Introduction
Microsoft Corporation is a global technology company headquartered in Redmond, Washington, specializing in developing and selling computer software, electrical goods, personal computers, and associated services. Microsoft’s mission is to empower every individual and organization on the globe to thrive, while its vision is to assist people and companies worldwide in realizing their capability. Empowerment is critical in this core mission; it embodies the company’s principal aim and the end goal of the organization’s strategic approaches. Microsoft’s target audience comprises individuals aged 16 and older who live globally in urban and rural locations. Microsoft generated $168 billion in sales in 2021, an 18 percent year over year (Bhadra 5). Operating income increased 32% to $70 billion, and the company continues to establish profitable new franchises. Microsoft’s most recent closing stock price, as of April 28, 2022, is 290, while its all-time high closing stock price, as of November 19, 2021, was 343.
Microsoft’s 52-week high is 350 and its 52-week low is 238. Microsoft’s average stock price for the previous 52 weeks is 295. It distributed $12 billion to shareholders in the third quarter of 2022 through dividends and share repurchases, a 25% increase over the third quarter of the fiscal year 2021. Around 182,000 employees globally work for the American technology corporation on a full-time basis (Bhadra 5). Approximately 60% of Microsoft’s workers are based in the United States, the company’s home nation. The company’s workforce comprises four business units: operations (production, distribution, product management, and consultancies), research and development, marketing and sales, and general and administrative assistance. Microsoft Corporation’s structure is anchored in divisions and organized around different software, hardware products, and organizational outputs.
Environmental Analysis: PESTEL Analysis
Political Factors
The political stability of the majority of the world’s markets provides Microsoft with the opportunity to enhance its investments and commensurate performance. For instance, the corporation might boost its sales activities in Europe to grow revenues proportionately (Bhadra 7). On the other hand, growing government backing for automation gives Microsoft with potential to expand its digital technology sales through governmental clients. This external aspect is crucial for large-scale acquisitions made by government entities.
Economic
Microsoft gains from the majority of wealthy countries’ economic stability. For instance, in specific markets, the corporation may anticipate consistent performance. Additionally, the external financial element of the worldwide growth in middle-class disposable income generates revenue potential for the organization (Boyle 32). This is because middle-class consumers account for a sizable portion of Microsoft’s income.
Sociocultural
Microsoft can capitalize on the consistent views about leisure by developing products that cater to users’ leisure interests. For instance, the corporation may invest more in developing innovative computer gaming items (Bhadra 8). Additionally, growing cultural diversity poses a risk to Microsoft regarding product-customer mismatches in distant or macro-environments. Customer happiness, for example, may drop if the company’s products cater to just the most diverse cultural groups. Nevertheless, Microsoft has a chance to solve this issue by improving its products and services.
Technological
Microsoft Corporation’s performance can be improved through the quick invention of its cellular devices. This possibility is predicated on mobile technology’s growing acceptance and increasing demand. However, this external technology aspect poses a challenge to Microsoft by facilitating competition. Additional technological businesses might enter the industry because of this possibility (Bhadra 8). On the other side, the growing amount of online transactions presents Microsoft with an opportunity to expand its product portfolio that supports safe online transaction processing. However, the increasing amount of online transactions puts the organization at risk of cybercrime assaults.
Ecological/Environmental
Microsoft Corporation has a chance to improve its environmental reputation due to the growing desire for green products. For instance, the corporation may create more ecologically friendly goods and increase its reliance on green energy in its operations (Boyle 32). In this regard, Microsoft’s initiatives to enhance company sustainability directly address an opportunity created by societies’ growing emphasis on corporate sustainability.
Legal
Increasing rules governing electronic waste disposal provide a chance for Microsoft Corporation to establish more advanced recycling and disposal initiatives that enhance the company’s brand image. Nonetheless, this external legal aspect poses a danger to the company’s ability to address the environmental effect of its operations (Bhadra 7). On the other side, evolving patent laws support Microsoft’s global expansion by gradually addressing challenges such as software piracy.
Industry Environment: Microsoft’s Five Forces Analysis
Competitive Rivalry
Current market leaders such as Apple, IBM, and Microsoft battle for a more significant part of the cloud and software business. Along with Microsoft, all rivals invest extensively to develop and differentiate themselves, remain ahead of the competition, and deliver unparalleled goods to the market. Additionally, because all rivals operate on a broad scale, they share resource suppliers (Bhadra 5). This is also true in Microsoft’s gaming business, with the XBOX product line dominated by established firms such as Sony and Nintendo.
Customers’ Bargaining Power
The cloud application operating system and office suite markets have few rivals. The cloud industry is dominated by a few large competitors, including Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft’s Azure platform. Several participants operate in the office suite and windows OS markets, including Linux and its various distributions, MAC OS, and Windows. Microsoft’s clients may be broadly classified into two categories: individual customers and companies (Dutta and Dutta 981). Individuals do not exhibit consistent behavioral patterns, and the quantity purchased is insignificant. On the contrary, corporations make larger purchases of Microsoft’s goods and have greater negotiation advantage for discounts; the same holds for bargaining power. Substitutes are accessible, but the switching costs are substantial, considering the amount of user training required. Considering all of these concerns, customers have slight to moderate negotiating power, reliant on the form of the client.
Suppliers’ Bargaining Power
The suppliers’ small size and population exert a considerable but limited effect on Microsoft’s operations. The limited total supply exerts a significant but limited effect on Microsoft (Dutta and Dutta 982). If the total supply is reduced, the strength of this force may grow. Thus, the external variables included in this component of Microsoft’s Five Forces study suggest the modest bargaining power of suppliers as a critical strategic concern in the information technology business environment.
Threat of Substitutes
Alternatives to Microsoft’s current products, such as manual or non-online procedures, MAC OS, Linux, and Ubuntu, typically perform worse than Microsoft’s present goods. This external element mitigates the company’s threat of replacement. The global adoption of more superior technology limits the availability of replacements and mitigates Microsoft’s danger of substitution. While low switching costs enhance replacement, this external factor alone is inadequate to strengthen alternatives considerably (Dutta and Dutta 983). The threat of substitutes is a modest concern in the industry environment of Microsoft Corporation.
The threat of New Entrants
Microsoft is a multinational technology company with operations in various industries, including computer software, operating systems, consumer electronics, personal computers, and cloud computing platforms. Microsoft’s system software, Windows, is the most widely used PC operating system globally, with a market share of almost 95% (Dutta and Dutta 982). The office suite may be the most commonly used software internationally. For any new entrant, establishing participants in the market will require investments and the simplicity of switching from Windows to their operating system. Microsoft has ensured that it does not lose market share due to market expansion by entering into agreements with hardware makers to preinstall Windows as the default operating system. This, along with Microsoft’s brand value, the considerations described above, its overwhelming market dominance, and its ability to drive the market, will create significant obstacles to entry for new players. The danger of new entrants might be regarded as modest.
SWOT Analysis
Issues Identification and Description
Microsoft’s most serious issue is that it has failed to establish a presence in the mobile industry. Microsoft’s cellphone market share is barely 3.5 percent; that is a pitiful percentage, especially compared to Apple’s 15% and Google/Android’s 80 percent (Dutta and Dutta 983). Microsoft’s Surface tablet has less than a 3% market share.
Another issue facing Microsoft is that its network is not competitive. However, Office 365 is an exception to this rule and a significant one. However, its Windows Store accounts for around 20% of the App Store and Google Play; it lacks a competitive alternative to iTunes. Chrome browser has eclipsed Internet Explorer in terms of total market share, while IE has lost nearly 50% of its market share since 2008 (Bhadra 6). Bing Search continues to be a weak second to Google (19 percent versus 68 percent, respectively). Microsoft only recently launched Microsoft Office Online, a free online edition of Office, in reaction to Google Drive.
Microsoft’s power has waned in recent years, and the company has made some crucial errors. For example, the company waited nearly three and a half years after the first iPhone debuted to launch its smartphone software, Windows Phone 7 (which utterly failed). It took two years to launch its first tablet following the iPad; it proceeded all-in with a new OS for PCs and mobile devices. Windows 8 features a metro-tile interface that works best with a touchscreen device rather than the standard mouse and keyboard that most consumers have gone all-in well with a new operating system (Dutta and Dutta 982). Finally, one of the reasons Microsoft dominated the PC market was because it licensed the Windows OS to many third-party manufacturers such as Samsung, HP, Asus, Lenovo, Acer, and Dell, who flooded the market with low-cost machines. These same companies make tablets and Windows 8 laptops today.
Proposed Strategies
Windows is the only primary operating system without a viable smartphone component. This is significant because personal computer habits change toward mobile computing. Apple generated around 53% of its revenue last quarter from iPhone sales (Dutta and Dutta 983). Consumers’ reliance on tablets has eroded the desktop and laptop sectors. A family that purchased two laptops now purchases only one and utilizes a tablet as a secondary device. Microsoft is a market leader in software; with sufficient research and development, they can effortlessly address the flaws with their phones, which were introduced and have since been withdrawn from sale in various countries. Establishing a robust mobile presence is critical for a brand’s ecosystem to remain intact. Due to Microsoft’s lack of a viable mobile application, customers are forced to look beyond it to Google or Apple, and once there, they are more projected to remain.
The issue is not with the value of its items; instead, it is with convincing people to try them. Microsoft can resolve this issue by lowering costs across the board for its mobile products. Microsoft would gain momentum in the industry if they could provide significant discounts on tablets and smartphones on a level with Google and Amazon (Boyle 33). Additionally, they could utilize Office and Xbox to give value to these gadgets; after all, a tablet or cellphone with free Office 365 or Xbox gaming titles would be a big pull for customers. They established the mobile market with their software and hardware requirements, ensuring that clients do not receive all of the features demonstrated by competitors such as Google or Apple. A flaw in Microsoft’s approach is a lack of appropriate partnerships. If they form the right collaborations, Microsoft will also produce end-user devices as attractive to clients as their competitors’ smartphones. Microsoft already has a strong brand, so launching and advertising such gadgets should be adequate.
A vibrant ecosystem is crucial for customer retention and device sales growth, and Microsoft has a long way to go in this area. On the plus side, Outlook.com reached the same user base as Gmail a few months after its introduction and has maintained that popularity. Additionally, its Office Online offering has received favorable reviews. Microsoft needs to increase the number of applications in its store, but it is a dilemma: developers do not want to make apps for which there is no demand, and customers do not want a phone that lacks their favorite apps. Microsoft should devise a strategy for incentivizing developers (Dutta and Dutta 983). It may accomplish this by funding app developers, delivering more significant margins on sales, and providing considerable credit to customers for app purchases.
Microsoft’s product pricing continues to be out of line with consumer expectations. The company overcharged essential products such as Xbox One, Windows Phone, Surface, and Office before being forced to reduce costs. What is urgently required is a more effective pricing approach. Microsoft has to abandon its premium-model strategy for various items: phones, tablets, laptops, and Xbox (Boyle 33). Additionally, Microsoft should avoid promoting Windows 8’s metro-tile system as a unifying framework for mobile platforms, laptops, and desktop computers. While this makes sense on a smartphone, it is just not what people desire right now with traditional desktops.
Microsoft cannot manage the design, style, functionality, marketing, or price of most of its Windows products due to the involvement of third-party corporations. Microsoft has attempted to address this issue by acquiring Nokia and developing its customized tablet, the Surface, but it risks alienating its tablet allies. Consequently, Microsoft’s Surface has always been significantly more expensive than third-party Windows 8 tablets. While Microsoft’s manufacturing agreements are generally beneficial to the corporation, its loss of control over its devices makes it difficult to maintain brand control and develop innovative designs and features. Manufacturer relationships are far too vital to jeopardize (Dutta and Dutta 982). The Surface series should be phased out in favor of the Surface Pro. It may charge a premium since the market is developing rapidly and does not encounter as much partner rivalry with Nokia devices.
Consumer purchasing decisions are dynamic and will always be so. Increased loyalty and revenue are not the only benefits of introducing a specific end-user device. When customers see that one of its competitors, such as Apple, Google, or Amazon, has introduced a new gadget or enhanced an old appliance with some distinctive features, they will abandon Microsoft. This is why Microsoft should constantly monitor the wants and expectations of its clients. Microsoft should invest a billion dollars in research and development, which they could be using to ascertain their consumers’ current expectations and requirements. It will assist the organization in being up to date with their clients and demonstrating to them that they are continually trying to suit their needs (Boyle 33). This may be illustrated by releasing a new edition of an end-user device, with just the latest version including functionality not previously available. They can include new features in a subsequent edition or even develop novel concepts for gadgets that do not yet exist.
Microsoft should recognize that enhanced connections and ties will enable the corporation to produce new ideas, which they can engage in to grow their client base. The organization already has a brand reputation; they have consumer trust and loyalty that allows them to continue operating in the market. More inventive tactics and collaborations should increase the company’s market penetration; it should learn from prior mistakes and use the lessons learned through creativity and innovation (Dutta and Dutta 981). When they observe that a product team has become so focused on launching the same product in multiple versions that there is no room for inventive ideas to flourish, they can create a stance of innovation. In such an approach, individuals will be solely responsible for developing creative ideas that can be integrated into existing products or for developing a new gadget to be introduced in the market. These individuals can also monitor customer feedback and need to examine their purchases.
Potential Limitations to Recommendations
Microsoft has done some groundbreaking work in identity verification and cloud operating frameworks. However, the corporation is well-known for labeling its advancements as ‘Microsoft-centric.’ If a consumer wants to utilize one of Microsoft’s creative techniques, they must do it by using Microsoft technology such as Windows or the Internet (Dutta and Dutta 983). They have always relied on third parties to sell their items and services, which may work well for Microsoft’s online store, but generates a feeling of self-fulfilling prophecy. As a result, clients are left dissatisfied with the adjustment. The corporation gave an excessive number of variants of a comparable product, and rather than profit, the company drained its resources altogether. Each addition may have increased value over the previous one, resulting in inventions. However, the fact is that one development team was forced to manage numerous releases did not work for the organization.
There is a possibility that the corporation can create a significantly more stable environment for end-user gadgets that are now susceptible. The devices are easily hackable, and piracy breaches can occur anytime. Microsoft’s thorough understanding of cloud computing and computer systems indicates that the company would be able to implement extensive security protocols. Thus, customers would feel more secure opting for Microsoft-manufactured end-user devices rather than those manufactured by others (Dutta and Dutta 983). End-user devices’ availability has been unpredictable, and security is a significant concern. This presents the firm with both a difficulty and an opportunity. Businesses with an end-user device strategy are becoming increasingly vulnerable to unauthorized access and malware. Microsoft can add a multi-cloud capability to its devices, reducing its vulnerability to security risks.
Conclusion
Microsoft targets youthful demographics that are often students, workers, and brand loyal professionals. Approximately 182,000 Microsoft workers globally operate on a full-time basis. Although there are few rivals in the software sector, the industry is constantly growing. Customers’ bargaining power is governed by variables such as the number of rivals in the market, their coherent behavior, the magnitude of their purchases, availability, and the price of replacements. Success results from decades of upgrades and entails tremendous research and development expenses, technological investments, and the reputation developed over time. Naturally, reducing pricing on Microsoft’s cell line to increase sales will directly address its underlying issues. A basic strategy for determining consumer wants is to use feedback systems; rigorous input monitoring will inform the corporation of what they have overlooked or what their consumers want in a gadget.
Works Cited
Bhadra, Ram. “LinkedIn: A Case Study into How Tech Giants like Microsoft Abuse Their Dominant Market Position to Create Unlawful Monopolies in Emerging Industries.” Hastings Science and Technology Law Journal, vol. 13, no. 1, 2022, pp. 3-15.
Boyle, Claire. “Managing Information in a Pandemic: Microsoft 365-A Case Study.” IQ: The Rim Quarterly, vol. 38, no. 1, 2022, pp. 32-34.
Dutta, Pranay, and Prashant Dutta. “Comparative Study of Cloud Services Offered by Amazon, Microsoft & Google.” International Journal of Trend in Scientific Research and Development, vol. 3, no. 3, 2019, pp. 981-985.