Microsoft Corporation’s Corporate Strategy

Subject: Company Analysis
Pages: 11
Words: 3047
Reading time:
12 min
Study level: PhD


Microsoft Corporation is a large multi-national corporation that produces several lines of computers and related products. The company is known for the production of windows and operating systems that help in the normal running of computers. Two engineers, Bill Gates and Paul Allen on April 4, 1975, established Microsoft Corporation. The firm started as a manufacturer of the BASIC interpreter for computer programming languages (Flint, Woodruff, & Fisher, 2002).

The market was relatively young and many of these products were new. For this reason, this firm did not meet strong competition in this field during these early years. It grew very fast to capture the home market in this line of products. Because of the value attached to the computer by then, and the prices that this software fetched in the market, this company grew very fast. It soon gained entry into the Japanese market, where the products were also in high demand because the country was the second-largest producer of personal computers.

With a team of innovative minds and enough funds to support creativity and innovation, Microsoft started producing better versions of its services, besides developing new lines of products. Starting as MS-DOS, this software was upgraded to be Microsoft Windows in the 1980s. Its Microsoft Office would soon come to dominate the office suite industry because of its advanced features. Because of its financial strength, the firm has been able to buy new technological inventions from other firms.

It bought Skype Communications in May 2011 at a cost of $ 8.5 billion. Currently, this firm operates several lines of products, which include Windows Division, the Online Service Section, Tools and Server, and the Entertainment Division. Ahmed and Rafiq (2002) report that Steve Ballmer, the current Chief Executive Officer of this firm has hinted that the firm is considering an extensive investment in the Smartphone line of products.

The firm has been financially strong since it went public in 1986. Currently, the firm employs over 92,000 people directly while this firm employs scores of others indirectly, as experts or traders of the company’s products. As per the company’s financial statements, this firm recorded an operating income of $ 27.16 billion, with a revenue of $ 69.95 in the 2011 financial year (Gilberte, 2001). As per the data given by this scholar, the total assets for this firm amount to $ 108.7 billion. This makes it one of the largest international corporations.

Microsoft Corporation Corporate Strategy

The current corporate world is very competitive. Many firms are coming up into this industry with new strategies and with new products that are better and cheaper. These new firms are also much flexible to the current technological changes. As Frankfort-Nachmias and Nachmias (1992) observe, these new firms are the biggest challenge to established firms such as Microsoft, which may find a lot of difficulty in adopting the current emerging technologies at a rate that is required.

The biggest aim of the current firms is to maintain their profitability through effective and efficient productions, in order to ensure that they remain competitive within their respective industries. The corporate strategy is meant to ensure that these firms are in a position to manage market competition and that they are in a position to increase their market share, or at least maintain it as a way of ensuring that it remains competitive.

Microsoft Corporation is a large international firm with worldwide market coverage. For a long time, this firm has been operating as a monopoly in this world market in the production of computer software. This has seen it grow in size to become one of the world’s largest companies in share capital and in asset base. As Holbrook (2003) says, Microsoft has been a force to reckon with in this industry. Through patent, it has ensured that it protects most of its products from being imitated by other companies, a fact that has seen it become so monopolistic in this market. However, this is changing. Many governments across the world, including its own home country government that is, the US government, has severally petitioned this firm to relax its hold on some patents so that other innovators can come up with products serving the same purpose.

This has seen it fined severally both at home and in the international markets for charging other firms that use this technology. This is a clear message to this firm. The time to consult the law for comfort is over. This company must therefore devise new ways through which it can manage market competition, other than holding on to patent and charging users of its technology. To understand better the corporate strategy of Microsoft Corporation, it would be best to start by conducting both the SWOT and PESTEL analysis of this firm.

Microsoft Corporation SWOT Analysis

There are several ways through which a company can be analyzed to determine its worth within a given industry. Fifield (2007) says that this analysis makes it possible to comprehend both internal and external factors that affect the firm. The factors can be strengthening or weakening factors that a firm should consider in order to maintain a competitive edge in the increasingly competitive market. Microsoft Corporation can best be understood through SWOT analysis.

The strength of the company arises from several factors. Microsoft is the market leader in the industry of software. Starting in 1975, this company found this industry relatively young. The few firms existing in this industry were struggling to master the programming languages that could work in the computers being invented at this duration. Large computer companies such as IBM needed software that could be compatible with their newly invented personal computers.

The firms that were then doing this job produced software that had many flaws. When Bill Gates and Paul Allen came with new software that could work well with the personal computers, IBM, then the leading manufacturer of personal computers gave them a major contract. This was the beginning of the firm’s entrenched control in this industry. The two founders, with other employees, fast developed a niche for this firm, as a company that offered quality products to its customers at relatively low costs.

Eggert and Ulaga (2002) say that the firm’s strength during these early years was based on the innovative minds of the employees, starting with the owners, and strong business acumen that was employed by the entire team. The company has captured the world market and through intellectual patent, it has managed to frustrate other firms that have tried to offer it competition in this industry. Microsoft windows are currently trading in a near-monopolistic market. Other products of the firm such as the Smartphone are also very popular in the market.

The weakness of the firm has been evidenced, despite its massive success. As Cunningham (2000) says, this giant firm has experienced numerous challenges arising from its inability to manage various internal policies and procedures. Its online division products have constantly registered losses since its inception, lowering the overall profits of the firm. In the midst of the material prosperity of competing firms such as Google and Yahoo, Microsoft’s Bing has been a disaster in the market.

This line has failed to take off in the market because of features that make it very heavy hence slowing the usage. The effort by the technical team to improve its performance has been a failure. A new entrant, Mozilla Firefox, overtook its Microsoft Internet Explorer. The entire team of this firm has also been unable to avoid constant lawsuits, which have seen the firm experience huge fines within the home and international markets.

Opportunities are vast for this firm. According to Bryman (2001)), the sale of personal computers has more than doubled over the past decade. This has seen many computer-manufacturing firms demand more software for their personal computers. Microsoft controls over 95 percent of this industry’s market. Many other firms that manufacture such products as smartphones have also increased the demand for the operating system that such phones would use.

This has been an added advantage for this firm. With increasing internet consumption around the world, Microsoft stands a chance to reap from its internet line of products. Briggs (1986) states that large corporations and governments around the world have considered installing communication systems and other data management units within their facilities that are secure from hackers. The best way of doing this has been contracting the software manufacturers. This offers this giant firm a huge opportunity to reap maximum profits.

Threats are rife in this industry, despite the obvious opportunities that it poses. One main threat of this firm has been the presence of equally stronger competitors. Although the firm has managed to keep close control, stronger competitors have thwarted the production of operating systems for personal computers hence its effort to extend its lines of production has been frustrating. Its internet products have been a total failure due to the presence of strong market competitors such as Google and Yahoo. Although the law has always protected this firm from other firms’ infringement into its patented products, the same law has resulted in the firm paying huge fines due to a number of breaches.

One final threat that this firm has dreaded for the last two decades is the very technology that is its basis. Emerging technologies are so dynamic that this firm is left guessing the next direction this firm would have to take due to the technological changes. Another main threat that has eaten into the profits of this firm is the sale of counterfeit products. According to Edkins and Maja (2009), over 80 percent of the users of Microsoft products are not using genuine products. They buy cheap counterfeit products, denying this company the much-needed revenue to compensate for the cost of the intellectual labor used to develop the product.

Microsoft Corporation PESTEL Analysis

The political environment of this corporation has given it the best opportunity to expand. The United States of America is the leading democracy in the world, with a government that is very stable. Since the inception of this firm in 1975, no political strife has been experienced, which could have rendered trade an improbable activity. As Best (2009) says, a firm would need a stable political environment in order to take off and excel.

With internal strife, a firm would be forced to disrupt its operations, ultimately disrupting its entire progress. Because of this, Microsoft Corporation has grown to be a giant firm in this industry. Many other nations where this firm has established major offices such as Japan and the United Kingdom have also been relatively stable politically. The political class has also avoided affecting this firm in any way. In this continues, Microsoft stands a better chance to manage the current market challenges.

The economic environment has experienced mixed fortunes. When this firm started off, America was experiencing massive economic growth in its entire economy. Many large firms such as IBM were also doing well in their industries, as the competition was limited. There was the ability to buy among many of the local citizens, which was then the only market for this firm. The financial market was also doing well, and with the government directives that investment loans are offered at lower interest rates, getting finance for expansion was not difficult. This saw the firms expand at a faster rate. However, the first major blow (which, many analysts consider this firm passed with huge success), was the dot-com crash.

Although this firm was strong in the market, its sales were greatly reduced. This is because many people became a skeptic of computers and computer compatibles. However, it managed this challenge comfortably as people regained their confidence in computers. However, another challenge would come in the 2008-2009 economic recession. Sales dropped significantly and so were the profits. However, the current economic growth of the US and the entire world is giving hope to this firm.

The social environment has been a boost and a blow to this firm in equal measure. The world is advancing in technology and the main outcome of this is increased usage of personal computers. Within the United States of America, it is estimated that out of ten individuals sampled, eight would be regular consumers of computers, six of which would own a personal computer. The improved living standard the world over has seen a massive need for personal computers.

As such, Microsoft has had a massive sale of its products due to the increased demand for them. However, this social environment has been a blow as people are moving towards slimmer tablets and iPads, which have more attractive features than personal computers. This benefits Microsoft competitors like Apple Inc. The emergence of Facebook and YouTube as social networks has negatively affected this firm’s online products.

The technological environment has been very unpredictable. The emerging technologies are so unpredictable that this firm is at times left guessing what the next technology will bring to this industry. When smartphones came to the market, Microsoft quickly formed a pact with the manufacturers of these products like Nokia, to use Microsoft operating system. This was a timely action and the company reaped from this. When this company thought that it was at par with the current technology, they were met with a rude shock when Apple Inc., a long-time rival firm came with the iPad. This invention was unseen until then.

It came with features that made it far much better than the Smartphone and the personal computers that were in existence. This gadget could be used in retail shops by tellers, in hospitals by doctors, in newsrooms by news anchors, in airports by security guards, and virtually every industry and every place. This was a major surprise to Microsoft and is yet to recover from it. As Bailey (1996) states, technology can be as disruptive as it is a fundamental key to development.

Such large manufacturers of electronic products cannot avoid environmental conservation issues. Most of their manufacturing has been subjecting to investigation over the amount of smoke and other pollutions they pose to their immediate environment and the entire world environment. The United States of America is the second leading environmental polluter, after China, which has adamantly refused to cut down on its pollution rates. Microsoft however, has been lauded by a number of environmental groups, including the Green Belt Movement, for its effort in cutting down on environmental pollution. This has seen it awarded certificates, making it have a positive image in the corporate world.

The legal environment, just like the technological environment, has offered mixed fortunes for this firm. Microsoft Corporation has grown to the giant corporation it is today because it was able to patent its products. The law protected these patents, and therefore no other firm could produce a similar product in the market. This saw it operate in the world market as a near-monopoly firm in the production of computer software. However, the same law has been on its neck to relax its grip on some patients.

The law wants this firm to allow other innovators to develop related software without being subjected to the oppressive regulations of Microsoft. A number of courts have fined this firm for failure to adhere to the above requirement. This has seen it lose huge amounts that would have been used in other developmental projects. The law that protected it to become what it is today is demanding that it should let its competitors grow.

Microsoft Corporation Competitive Corporate Strategy

Upon the above-detailed analysis of the firm’s current and past internal and external environment, it would be easier to bring in the firm’s current corporate strategy, much of which has been reflected in the above discussion. Following the stiff competition in the market by other equally strong brands, the Microsoft Corporation’s corporate strategy has been on value creation and value capturing in its various target markets. The company has re-engineered its production strategy to ensure that it creates value in the market. This has been witnessed in its strongest line of products: windows when it produced windows 2010 to improve on the previous windows vista.

Windows 2010 were produced to offer users higher value, and not because Windows Vista was not performing properly. Quality has been the defining new strategy of this firm. Its move to acquire Skype has been seen as a move to enhance the quality of its products. As yahoo allows its users to communicate using text, Microsoft, through Skype, allows users to chat irrespective of one’s location. This is a better value. As Andreson, Narus and Rossum, (2010) observe, the current market is obsessed with value for the products they purchase. Microsoft has decided to define its products and production in general from this value.

Generation of Returns through Quality Offerings

To offer quality, many expenses would be incurred. However, the ultimate goal of Microsoft is to generate increased returns on its products. This is a paradox to the management, which has to be dealt with accordingly. After detailed research, the quality assurance team, in collaboration with the marketing and research and development team came up with differentiation as the way out. Microsoft has adopted differentiation both within its facilities and in the market.

Within the market, the firm has differentiated its products to uniquely position, making it avoid market competition. Within the company’s facilities, each department has specific differentiated tasks that ensure that no department overlaps, and no duty would go unperformed. Within the departments, there are units with specific tasks, each assigned to a specific individual. This has ensured a smooth flow of tasks from one department to another, cutting the cost of production hence making it solve the paradox of offering quality to the market at an increased income.

It can be concluded that the company has many opportunities, although a number of threats and risks exist. Furthermore, the firm has a number of strengths, even though some weaknesses can be observed. Therefore, the firm should be keen on technology since only technology can take it to new heights. Technology is a variable that can either destroy a firm or give it an advantage in the market. The firm should establish appropriate technologies and apply them in marinating the market share


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