
skill sets and would be able to increase the revenue of the company through new sales
(Shenkar et al., 2014).
Porter’s generic strategy
Porter's generic strategy encompasses three main pathways through which a company may
able to increase is a competitive advantage in market quickly through an emphasis on either
quality or price of the product (Harding, 2017). All of the three pathways within this
framework are elaborated here
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