Executive Summary
The 4th of April 1975 marked the founding of Microsoft, an American global enterprise in the field of computer technology. Microsoft, today the largest software corporation, was founded by Paul Allen and Bill Gates. Additionally, it is among the most valuable corporations in the world. The SWOT analysis showed the company’s internal strengths and weaknesses, as well as its external opportunities and threats. PESTEL analysis showed the factors affecting the corporation in political, economic, social, technological, environmental, and legal areas. Five Forces analysis showed the main forces that are affecting the functioning of the organization. The recommendations for the company include committing to a cost leadership approach, concentrating on competition, and emphasizing research and development.
Organization Background
Microsoft is involved in the creation, licensing, and maintenance of a variety of software products that address various needs. Steve Ballmer was named the CEO of Microsoft in 2000. Before leaving, Bill Gates had a meeting with Steve Ballmer at that time at Harvard University. Ballmer’s abilities were questioned, yet Microsoft continued to dominate the commercial and consumer computer sectors. The business side of Microsoft was where it got the majority of its profits and its main advantages.
Prior to 1990, Microsoft mostly supplied the hardware industry, which was its intended audience. With each new release of Microsoft Windows, the company increased its share of the global PC market.
Many of Microsoft’s earlier operating systems were replaced, beginning with Vista as part of Project Longhorn in 2001. 2007 saw the general public’s introduction of the new operating system, Vista. Windows XP was popular among Microsoft’s business clients because it was a quick, dependable, and secure operating system.
Microsoft maintained its dominance in the software business with the release of Windows 7 in 2009 to substitute Vista.
Internal Strengths
Leading software firm – Microsoft is the industry leader in the world for software, particularly in cloud computing. Microsoft Teams, the company’s remote work solution, had a rise in daily users in fiscal Q3 2020 of 110 percent in only four months and a 70% increase in six weeks (Protalinksi, 2020).
Microsoft is the second-biggest corporation in the world, depending on the market valuation. It is the second biggest company with the highest market share. Among the top five cloud service providers, it also has the highest market share, up 3% points (Newman, 2018).
Wide market reach: Microsoft has operations in over 190 nations globally. After the promotional Windows version 10 was released, it was installed more than 700 million times globally (Woods, 2018).
Continuous growth Microsoft’s most recent financial figures amply show the company’s rapid expansion in the cloud sector. Investor’s Business Daily estimates that Microsoft’s value might reach $2 trillion in 2022 (Seitz, 2020).
Reputable brand with high levels of patronage 60 million businesses use Office 365, and there are 1.2 billion users of Office worldwide. It probably has the largest, most devoted consumer base (Callaham, 2018). Customers rely on the brand and are committed to it.
Internal weaknesses
Theft committed through cybercrime – Microsoft is now more exposed as a result of the rise in cybercrime cases. According to reports, hackers have repeatedly attempted to compromise the Windows Operating System’s cybersecurity.
Lack of market leadership in the Internet browser sector – Microsoft is losing market share in the sector while Google, Firefox, and Safari gain market share. Microsoft’s IE and Edge failed to even be included in the most popular browsers of 2018.
Acquisitions made by Microsoft were unsuccessful. These purchases led to failures and divestitures. Microsoft’s biggest flaws are investments like this that do not pay off.
Unfair business practices – Slack Technologies complained to the European Commission over Microsoft’s anti-competitive actions. A federal appeals court in the US is now reviewing an appeal from Improved Search LLC, which has the right to resurrect a case against Microsoft for violating a patent on search engine technology.
External Opportunities
Growth of the cloud-based industry – In recent years, its cloud-based solutions have experienced tremendous growth and success. Microsoft has the chance to grow its cloud business as a result. Microsoft stated that it will be releasing a new generation of its cloud-based technology in May 2020 to meet the demands of healthcare businesses.
Partnerships and Acquisitions: Microsoft should concentrate on forming new strategic partnerships and alliances. The corporation will be able to increase its market share as a result.
A lucrative option for Microsoft will be to acquire significant high-tech companies. Microsoft was awarded a five-year contract to provide business software to Coca-Cola in April 2020.
Industry for smartphones and tablets – Microsoft has a great chance in this quickly expanding sector. It may profit from the rising demand for these goods.
Cost leadership approach – By making its goods available at low costs, Microsoft can increase its sales and revenue. Additionally, it may stop hackers from using its software improperly.
External Threats
Complaints related to the workforce: Microsoft’s 2018 workforce diversity figures revealed an imbalance in the workforce it hired. Due to the poor employment of women and people of color, the company’s HR policy has come under harsh criticism.
Microsoft has received a lot of flak for the Xbox Live gaming network because of the gay reference scandal. The firm deems references to homosexuals and gays to be unsuitable and offensive for other users. Hence they cannot be included in the Gamertag or user profile.
Microsoft and Google are in a fierce battle for market share with Apple. The established positions of these businesses may pose a challenge to Microsoft’s market share. In order to entice customers away from Microsoft, Google improved its competitiveness for working remotely by integrating video-call capabilities, editing tools, as well as other tools for remote work into Gmail.
Consumer preferences evolving – The markets for computers, cellphones, and notepads are quite popular. Microsoft has a small percentage in these markets.
Macro Environment Analysis: PESTEL
Politics: the majority of markets have stable political environments (opportunity); government support for automation growing (opportunity); more agreements on commerce between nations (opportunity & threat)
Economics: most developed nations have a high level of economic stability (opportunity), a growing number of emerging nations (opportunity), and rising discretionary income for the middle class (opportunity).
Society: stable perspectives on leisure (opportunity); the spread of cultural variety (opportunity & threat); constant desire for excellent customer service (opportunity).
Technology: the quick uptake of mobile technologies (opportunity & threat); a rise in the number of transactions made online (opportunity & threat); business automation is growing (opportunity).
Environment: desire for green products is rising (opportunity); growing attention on corporate sustainability (opportunity); increasing the number of recyclables available (opportunity)
Legislation: increasing requirements for the disposal of electronic trash (opportunity & threat); reforming the patent laws (opportunity); rules for energy consumption (opportunity).
Micro Industry Analysis: Porter’s Five Forces
- Microsoft must continue to succeed by successfully competing. The external elements listed below and their relative weights in the instance of Microsoft function as a fierce source of rivalry for the business:
- reasonable cost of switching (moderate force)
- high level of firm aggression (strong force)
- a wide variety of businesses (strong force)
- Microsoft has to keep gratifying consumers since they have a big impact on the business’s performance. Depending on the aforementioned external elements and their intensities, Microsoft has to react to a moderate force of customer bargaining power:
- low availability of substitutes (weak force)
- reasonable cost of switching (moderate force)
- Exceptional information (strong force).
- The state of the supply is critical to Microsoft’s operations. The external variables listed below, together with their intensities, keep Microsoft Corporation’s supplier negotiating strength at a low level:
- Medium-sized suppliers (moderate force)
- moderate supply population (moderate force)
- moderate supply overall (moderate force)
- The market share of Microsoft may decline due to substitutes. For Microsoft, the weak force of replacement is imposed on the company by the following external forces and their intensities:
- Low performance of replacements (weak force)
- a scarcity of alternatives (weak force)
- reasonable cost of switching (moderate force)
- The impact of new competitors on the environment of the computer software and hardware business is the main emphasis of this part of the Five Forces study. Following are the external factor intensities that contribute to the moderate force of a threat of new entrance against Microsoft:
- The high price of brand building (weak force).
- The cost of conducting business is reasonable (moderate force).
- Reasonable cost of switching (moderate force).
Generic Strategy Recommendations
- For Microsoft to be as competitive as possible with the products of other companies, research, and development must be increased along with product development improvements. Additionally, innovation helps Microsoft’s general strategy and aggressive expansion plans. According to the Five Forces analysis, the company’s strategic planning must take into account the negotiating power of customers, the supplier bargaining power, and the danger of new competitors. One of the internal opportunities is the cost leadership strategy which is a possibility for Microsoft to solve many issues.
- Microsoft is facing increasing competition from Asian businesses. It is advised that Microsoft create cutting-edge solutions that can outperform its competitors in order to counter this danger. Additionally, it is advised that Microsoft form more strategic partnerships with other companies to improve its ability to compete in international markets. The prospects in the industrial environment should be sufficient for Microsoft to remain one of the leading corporations in the global information technology sector.
Organization Design Recommendations
By making its goods available at affordable costs, Microsoft can increase its sales and profits. Additionally, it may stop hackers from using its software improperly. To do so, the internal policies must orient the optimal prices for products that would create a balance between the number of sales and revenue. In this case, the revenue will be higher, and the issue of hackers stealing software will be partially solved. This is due to the decrease in the need to steal software, as it would be sold for an adequate price.
Ethical Considerations
There are various problems in Microsoft regarding its long-term sustainability. Unfair practices might lead to future issues and can harm the brand. There is a lower chance of successful partnerships if the brand is associated with such actions. Microsoft should better analyze its actions in terms of how legal and appropriate they are.
Microsoft should address the controversies about them hiring mostly white males. It affects the brand and the business as well and might impact the reputation of the brand, as well as its attractiveness for new partners and talented employees.
References
Callaham, J. (2018). There are now 1.2 billion Office users and 60 million Office 365 commercial customers. Windowscentral. Web.
Newman, D. (2018). Opinion: Microsoft, not Amazon, is the company gaining market share in the cloud. Marketwatch. Web.
Protalinski, E. (2020). Microsoft Teams passes 75 million daily active users. Venturebeat. Web.
Seitz, P. (2020). Microsoft seen beating Apple to $2 trillion market-cap milestone. Investors. Web.
Woods, R. (2018). Microsoft finally confirms that Windows 10 is installed on 700 million devices. Neowin. Web.