Introduction
Company Analysis of Microsoft will be conducted in this report. Rothaermel (2017) has revealed in his research that strategic management refers to the way by which an organization manages its resources in order to attain the targeted goals and organizational objectives. It assists companies to set organizational objectives, analyse internal environment of the company, analyse the competitive environment, evaluate strategies and make sure the strategies are followed by every department of the organization (Noe et al., 2017). A case study approach has been chosen in this report to analyse the performance of Microsoft and the effectiveness of its strategies. Microsoft is an American multinational company that provides services in 210 countries of the world (Vault, 2019). Microsoft is the best software and computer services company in the world according to the ‘2019 Vault Ranking’ (Vault, 2019). In 2019, Microsoft has generated more than $125 billion in revenue and 51% of the revenue is generated in the US (Microsoft, 2019). The company have successfully increased its revenue up to 15% over than past two years (Vault, 2019). The company have 144,000 employees across the world, among them, 59% are from the US and the rest 41% are from other countries (Dazeinfo, 2019). The best software of the company is Microsoft Windows operating systems, Microsoft Office Suite, Edge web browsers and Internet Explorer. And the best hardware products are the Microsoft Surface lineup of touchscreen and Xbox Video game consoles.
You may feel interested to read similar posts:
External Environment Analysis of Marriott International
International Marketing Performance of Uber
Company analysis of Microsoft with the application of different theories
Application of Ansoff growth matrix in Microsoft:
Microsoft uses an extensive growth strategy to increase its revenue. Product development and market penetration strategies are followed by the company which is related to Ansoff’s growth matrix. Ansoff’s growth matrix has four segments such as market penetration, product development, market development and diversification (Goetsch, and Davis, 2014).
Market penetration refers to the way where companies do business with the same product in the same market but uses strategic marketing to increase their sales in the market and become profitable (Wheelen et al, 2010). Product development refers to the process in which companies develop existing products or invent new products to sell in the existing market to become profitable (David, and David, 2013). Market development means entering a new market with existing products and services to target the new customers of the market and increase demand in order to increase sales (Meskendahl, 2010). Diversification refers to the growth strategy of entering a new market with new or developed products (Eden, and Ackermann, 2013).
Microsoft follows a market penetration strategy from the model and sells its products to the 210 countries where they have services (Vault, 2019). The company uses different channels to sell their products, such as distributors, OEMs and online resellers and retailers. MS spends $18 billion in sales and marketing to increase its sales (Vault, 2019). MS uses a product development strategy in which they develop current products and invent new ones to achieve extensive growth. They keep inventing new software and updating previous software furthermore, develop current hardware and invent new features in hardware to attain extensive growth and maintain a leading position in the industry (Fast Company, 2020).
Application of Generic Strategies in Microsoft:
MS strengthen its position by applying a differentiation segment that assists the company in remaining on the top among its competitors.
There are four strategies of generic strategies as Cost Leadership, Differentiation and Focus strategy and differentiation focus strategy (Moutinho, and Vargas-Sanchez, 2018). Cost leadership indicates the process of providing products and services at a lower cost than competitors by decreasing production costs and other costs (López-Nicolás, and Meroño-Cerdán, 2011). Focus refers to finding the unfulfilled demand of customers that is not fulfilled by any competitors yet, and differentiation refers to providing unique products and services from competitors to attract most of the customers toward a company (Wheelen, and Hunger, 2011). The disadvantage of this model is, sometimes one strategy adaption may not give a strong competitive advantage and companies have to adopt two strategies to strengthen their position.
Microsoft produces the latest software and hardware with high quality with the application of a differentiation strategy, and it helps them to make its competitive advantage stronger (Global Strategy, 2015). This strategy helped the company to produce the software that competitors are unable to invent such as advanced operating systems like Windows, MS Office software etcetera. As a result, this software is widely used in official work and personal work across the world, and it makes them a more demanding company than its competitors in global competition.
Application of the Five forces model in Microsoft:
The five forces model assists companies in evaluating the competition of the market in which they are executing business (Hitt et al., 2012). Threat of substitutes, the threat of new entrants, competitive rivalry, power of buyers and power of suppliers are the five segments of the model.
By analysing the five forces model, companies know about the power of competitors and the condition of their business (Trkman, 2010). It helps companies to know about the power of customers and suppliers also therefore the company can find out an effective ways to interact with the influence of these parties (Johnson, 2019). This model also shows the risk of entering new entrants in the market and companies can take necessary steps to reduce the threats of new entrants (Schilling, 2010). The disadvantage of the model is, companies avoid important factors like globalization, and continuous change in information technology which should be analysed to ensure long-term strategy (Freeman, 2010).
By analysing the ‘Five forces’ model, Microsoft gets aware of the competition in the global market. The threat of new entrants is low for the company because MS invests 16.9 billion US dollars in providing the latest products and software to the customers and new entrants cannot invest huge amount like MS in R&D (Statista: 1, 2019). Competitive rivalry for MS is high because its competitors, such as Apple, Google etcetera are investing more in R&D to replace their demand (Owler, 2019). The bargaining power of buyers is low because competitors are unable to provide software like MS therefore customers will purchase MS products at higher prices than others. The threat of substitutes is also low because substitutes of office software are writing which people avoid. As a result, substitutes for MS are also low. Being a supplier of MS is a great opportunity for suppliers, and they do not bargain with MS to maintain their business relations (Porter Analysis, 2017). As a result, suppliers who supply mechanisms for MS hardware have low power in front of MS.
Microsoft reduces employees turnover by empowering employees:
Microsoft believes that its success is because of the talented employees they have and take necessary steps to reduce turnover of employees and increase retention. This concept of MS matches the experience curve.
Experience curve refers to ways of decreasing expenses, preventing obstacles and ensuring market growth through ensuring the utilization of employees’ experiences (Hill, Jones, and Schilling, 2014). By utilizing the experience curve model, companies become capable of decreasing their expenses because employees operate all the operations through their experiences. And companies become capable of maintaining their place in the market. The disadvantage of the model is in this advanced and competitive business world, the model is not that effective (Ginter, Duncan, and Swayne, 2018).
MS believes that its strengths are its employees and that the culture encourages its employees greatly (Microsoft: 1, 2020). The company’s growth mindset culture offers the employees to learn and develop their abilities continuously. That enhances the capabilities of the employees, and they can work better for the company. As a result, their performances get flourished, and MS became capable of developing the quality of its products. The wellness and safety programmes of MS for employees ensure a safe work environment for the employees, and employees become more loyal to the company. Employees get the chance to enhance their skills through the training programme arranged by MS. All these positive aspects of MS make employees more loyal to their company. As a result, employees’ experiences increase by working for a long time in MS, and the company become capable of delivering the best products to the customers which makes them the best software company in the world.
Application of Value chain analysis in Microsoft:
Value chain model refers to the actions that are implemented for creating a value chain by an organization (Chang, 2016). Inbound logistics, outbound logistics, operations, marketing and sales, and service are the segments by which an organization create value (Hesterly, and Barney, 2010). But the model has disadvantages also, such as it sorts different types of segments within a single unit for which an organization may not be capable of finding the complete picture of the entire situation (Rosemann, and vom Brocke, 2015).
Microsoft produces the latest hardware and software with the best features that create value, therefore, customers purchase their products at a higher price. MS is capable of delivering products at a lower price,s but customers stay ready to pay the higher price because of the value they create, and it is the reflection of the Value Chain model. MS generates high profit by utilizing the segments of value chain analysis. MS have a good relationship with its suppliers that ensures the supply of quality mechanism for making hardware which refers to inbound logistics. The operating segments of MS such as intelligent cloud, productivity and business process and many more personal computing. The company distributes their products online, OEMs, retailers, resellers and distributors which refers to the outbound logistics of MS (Vault, 2019). As a result, customers get MS products at near their hands and can purchase them anytime. MS follows licensing method to sell its products and it refers to the segment of marketing and sales from value chain analysis. The company keep motivating their employees through training and development programme, ensuring a secure work environment and ensuring fulfilling employees’ right to hold on to their success (Microsoft, 2020). MS utilizes the development of technology and invents new software and hardware to make people’s work easy and create value. MS does its procurement by itself by maintaining a good relationship with suppliers that help them to get the best mechanisms and make the best hardware. Motivating HR, utilizing technological development and procurement refers to the support activities of MS in value chain analysis. Ensuring the implementation of all the segments make them capable of generating higher revenue.
Microsoft utilizes their strength and competencies in order to be more successful:
The goal of MS is to empower individuals and companies in this world to attain more by delivering the best software and hardware(Microsoft: 2, 2020). Individuals and companies become capable of attaining more by using the hardware and software of MS. Success of the company depend on the innovation they have done and it fosters its growth (Mintzberg, Ahlstrand and Lampel, 1998). The company invests 16.9 billion US dollars in R&D to keep inventing the latest hardware and software (Statista: 1, 2019). The innovation strengthens the competitive advantage of MS enormously because competitors are unable to offer these type of operating system, apps and office software that the company invents. This concept refers to the Core Competency theory. MS is working to attain dominance in the sector of technology, effective processes and customer relationship management. Core Competency theory assists MS in creating different images in customers’ minds than the existing companies in the global market. The company have become a unique service provider in the technology sector because the operating system of MS 7, 8, 8.1 and 10 have no substitutes in the global market. And the office programmes such as MS Word, MS XL, MS PowerPoint have also made the company stronger in the global market. Customers of MS are loyal to them because the company keeps innovating new products and making their life easier.
Effectiveness of the strategies that Microsoft applies:
Market penetration and product development helped MS to increase revenue:
MS’s strategy of market penetration helped them to generate higher revenue. The company have invested 18 billion US for marketing and sales to attract customers in the existing market (Vault, 2019). Huge investment in marketing and sales helps the company to attract new customers to its existing customer base. And the company successfully increase customers within the 210 countries where they have services through the market penetration strategy (Microsoft, 2020). The product development strategy of MS helped them to maintain their customer base and create new customers greatly. Because of the strategy, MS has become able to remain in the global competition as the best company because customers get advanced software and hardware from MS. The hardware and software are not imitable by competitors because MS focus on continuous innovation and keeps inventing new features for their products. As a result, customers are tamed to purchase MS products because they have no better option than MS. Product development help MS stay ahead of its competitors and maintain the gratification of customers by fulfilling their demand.
Differentiation strategy strengthens their position in global market:
MS uses a differentiation strategy to strengthen its competitive advantage, which is the most effective strategy for making a company’s position stronger (Global Strategy, 2015). MS develops the most advanced products that is inimitable, and competitors fail to develop products like MS. The company continuously invest in the R&D sector in huge amount to maintain the innovation within their products. Differentiation strategy has made the company capable of making windows operating system and MS office software that competitors fail to copy. Therefore, customers have no option instead of buying MS software, and it is the key strength of the company. This strategy has made MS capable of increasing its revenue highly.
The above list of MS revenue shows that the revenue was 110 US billion, which reached 125 billion US dollars. For the latest features and unique software to make life easier, customers purchase MS products at a high prices. It seems that the differentiation strategy is one of the key strengths of MS that increase their revenue.
The great leadership approach of MS helped the company to attain continuous success:
The CEO of MS is Satya Nadella and he proved himself as an ideal leader for the company. The CEO has made the company capable of making an extra $500 billion in market capitalization (CNBC, 2019). The leader of the company has contributed to the success of MS by transforming some biggest product assistance. He led the transformation to cloud infrastructure, which increased the market share of MS enormously. He applies appropriate leadership approaches to lead the employees of the company and keep them motivated through the employee welfare programme and other facilities. As a result, employees of the company follow his lead and employee engagement increases. It helps the company to reduce expenses that automatically increase profit. His appropriate leadership approach reduces employee turnover from MS. Therefore, the company become able to deliver the best products to customers because the quality of service and product increases when the employees work actively.
MS focus on increasing employee retention for extensive growth:
Increasing employee retention is one of the most effective strategies that drive the success of MS (Whittington, 2001). The company provides a flexible work environment for the employees to ensure that they are working comfortably. MS ensures a secure work environment that assists employees to stay fear free while working, and it makes them stressed free, therefore, they work hard with concentration. The company also have an employee welfare program that makes employees loyal to the company and MS ensures that employees’ right will not be hampered by the company. All these steps help MS to increase employee retention. As a result, employees of the company work there for a long time, and it enhances their experience. Employees utilize their experiences to do their work, and it ensures a better outcome. It makes the company more productive than before. MS does not need to arrange many training program because the employees work a long time in the company and have great work experience. Therefore, it also decreases the cost of MS by minimizing training costs, employee replacement costs etcetera.
Creating value assists MS in maintaining its leading position in the global market:
Creating value for MS increases their sales continuously. MS maintains strong relationships with suppliers to have the best mechanisms and make the best hardware for customers across the world. It uses all types of distribution media to distribute its products, and customers get their products at near their area. Because of the effective distribution channels, customers get products when they need them. But the company does not use the advancement of technology in some sectors. For example, they did not give their best effort to developing smartphones. Even MS sometimes does not promote its products and services properly. For example, the mailing site of MS called outlook.com is unknown to most of the customers of the world. The company should focus more in marketing to increase its sales.
Emphasizing core strength and competencies makes MS the best company in the global market:
The core strength and competencies of MS is the R&S sector of the company that keeps innovating new products for customers. The company invests 16.9billion US dollars in inventing new software and hardware for customers (Statista: 1, 2019). This investment has made them capable of bringing the latest inimitable software to customers. The R&D teams of MS have invented the Windows operating system, and any competitors in the world are not capable of replacing this operating system through their software. Individuals and companies use the software of MS to make their work easy and decrease manual work. It helps customers to save time by doing work through the software and hardware of MS. Continuous innovation has made them the best company in the world for delivering the operating system of Windows (Stacey, 2007). But the company should focus on the area where it failed in the past time because these areas may have the potential to make the company more profitable. For example, MS launched Windows 10 mobile but failed to survive in the competition of the smartphone world (Computer World, 2019). The company should innovate more in this sector to bring smartphones which will be successful in attaining customers’ gratification.
Conclusion
By analysing the case study of MS, it seems that MS is one of the best brands in making personal computing hardware and software. The competitors fail to provide services like MS and the R&D investment helps them to produce the products and services uniquely competitors. MS maintains its demand by innovating new software and developing existing. Because of the best products, customers pay a higher price, and MS become highly profitable. But the company should focus on entering the smartphone sector which they failed to dominate like other sectors. If the company become able to develop a smartphone that satisfies customers’ demand, the company will be more successful. MS should focus on promoting the mailing site, it also has the potential to make the company profitable.
References
CNBC, 2019. Microsoft CEO Satya Nadella says this piece of advice impacted him profoundly. Retrieved from: https://www.cnbc.com/2019/11/11/microsoft-ceo-satya-nadella-on-the-advice-that-shaped-his-leadership.html. [Assessed on: 11 January 2020]
Computer World, 2019. How Microsoft failed with Windows 10 Mobile. Retrieved from: https://www.computerworld.com/article/3336057/how-microsoft-failed-with-windows-10-mobile.html. [Assessed on: 12 January 2020]
Dazeinfo, 2019. Number of Microsoft Employees: US and International. Retrieved from: https://dazeinfo.com/2019/11/12/number-of-microsoft-employees-worldwide-us-international-graphfarm/. [Assessed on: 5 January 2020]
Fast Company, 2020. Microsoft. Retrieved from: https://www.fastcompany.com/company/microsoft. [Assessed on: 6 January 2020]
Global Strategy, 2015. Differentiation at Microsoft. Retrieved from: http://globestrategy.net/?p=83. [Assessed on: 6 January 2020]
Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2012. Strategic management cases: competitiveness and globalization. Cengage Learning.
Microsoft: 1, 2020. Empowering our employees. Retrieved from: https://www.microsoft.com/en-us/corporate-responsibility/empowering-employees. [Assessed on: 8 January 2020]
Microsoft: 2, 2020. Empowering Others. Retrieved from: https://www.microsoft.com/en-us/about. [Assessed on: 9 January 2020]
Microsoft, 2019. Annual Report 2019. Retrieved from: https://www.microsoft.com/investor/reports/ar19/index.html. [Assessed on: 5 January 2020]
Owler, 2019. Microsoft’s Competitors, Revenue, Number of Employees, Funding and Acquisitions. Retrieved from: https://www.owler.com/company/microsoft. [Assessed on: 7 January 2020]
Pinterest, 2020. Value Chain Analysis in Strategic Management. Retrieved from: https://www.pinterest.com/pin/707628160179166677/?lp=true. [Assessed on: 9 January 2020]
Porter Analysis, 2017. Porter Five Forces Model of Microsoft. Retrieved from: https://www.porteranalysis.com/porter-five-forces-model-porter-analysis-of-microsoft/. [Assessed on: 7 January 2020]
Policonomics, 2017. Experience curve. Retrieved from: https://policonomics.com/experience-curve/. [Assessed on: 8 January 2020]
Statista: 1, 2019. Microsoft’s expenditure on research and development 2002-2019. Retrieved from: https://www.statista.com/statistics/267806/expenditure-on-research-and-development-by-the-microsoft-corporation/. [Assessed on: 7 January 2020]
Statista: 2, 2019. Microsoft’s revenue worldwide 2002-2019. Retrieved from: https://www.statista.com/statistics/267805/microsofts-global-revenue-since-2002/. [Assessed on: 10 January 2020]
Schilling, M.A., 2010. Strategic management of technological innovation. Tata McGraw-Hill Education.
Trkman, P., 2010. The critical success factors of business process management. International journal of information management, 30(2), pp.125-134.
Vault, 2019. Microsoft Corporation. Retrieved from: https://www.vault.com/company-profiles/computer-software/microsoft-corporation. [Assessed on: 5 January 2020]
Wheelen, T.L. and Hunger, J.D., 2011. Concepts in strategic management and business policy. Pearson Education India.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2010. Strategic management and business policy. New Jersey: Prentice Hall.
Whittington, R., 2001. What is strategy-and does it matter?. Cengage Learning EMEA.