LCBS5001 Strategic Management: Microsoft's Business Strategies Report

This report provides a comprehensive strategic analysis of Microsoft, examining its business strategies through the application of various strategic tools. It begins with an overview of the company, its vision, mission, products, and services, followed by an exploration of its marketing segmentation, targeting, and distribution strategies. The report then delves into external environmental analysis using PESTLE analysis of the UK market and Porter's Five Forces, assessing industry rivalry, buyer and supplier power, and threats of new entrants and substitutes. Internal analysis includes a value chain analysis and a look at Microsoft's operations and strategic clock. A SWOT analysis identifies the company's strengths, weaknesses, opportunities, and threats. The report concludes with strategic recommendations for Microsoft to sustain its competitive advantage in the evolving business landscape.

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