Microsoft's Strategic Management and Competitive Advantage

Microsoft's strategic management practices are pivotal in its global market expansion efforts. By employing a mix of cost leadership, differentiation, and continuous innovation, the company has successfully entered new markets and maintained its competitive edge. This assignment examines Microsoft's strategies through various lenses, including case studies on their successful market entries and the role of technological capabilities in driving strategic orientation.

Running head: MICROSOFT REPORT
Microsoft Report
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Table of Contents
Introduction......................................................................................................................................2
1.0 Task 1.........................................................................................................................................2
1.1 Analysis of Internal Resources and Capabilities...................................................................2
1.1.1 VRIN Criteria.................................................................................................................2
1.1.2 Competency Framework.................................................................................................4
1.1.3 SWOT Analysis..............................................................................................................5
1.2 External Environment............................................................................................................7
1.2.1 PESTLE Analysis...........................................................................................................7
1.3 Competitive Forces within Industry......................................................................................9
2.0 Task 2.......................................................................................................................................12
2.1 Strategic Options.................................................................................................................12
2.1.1 Business Unit Level......................................................................................................12
2.1.1.1 Porter’s Generic Strategies....................................................................................12
2.1.1.2 Bowman Strategy Clock........................................................................................13
2.1.2 Corporate Level Strategies...........................................................................................16
2.1.2.1 Ansoff matrix.........................................................................................................16
2.2 Justification for Selected Strategy.......................................................................................16
Conclusion.....................................................................................................................................18
Reference List................................................................................................................................19

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Introduction
Microsoft is an American multinational technological company, which develops,
manufactures and sells computer hardware, consumer electronic, personal computers and
services. The operating system of Microsoft has hold 37.43% market share in the world. The
study will assess the external and internal situation of Microsoft and provide strategic options for
achieving organizational success. The external market and competitive force will be assessed
through PESTLE and Porter’s Five Force Analysis. The strategic choice options for the
organization will be assessed through Porter’s Generic strategy and Ansoff matrix.
1.0 Task 1
1.1 Analysis of Internal Resources and Capabilities
1.1.1 VRIN Criteria
Resource and
Capabilities
Valuable Rare Imitable Non-
substitutable
Competitive Advantage
Worldwide and
Extensive
Distribution
Channel
Yes Yes Yes Yes Sustained Competitive
Advantage
World Best Leading
Operating System
Yes Yes Yes Yes Sustained Competitive
Advantage
Wide Range of
Product Portfolio
Yes Yes Yes No Temporary Competitive
Advantage
Superior Yes No No Yes Comparative Parity

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Engineering
Strong Brand Image Yes Yes Yes Yes Sustained Competitive
Advantage
Dedicated Human
Resources
Yes Yes No No Comparative Parity
Automated
Production
Yes Yes No No Comparative Parity
Advanced
Technology
Yes Yes Yes Yes Sustained Competitive
Advantage
Table 1: VRIN Analysis of Microsoft
(Source: Wang 2014)
From the above table, it can be found that worldwide distribution channel of Microsoft
leverages its operational performance. According to Gouillart (2014), the organization distributes
and markets its products and market through three major channels like OEMs (Original
Equipment Manufacturers). It is highly valuable and cannot be easily imitated by any other
organization. Therefore, such strong distribution channel leads to sustained competitive
advantage for the organization. On the other hand, Microsoft.com (2017) opined that the
convenient operating system of Microsoft also forms the sustained competitive advantage.
Furthermore, the organization has wide range of product portfolio including windows, server,
office, visual studio, surface, window store, Xbox live and others. Such product portfolio is
highly valuable for the organization and it is rare in the market. However, it can be produced by
substitute in the market. Therefore, such product portfolio can for comparative parity for the

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Interpersonal
Customer Focus
Diplomatic Sensitivity
Organizational Knowledge
Strategic
Developing Talents
Strategic Thinking
Organizational Alignment
Delivery Related Result
Achievement Focus
Analytical Thinking
Managing Resources
Teamwork and Team Leadership
organization. Apart from that, the strong brand image of Microsoft leads the organization
towards beating the rivals, which contributes in its sustained competitive advantage.
1.1.2 Competency Framework
Figure 1: Competency Framework
(Source: Mohamed and Jones 2014)
While seeing at the competency framework of Microsoft, it can be seen that the delivery
related result of the organization is as per the organizational standard. Moreover, the
organization is always achievement oriented for meeting the ultimate organizational vision. The
analytical thinking capability of the organization makes the organization capable of providing
customized technical solution to the customers. Furthermore, the highly skilled and
knowledgeable employees of the organization build the foundation of the employees. On the

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other hand, the customer focus attribute and capability of the organization allows it towards
delivering unique technical solution to the customers. The diplomatic sensitivity of the
organization allows it towards assessing the core needs of the customers, which allow it to meet
their customized needs. Furthermore, the strategic thinking capability of Microsoft allows it
towards thinking beyond the short term achievement and achieving long term achievement.
1.1.3 SWOT Analysis
SWOT Analysis of Microsoft
Strength  Strong brand loyalty and bran image of Microsoft attracts huge
customer groups
 Leading operating system of the Microsoft is easy to operate to the
customers
 The robust financial performance of the organization helps in
frequent product and service innovation
 The acquisition of Skype has provide huge of scope of competitive
gain
 Strong distribution channels of Microsoft forms smooth
manufacturing system
 Advanced technology of Microsoft helps it to gain high level of
competitive advantage over the rivals (Lourdes Sosa 2013)
Weakness  Microsoft is still defendant against various unresolved legal cases
 Lack of control counterfeit the software business of Microsoft in the
developing nations

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 Microsoft has been claimed with having no innovation for decades
 High price point certainly deters the customers, which could be a
great problem for the organization
 Strong brand reputation can be vulnerable to breakthrough for even
any small mistake
Opportunity  Wide expansion in international market has provide huge business
opportunities
 Cloud based service can be the reason for competitive advantage
 Microsoft has huge opportunity to enter in mobile industry
 Partnership with other companies can even lead to product and
service innovation (Chen, Delmas and Lieberman 2015)
Threats  Microsoft faces tough competitive pressure from Apple, Google, IBM
Oracle and others
 Rapid technological change can be threat for Microsoft
 The pirated market in the developing nations can be threat for
Microsoft
Table 2: SWOT Analysis of Microsoft
(Source: Eloranta and Turunen 2015)
Strong brand loyalty of Microsoft attracts huge customer in both the developed and
developing countries. The robust financial background of the organization allows it to invest
huge amount in the research and development department. Therefore, the organization can
effectively concentrate on innovation and development for providing unique products. However,

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the organization has been claimed with having no innovation for several years, which is making
the customers disappointed (Gouillart 2014). Furthermore, high prices of the premium of the
products often deter the customers from purchasing them. It often affects the sales volume of the
organization. Strong brand reputation of the organization can also be vulnerable to breakthrough
for any small mistake. The organization has huge opportunity towards wide international
expansion with high level of brand reputation. Moreover, wide international expansion can
enhance the overall sales volume of the organization. Apart from that, the partnership
relationship of Microsoft with other organizations like Adobe, Chevron and others can lead to
business innovation. However, the organization is facing tough competition from Apple, Google,
IBM Oracle and others in terms of gaining market share.
1.2 External Environment
1.2.1 PESTLE Analysis
Political Factor
According to Brook and Pagnanelli (2014), Political stability of developed countries
facilitates the business development of Microsoft. Less changing political regulations helps in
boosting the business development. Government support for industrialization in the developed
country is also favourable for Microsoft. Flexible international trade agreement can be
favourable for Microsoft in terms of expanding in international market. However, Barney (2014)
opined that frequent changes in the inflation rate can hamper the business development of
Microsoft. Furthermore, political interaction in the new deals can also be harmful for the
business development of Microsoft (Barney 2014).
Economical Factor

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Lourdes Sosa (2013) pointed out that economic stability and growth of developed
countries develops the business success of Microsoft. Growing economy increases the return on
investment of the organization by increasing its profit potentiality. However, Wang (2014)
argued that Global economic crisis can hamper the business profitability of Microsoft. On the
other hand, unpredictable fluctuation in foreign currency can be harmful for Microsoft.
Social Factor
High disposable income of the people in developed country has increases their spending
power, which is favourable for Microsoft. As per Gouillart (2014), empowering youth and their
tech savvy nature also form the success scope of Microsoft. The accessibility of technology to
different kinds of people has increased the demand of Microsoft’s technological products and
services (Hagiu 2014).
Technological Factor
Rapid adoption of mobile technology can be threat for Microsoft, as it is not much
concentrated on mobile technology. Eloranta and Turunen (2015) stated that increasing
automation in business can be an opportunity for Microsoft having smooth production process.
Microsoft puts almost 13-14% revenue in their Research and Development department, which
leads to products and service diversification (Hsu et al. 2014)
Legal Factor
Increasing regulation on electronic waste disposal can be threat for Microsoft and leads to
legal constraints. The Energy consumption laws can be threat for the organization in its
production process. However, the organization strictly adheres to intellectual property right act.

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Environmental Factor
In order to maintain sustainability, Microsoft has increased its step towards saving energy
and green IT. The organization also requests customers for recycling their products after using
them (Yang and Wang 2014). Moreover, it has increased the availability for recyclable materials.
1.3 Competitive Forces within Industry
Threats of New Entrants
The New entrants need huge investment for developing and designing software in
technology industry. Furthermore, Chen, Delmas and Lieberman (2015) stated that strong brand
image of the reputed companies like Microsoft and Google can be great barrier for entrants.
Moreover, the innovative entrepreneurial activities help the organization in beating the threats of
new entrants. On the other hand, Cennamo and Santalo (2013) opined that getting market share
in high reputed market can be tough for new entrants. Therefore, Microsoft faces low threat from
new entrants and gain profits in the competitive marketplace. However, it can be key competitive
pressure on the company in future.
Threats of Substitutes
The substitute products and services like record keeping, manual writing and others have
become obsolete now. Such products are services are of no use to the customers. Therefore, the
organization faces low threats from substitute products and services.
Competitive Rivalry
Microsoft faces tough competitive pressure from the major market players in the
technological and electronic industry. Moreover, increasing diversity of firms impose huge

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competitive pressure on Microsoft. Yang and Wang (2014) pointed out that Microsoft faces
extreme competition from the competitors like Google, Apple, IBM and others. However, the
unique value of the products and services help the organization towards maintaining its profit
level in the industry. Competitive rivalry is the most important threat to Microsoft in this
industry.
Bargaining Power of Suppliers
As per Stead and Stead (2013), suppliers feel prestige to be labeled as the supplier of
branded company like Microsoft. It minimizes the power of supplier to negotiate the price with
Microsoft. However, wide availability of supply often increases the bargaining power of
suppliers. Therefore, Microsoft faces moderate bargaining power of suppliers.
Bargaining Power of Buyers
Brook and Pagnanelli (2014) stated that low availability of substitute products lowers the
bargaining power buyers. Furthermore, high quality products and services prevent the customer
to switch in any other organization (Uzzafer 2013). Therefore, the organization faces less
bargaining power of the buyers. However, it can be an important threat on the profitability of the
organization.

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Figure 1: Porter’s Five Forces of Microsoft
(Source: Arora, Belenzon and Rios 2014)
CompetitiveRivalryHighThreatsofNewEntrantsLowBargainingPowerofSuppliersModerateThreatsofSubstitutesLowBargainingPowerofBuyersLow