Strategic Management Report: Microsoft Company Analysis and Critique

This report delves into the strategic management of Microsoft, examining its application of Porter's Five Forces model to assess its competitive position within the technology industry. It provides an overview and critique of the model, analyzing the bargaining power of suppliers and buyers, the threats of substitutes and new entrants, and the rivalry among existing competitors in the context of Microsoft. The report also includes a comprehensive company analysis, exploring Microsoft's mission, current business scenario, industry trends, economic conditions, challenges, and risks. It highlights key aspects such as commercial cloud, industry trends, and challenges related to its ecosystem and manufacturing partnerships. The analysis aims to provide a clear understanding of Microsoft's strategies and challenges in a dynamic and competitive market, making it a valuable resource for students studying strategic management. The report also provides recommendations and concludes with references for further study.

Strategic Management

Table of Contents
INTRODUCTION...........................................................................................................................1
FINDINGS.......................................................................................................................................1
Overview & Critiques of Porter's model of competition500......................................................1
Company analysis.......................................................................................................................2
Does this theory and practices work...........................................................................................5
CONCLUSION................................................................................................................................7
RECOMEDATIONS.......................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Strategic management is defined as the ongoing procedures of firm for planning,
monitoring, analysing evaluating all things that is essential for organisation in order to
accomplish their objectives in effective and effectual manner. Moreover, this is an imperative for
firms as it enable them to evaluate future opportunities as well as applied crucial plan of action
for obtaining these in healthy as well as fostering manner (Certo and et. al., 2016). Also, this is
helpful for identifying significant procedures as well as resource allocation for attaining
objectives. The chosen company for this report is Microsoft which is a multinational Technology
company having headquarters is in Redmond, Washington. This report covers overview and
critique of porter five force model as well as company analysis. Apart from this, working of this
theory and practices are also discussed in this report.
FINDINGS
Overview & Critiques of Porter's model of competition
Porter's five forces model is developed by Michael E. Porter in year 1979. in this there
are five competitive as well as effectual forces which shapes a market and industry as well. All
these forces assists in evaluating all aspects from competition intensity into marketplace towards
attractiveness and profit of sector. It is frequently utilised for finding a structure of for
ascertaining corporate strategy. All these factors are discussed below:
 Bargaining power of suppliers: Suppliers are the person which facilitates organisation
with efficacious materials as well as elements for assisting them in performing its
business operations appropriately and effectually. The strong bargaining power of
suppliers allows them to sell costly or low quality products and raw materials to its
buyers. In respect of Microsoft, bargaining power of suppliers is very low as they have
various potential suppliers because it is famous brand. In context of Microsoft they use
supplier program which defines the way a business can critically and strategically do
their business by including all their requirement and expectations in order to remain
always competitive in the marketplace. By using the preferred supplier makes it easy for
Microsoft employees to work at global level so they can give one of best attributes in
positive manner.
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 Bargaining power of buyers: Buyers has power to demand low price with high quality
form the producer of industry in which its bargaining power is strong (David and David,
2013). In context of Micro soft, their products are are high quality as well as it have
great market reputation. So, in this industry the bargaining power of buyers are very low.
In context of Microsoft's they are market leaders and their products are highly qualitative
and available in cost effective manner. With the help of such kinds of qualities
organisation can reduce the bargaining power of buyers. They are pioneer in innovation
as they seek various discounts to cope up by limiting the buyers power.
 Threats of substitutes: It is the forces which is threaten when buyer can easily identify
substitutes products with attractive price or effective quality and when buyers may switch
from one product to other with little cost. In case of Microsoft, the threats of substitutes
product is very high as most of the individuals are using pirated MS operating system. In
context of Microsoft's they existed in fierce competitive world as the substitute products
threat is very much high so they have to by majorly focusing on value proposition of
products that are uniquely differ from offering of products and services in order to remain
always competitive in marketplace.
 Rivalry among existing competitors: This forces is considered as the major
determinants upon how competitive as well as profitable a sector is. Within competitive
sector, organisation has to compete aggressively for market share that outcomes into
lower profitability. In software industry, the competition is based on innovation and
market campaign. The Microsoft have various competitors such as Google and others so
the competition is very high. They existed in fierce competitive world by selling products
such as personal computing, software and applications industries in the marketplace that
raise the level of competition in marketplace at global level. So to reduce the level of
competition respective firm put one of their best efforts in order to remain competitive in
marketplace.
 Threats of new entrants: It is considered as the force that ascertains how simply new
entrants can enter into specific sectors. In case industry is profitable as well as there are
some barriers to enter, competition soon intensifies. So, within computer software
industry the threats of new entrants is high as fastest product development as well as
technological innovation permits new entrants to easily capture marketplace . Every
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product in the market existed with the substitutes as it affect to the organisational
profitability and sustainability. In context of Microsoft's they by giving one of best
services such as after sale services rather then only oriented towards product can lessen
down respective bargaining power. By increasing the switching cost of the customers
help to them in gaining competitive edge.
So, from the above models, it could be said that within the computer software industry
the bargaining power of suppliers, buyers is low where as threats of new entrants, Rivalry among
existent competitors and threats of substitutes is high (Ginter, Duncan and Swayne. 2018)
Harrison and John2013). This helps the respective organisation to get raw material at effective
prices and their clients will purchase its products at supreme cost which enhances their
profitability. Moreover, here treats of entrants is high so it is also beneficial Microsoft as they
have less number of new competitors. The disadvantage is that, they have high threats of
substitutes and rivalry among existing competitors. As they have various strong competitors such
as Google and others so the competition is tough. Moreover, people tend to use copied or pirated
operating system which is not effective for company as this slows down profit and productivity.
Company analysis
The company Microsoft was established in year 1975. its mission is to allows individuals
as well as business in all over the world for realising its full potential through developing
technology which transform the manners of people communicate as well as perform. They
develop as well as market the software, hardware devices and others which deliver new
opportunities, grater convenience as well as increased value to person's lives. Moreover, they
gain revenue through developing, licensing as well as supporting a board range of software
products by facilitating an array of services involving cloud based services to clients and
enterprises, through designing and selling devices related to cloud based service as well as
delivering appropriate online advertisement to international people (Microsoft Annual Report
2018. 2019).
Current business scenario:
Presently, Microsoft is the growing company into various sub sectors in which another
firms are struggling to develop a mark. In Year 2018, the company gained approx $110 Billion.
They have a huge international market as well as continue to develop effectual utilisation of
technology as well as maximising their capabilities. The several aspects and development
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through organisation had a greater role into their effectual performance. Commercial cloud is
considered a category which is formed through Microsoft that involves Office 365, Dynamics
365 and others. The company have concentrated their strategy towards maximising cloud
computing performance. Other sources of their performance are Windows pro, Surface and
LinkedIn. Moreover, they have efficaciously managed to remain company in context of Gaming
through obtaining a worth of about $10 billion (Microsoft Annual Report 2018, 2019). Also,
every firm needs to formulate as well as execute strategic management for remaining leaders
into marketplace as well as enhancing its effectiveness.
Industry trends:
The computer software industry is more competitive and dynamic with frequent changes
into technologies and business model. Every industry shift is an opportunity for conceiving new
products, technologies ideas and so on. Which can further transform the particular sectors as well
as enterprises. At Microsoft, they push boundaries of what is possible by a wide range of
research and development activities which seek for identifying as well as addressing the
changing trends of industry, competitive forces and consumers demands.
Economic conditions, challenges and risk
The market for cloud based services as well as software devices is dynamic as well as
more competitive. The Microsoft traditional business is Windows operating system as well as its
competitors are forming new devices as well as deploying competing cloud based services for
clients as well as businesses. The devices and develop factors consumer prefer evolve rapidly as
well as influence how clients access services within cloud and in few cases the choice of
consumers that suite cloud based services to apply. The Windows ecosystem should continue to
adopt and involve over an extended period with changing atmosphere. Also,m for supporting
their strategy of offerings a set of services and devices is developed for empowering clients for
activities they value most as well as they also announced a functional realignment within July
2013. The aggregate demand of its software, hardware and service is correlated to internation
macroeconomic factors that remain dynamic. Microsoft business division develops as well as
markets software as well as online services which are developed for enhancing personal, group
as well as company's productivity. The offerings of MBD involves Microsoft office system that
produce more than 90% of revenue as well as Microsoft dynamics business solutions. Its
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Entertainment and devices Division formulate as well as market products or services which is
developed for entertaining an connecting people.
Challenges faced by Microsoft:
There are various challenges which was faced by Microsoft, some of them are discussed
below:
 Ecosystem: This is considered as the problems which is not standing up to competition.
Office is the exception to this and this is a biggest one (HillJones and Schilling, 2014).
But its windows store is around one -fifth the size of App store as well as Google play.
These do not has a viable competitors to Itunes. Also, Google Chrome Browser surpassed
internet explorer into total market share. Bing remains a distant second to Google search
as well as Microsoft launched the free online version of office- Microsoft Office online-
in responses to Google drive. Due to having a robust ecosystem, so it is tough to retain
consumers and leading devices sales. Also, the Outlook.com obtained the similar number
of customers as Gmail which becomes popular. So, their Office online product have been
rate highly. This can be overcome by acquiring more applications in its store but there is
a problems the developers so not want to design apps which is not in demand as
consumers do not like to purchase that kinds of phone in which they do not has its
favourite application. For this they has to identify a way to incentivize developers. They
can do so through paying app developers outright, providing high margins upon sales as
well as facilitating clients significant credit towards app purchases. Ecosystem that are
very much demanding in today's scenario as people become more aware about
environment. So it is very much essential aspect in front of Microsoft to analyse the each
and every aspect of the product before launching into marketplace that it is must eco
friendly that helps to lessen down the bargaining power of consumers and also suppliers
in order to gain potential goals and objectives to gain potential outcomes in positive
manner. In that aspect organisation also invest their money in kinds of CSR activities to
create trust of people in positive way.
 Manufacture partnership: The reason through which the Microsoft came to dominate
the PC market was, they licensed the Windows operating system for broaden array of
third party manufactures such as Dell, hp and others that whole flooded the marketplace
with cheap products. These are known to be the similar manufacturers which are
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currently producing Windows 8 laptops, Tablets and Ultrabooks. Without any larger
manufactures, respective organisation faces huge competition into marketplace. But this
is known to be the mixed blessings with the entanglement of third party firms, respective
organisation do not has capability to control the features, design style and others of their
Windows products. Also they tried to cope up with this through purchasing Nokia as well
as manufacturing their own branded tablets, surface but for performing this there is risk
of alienating their tablets partners as an outcomes surfaces have always been priced
considerable higher than third party Window 8 tablets. Whole, Microsoft's manufacture
partnership are positive for firm but lack of control over their products creates this tough
to control brand as well as innovate with new characteristics and designs (Microsoft’s 4
Biggest Problems. 2014). the another major attribute is to produce products and services
that are pilfer less and unique in identity, in context of Microsoft they by taking patent
and copyright to save the data and information in order to give unique products to the
consumers. They uniquely design and control features in order to give one of best
attributes to gain potential outcomes. Respective factors helps to eliminate the bargaining
power of suppliers and consumers as they get rare products and services and in respect
they pay price for it.
Success:
By using the Porter's five force model Microsoft should be able to access the major effects of
various stakeholders on their business works and activities in order to build one of best strategies
and tactics to gain potential outcomes. So it helps them to access the potential outcomes and
effects of it.
Failures
On other hand there are some drawbacks that respective theory hinders the self interest of
organisation as it sometimes misleads to the owner in order to evaluate the various factor to gain
potential outcomes.
Recommendation:
It has been recommend that organisation have to by adopting products that are unique in nature
can give them competitive advantage in positive manner. So it proved beneficial for organisation
to access their competitors strength and weaknesses to build strategies accordingly.
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Does this theory and practices work
The Microsoft applied this Porter's five forces theory in this work effectively and
efficiently, Porter's five forces model facilitates a clear path of potential threats and opportunities
for the company which assists it to perform effective strategic management. So, its practices are
discussed below:
 Bargaining power of suppliers in Microsoft: In respect of Microsoft, supply condition
plays a crucial role in ascertaining their business. The hardware and software business
environment of respective organisation has a clear influences of suppliers. Moreover,
they have various potential suppliers. Thus, the organisation has the option of terminating
a suppliers in case they try to bargain with them (Lasserre, 2017). Also, a large number of
potential suppliers are trying to contract the company. So, its suppliers bargaining power
is low and they take advantage of it purchase raw material at effective costs.
 Bargaining power of buyers: While accessing the marketing activities of Microsoft ,
this is clear that organisation have greater control over their buyer. This specifies that
their products are of high quality as well as thereby has a well market reputation.
Moreover, they are known to be the branded products. Thus, buyers usually does not has
bargaining power over firm. Also, the present trends shows that emerging software
developers market its products at competitive cost as well as this circumstances can force
respective firm to allow their clients to has more control over their sales. Also, buyer
switching cost is low within this particular.
 Threats of new entrants: The threats of new entrants if very much high within software
sector. Faster product developments as well as technological innovation enable a new
entrants to capture the market easily (Morschett, Schramm-Klein and Zentes, 2015). The
present trends shows that person are highly attracted towards new software formation as
it always try to replace the existent technology with more developed ones. So, this
obvious that number of new market players has entered within software. However, higher
entry cost minimises the threats of new market entrants to some extent. So, the challenges
and issues they face may enhance more.
 Threats of substitutes: In case of Microsoft, the substitutes can be manual or non-
online procedures. These does not meet their process performance level. Moreover, the
ideas of software are broadly copied as well as several people and enterprises are prefer
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to apply pirated software versions. This is expected that millions of individuals are
utilising pirated Microsoft operating system. Most of the duplicated software facilitates
full characteristics to its clients exactly as original software performs. So, such pirated
and duplicate software are simply available at low cost, several users are not at all
interested to purchase Original version. Then also the government provides huge
emphasis upon enforcement of intellectual property laws, software piracy and others.
 Competitive Rivalry: In current business scenario, competitors are that firms which are
involved into providing same services to clients. These organisation are threats as its
strategies are unpredictable so their working methods (Noe and et. al., 2017). They may
generate something or formulate new strategy which can provide them an edge into
market area. Therefore, this is signifiant for firm to keep changing its operations as well
as increase its capabilities for gaining effective position and market share within
business. As Microsoft have several rivals into marketplace like Google, SAP, IBM and
others. Whole has great market share as well as effective customers base across world.
This factors makes them a stronger threats for technological firms, they utilises
efficaciously and satisfy the current clients demands as well as few are even designed to
accomplish the forecasted upcoming wants. These organisation are aggressive when this
comes to diversity as well. Apple have a range of products and services as well as quite
diversify into nature like wise Google. These firms are investing more upon its research
and development for determining the exact value which is to be developed into its
collecting strong clients attention. These aspects develops the threats of existing
competition very much high for respective organisation.
From the above analysis, it has been analysed that the porter's five forces theory works as
they are are the famous brand so it is having several suppliers which supply them elements,
components, product etc. at lower or effective price which aids them to develop higher or
standard quality products at supreme cost. Also, their suppliers induces limited forces and they
are more capable to make their own software (Rothaermel, 2013). With their skilful as well as
talented research and development team and assists them to formulate more strategies
accordingly in order to gain competitive advantage within marketplace. Moreover, the
bargaining power of buyer is also low that help them to charge effective price from buyers by
which they can able to gain more revenue and income. These aids them to do more innovation in
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future for enhancing profitability in effectual manner. In addition to this, with the application of
porter five force model the respective organisation can able to know about their entrants threat
which is very high as the technologies and innovation is enhancing day by day so this threats is
also growing rapidly. Therefore, they can formulate strategies accordingly and perform their task
with full efficiency (Simon, Fischbach and Schoder, 2014). Moreover, the threats of substitutes
and competitive rivalry is high so they can effective evaluate their competitors strategies such as
Google and others into respective industry. Also, they may generate something or formulate new
strategy which can provide them an edge into market area. Therefore, this is signifiant for firm to
keep changing its operations as well as increase its capabilities for gaining effective position and
market share within business.
CONCLUSION
From the above report, it has been concluded that strategic management is an crucial
component for whole company for attaining its objectives and goals at certain time duration.
Also, this is a universal process that is utilised for planning, monitoring and evaluating all the
activity that is significant for firm for accomplishing business targets. Porter five forces is
applied for evaluating all aspects from competition intensity into marketplace towards
attractiveness and profit of sector. The computer software industry is more competitive and
dynamic with frequent changes into technologies and business model. Every industry shift is an
opportunity for conceiving new products, technologies ideas and so on. In addition to this, the
respective organisation are facing several challenges such as ecosystem, manufacturer
partnership and many others. So, for this they have to acquire more applications in its store but
there is a problems the developers so not want to design apps which is not in demand as
consumers do not like to purchase that kinds of phone in which they do not has its favourite
application. For this they has to identify a way to incentivize developers. They can do so through
paying app developers outright, providing high margins upon sales as well as facilitating clients
significant credit towards app purchases. Also through slashing prices on their mobile line for
generating more sales, this will resolve issues more efficiently and directly. Moreover, this
application of porter five forces theory is effective for developing appropriate strategies and
implement it appropriately as this is helpful to understand competitors and industry as well as
gain profitability in efficacious way.
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RECOMEDATIONS
From the above report, this have been recommended that Microsoft should considered
this model for surviving longer duration within marketplace. As it aids them to examine those
factors which can threats their profit index. Moreover, this is also suggested that, for ascertaining
the effects of these factors they can invest more into research and development department so
that it can analysis its affects and develop strategy consequently which help them to enhance
profit ration of organisation in future. Also, for overcoming from the challenges of ecosystem
they can get various apps in their store as well as they should identify a path to incentivize
developers. In addition to this, in order to overcome manufacture challenges respective
organisation should discontinue their surface line as well as concentrate upon surface pro so that
they can able to charge premium cost.
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REFERENCES
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organizations. John Wiley & Sons.
Harrison, J. S. and John, C. H. S., 2013. Foundations in strategic management. Cengage
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integrated approach. Cengage Learning.
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Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Strategic international management (pp.
978-3658078836). Springer.
Noe, R. A. and et. al., 2017. Human resource management: Gaining a competitive advantage.
New York, NY: McGraw-Hill Education.
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in corporate strategic management. Information Systems and e-Business Management.
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Steiss, A. W., 2019. Strategic management for public and nonprofit organizations. Routledge.
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Online
Microsoft Annual Report 2018. 2019. [Online]. Available Through:
<https://www.microsoft.com/en-us/annualreports/ar2018/annualreport/>
Microsoft’s 4 Biggest Problems. 2014. [Online]. Available
Through:<https://www.huffpost.com/entry/microsofts-four-biggest-
problems_b_5641212>
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