Microsoft Strategic Analysis.docx

STRATEGIC ANALYSIS REPORT OF MICROSOFT CORPORATION

SUBMITTED TO:

Sir Dr. Shahid Tufail SUBMITTED BY: MUHAMMAD USMAN UMAIR JAFFAR SHAHEEN NAWAZ

20134 20133 20115

MBA 7TH (MORNING)

GOVERNMENT COLLEGE UNIVERSITY FAISALABAD

Acknowledgement 1

All praise to ALMIGHTY ALLAH alone, the omnipresent and the most merciful and compassionate. The words are bound, knowledge is limited and time is short to express His dignity. It is one of infinite blessings of ALLAH that he bestowed me with the potential and ability to contribution towards the deep oceans of knowledge already existing. I pay hum-age to greatest personality of the universe; HOLY PROPHET HAZARAT MUHAMMAD (PBUH) who is forever torch bearer and spring of guidance in every sphere of life. I am deeply indebted and also express my gratitude to my respected teacher SIR DR.SHAHID TUFAIL for his support. Last, but not least we are thankful to all the mates at GOVERNMENT COLLEGE UNIVERSITY especially our Essential for strategic management fellows who supported us a lot. We could not achieve what little we have without the support of all of them.

1-Executive Summary Microsoft is a American public multinational corporation founded by Bill Gates and Paul Allen in April 4, in 1975, with a vision by a Harvard drop-out, to see a PC on every desktop. Its headquarter in Redmond, Washington. The company operates office locations in more than 60 countries worldwide. Its major operations centers are in Dublin, Ireland; Hu Macao, Puerto Rico; Reno, Nev; and Singapore. Today, Microsoft is a dominating the world and a leader in multiple industries. . Microsoft had record revenues of $73 billion in fiscal year 2012 that ended on June 30, 2012. Microsoft is listed in the Fortune 100 and has amassed an impressive portfolio of resources, alliances, global operations, customers and critics. The Microsoft Corp. trades publicly on the NASDAQ stock exchange. The symbol "MSFT" represents the company on the exchange. Its products are operating systems, Office suits, Xbox for games, Internet explorer, Search engines, Mails, Security, Servers, Visual studio, calling devices. The firm also offers consulting services, and training certifications as well as online products such as Bing, MSN, adCenter, and Atlas. Microsoft has strategic alliances with Nokia, NIIT, and Dominion Enterprises. The Company introduced a windows Phone and a windows tablet computer named Surface. Microsoft Corporation’s primary competitors include some of the most prominent technology companies in the industry. The list includes well-known brands such as Apple, Google, SAP, IBM and Oracle, Nintendo, Cisco. Because Microsoft is a diversified corporation that offers many types of products and services, the company faces stiff competition in several key areas of the technology sector.

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TABLE OF CONTENTS

Serial # Contents

Page #

1

Executive summary

2

Introduction to Microsoft Corporation

4-5

3

Swot Analysis

6-9

4

Microsoft’s Vision Statement

5 6 6.1 6.2 6.3 7 7.1 7.2 7.3 8 8.1

Microsoft’s Mission Statement Input stage: internal audit Internal Factor Evaluation (IFE) matrix External audit Competitive profile matrix Matching stage: Tows Analysis Space Matrix Internal external matrix

1

9 9 10 10 11 12 13 13 14-15 16

Decision stage: The Quantitative Strategic Planning Matrix (QSPM)

17 17

9

Recommendations

18

10

Appendix

19

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2-Introduction to Microsoft Corporation The word "Microsoft" is a portmanteau of "microcomputer" and "software". The Microsoft Corporation is a publicly traded world’s largest software company founded by Bill Gates and Paul Allen in April 4, 1975 to develop and sell BASIC interpreters for the Altair 8800. it rose to dominate the personal computer operating system market with MS-DOS in the mid-1980s, followed by Microsoft Windows. The company's 1986 initial public offering (IPO), and subsequent rise in its share price, created three billionaires and an estimated 12,000 millionaires among Microsoft employees. Since the 1990s, it has increasingly diversified from the operating system market and has made a acquisition of Skype Technologies for $8.6 billion in May 2011 in its largest-ever acquisition. The first product the company sold was Microsoft BASIC, a computer programming language system for creating software. The company released its first version of Windows on Nov. 20, 1985. The Microsoft Corp. has its headquarters in Redmond, Washington. The company operates office locations in more than 60 countries worldwide. Its major operations centers are in Dublin, Ireland; Humacao, Puerto Rico; Reno, Nev.; and Singapore. Microsoft basicaly known for producing and selling the Windows operating system such as window 8 operating system for personal computers, windows phone 7 operating system for mobile phones, Windows server, Windows Azure, Microsoft SQL, Visual studio, Silverlight, and the popular Xbox gaming and entertainment console. It’s hardware products as well as software programs such as Microsoft Word, Microsoft Outlook and Microsoft Internet Explorer. Many PC makers such as Acer, Lenovo, Dell, Hewllet-Packard, and Toshiba pre-installed Microsoft operating systems and software on devices. The firm also offers consulting services, and training certifications as well as online products such as Bing, MSN, adCenter, and Atlas. Microsoft has strategic alliances with Nokia, NIIT, and Dominion Enterprises. The Company introduced a windows Phone and a windows tablet computer named Surface. Following the release of windows phone 7, Microsoft underwent a gradual rebranding of its product range throughout 2011 and 2012.Its logos, products and services and websites adopted the principles and concepts of the Metro design language. Microsoft in early 2012 introduced windows 8, an operating system designed to power both PCs and tablet computers. Then in May 2012, Microsoft introduced its own tablet computer, the Microsoft Surface’s the company continue to diversify away from operating systems, it paid $1.2 billion to buy the social network firm Yammer and then launched its windows phone 8.To cope with the potential increase in demand for products and services. Microsoft is slowly but surely opening its own stores across the USA.

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In 2010, Fortune 500 ranked the company as 36th on its annual rankings of America's companies. Microsoft had record revenues of $73 billion in fiscal year 2012 that ended on June 30, 2012.Microsoft’s third quarter of fiscal 2013 results reported April 2013 were outstanding, with its business division’s revenues up 8% to $6.32 billion, its server and tools revenues of $5.04 billion up 11 percent. Its windows division revenues of $5.07 billion up 23%, its online services segment revenues up 18% to $832 million, and its entertainment and devices segment revenues up 56% to $2.53 billion. Microsoft Corp. had 94000 employees worldwide and owned more than 14 million square footage of commercial real estate around the world. The company's net revenue was $62.48 billion at that time. The Microsoft Corp. trades publicly on the NASDAQ stock exchange. The symbol "MSFT" represents the company on the exchange. Microsoft Corporation’s primary competitors include some of the most prominent technology companies in the industry. The list includes well-known brands such as Apple, Google, SAP, IBM and Oracle, among others. Because Microsoft is a diversified corporation that offers many types of products and services, the company faces stiff competition in several key areas of the technology sector. The extremely popular Windows operating system is perhaps the most prominent Microsoft product. In this area, the company competes with a number of smaller firms, such as Red Hat, that distribute open-sources operating systems such as Linux. Microsoft faces competitive pressures in all areas of its operations. The pressure comes from a diverse mix of technology companies, both large and small. Microsoft developing technologies that increasingly enable touch screen and voice to be more radily understood by Pcs, tablets, and phones.

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3-SWOT ANALYSIS Strengths 

Dominant brand image.



Strong Alliance with other Firms.

   

Largest acquisition of Skype. Easy to use software. Proficient in hardware. Robust financial Performance.

Opportunities 

Cloud based services.



Improvement in mobile Device industry.



Stronger security against Cybercrime.



Growth through Acquisitions.  Innovation in computer Hardware products.

Weaknesses . Slow to Innovate. . Low earning per share as Compare to its competitors.

. Dependence on hardware Makers.

. Pc markets have matured.

Threats . Intense competition. . Changing consumer behaviour. . Cybercrime. . Threats of new entrants.

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3.1Strengths 3.1.1 Dominant brand image: Over the years, Microsoft has been the leading OS and software provider, which resulted in more than 90% market share for PC OS. Few other brands are capable to compete with Microsoft for this reason. Even open source OS, which are completely free and well suited to use for common user, find it hard to attract users. Microsoft’s brand is the 5th most valuable brand in the world, valued at $ 57.8 billion. Brand reputation leads to higher sales and greater market share.

3.1.2 Strong alliance with other firms: Many PC makers such as Acer, Lenovo, Dell, Hewllet-Packard, and Toshiba pre-installed Microsoft operating systems and software on devices. Microsoft has strategic alliances with Nokia, NIIT, and Dominion Enterprises.

3.1.3 Largest acquisition of Skype: With nearly 300 million users, Skype is a significant boost to Microsoft’s online presence and have a lot of potential in generating income from online advertising.

3.1.4 Easy to use software: Microsoft products including its flagship Windows operating system are popular among the masses because of great quality and many decades of experience that Microsoft has put into its development.

3.1.5 Proficient in hardware: The company works with all the major computer hardware producers like Dell and Samsung and major computer retailers to make sure computers would be sold with already pre-installed Windows software. The company also invested in Dell and Nokia to tighten its relationships with these companies.

3.1.6 Robust financial Performance: Microsoft grew its revenues by 20% from 2008 to 2012 and holds more than $63 billion of cash and cash equivalents that can be used for acquisitions and substantial investments into R&D.

3.2 Weaknesses 3.2.1 Slow to Innovate: Microsoft has huge R&D resources and great position to enter new markets with innovative products but constantly failed to do so. It had an opportunity to be the first player in online advertising but missed the opportunity. Its entrance to mobile OS was also too late, while Google and Apple captured the market share.

3.2.2 Low earning per share: Microsoft has low earning per share as compared to its competitors like Apple, Google, and Oracle.

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3.2.3 Dependence on hardware manufacturers: Microsoft is a giant software corporation but it does not produce its own hardware and depends on computer hardware manufacturers to develop products that run Windows OS. If cheap and popular alternative OS would appear, hardware manufacturers may simple choose the alternative and Microsoft could do little to change the situation. 3.2.4 Pc markets have matured: Only recently has Microsoft entered the mobile technology sector and still heavily depends on its OS and software sales for standalone and laptop computers. The market for these products has matured and Microsoft will find it harder to grow revenues in these sectors.

3.3 Opportunities: 3.3.1 Cloud based services: Microsoft could expand its range of cloud services and software as the demand for cloud-based services is expanding.

3.3.2 Improvement in mobile device industry: Smartphones and tablets markets are growing steadily so Microsoft have opportunity to improve its mobile industry. 3.3.3 Growth through acquisitions: With a huge reserve of cash Microsoft could start acquiring new startups that would bring new technology, skills and competences to the business. 3.3.4 Innovation in computer Hardware products: Microsoft have opportunity to produce its own hardware products through its own manufacturing plant.

3.4 Threats 3.4.1 Intense competition in software products: Microsoft is more than ever on the pressure to introduce successful OS both in PC and mobile markets as such competitors like Google and Apple have already established positions.

3.4.2 Changing consumer behaviour: Customers shift from buying laptops and standalone PCs to buying smartphones and tablets, the markets, where Microsoft has only a modest market share and may never establish itself.

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3.4.3 Cybercrime: Today the rate of cybercrime increasing day by day in shape of hackers. So the Microsoft have also threat of it. 3.4.4 Threats of new entrants: Microsoft have also threat of new entrants companies in the market.

4-Microsoft’s Vision Statement Microsoft Corporation’s vision statement is “to help individuals and businesses realize their full potential.” This vision statement is based on the value of the company’s computer technology and software products. Microsoft’s vision statement has the following significant components: 1. Individuals and businesses 2. Help realize 3. Full potential The first component of the vision statement partly defines Microsoft’s target market. For example, instead of selling software products to individual customers only, the company also sells its products to organizations. The second component of Microsoft’s corporate vision statement shows what the business intends to do. For instance, the company aims to provide products that assist customers toward the achievement of their full potential, which is specified in the third component of the corporate vision. Thus, Microsoft’s vision statement presents the target market, what the company’s technology products do, and what customers can achieve through such products.

5-Microsoft’s Mission Statement Microsoft Corporation’s mission statement is “to empower every person and every organization on the planet to achieve more.” This mission statement reflects the company’s vision statement on its computer technology and software business. The following components are significant in Microsoft’s mission statement: 1. Empower 2. Every person and every organization on the planet 3. To achieve more The first component of the corporate mission shows what Microsoft’s products can do for customers. For example, such empowerment can take the form of speedy processing in offices and enhanced information access in homes. The second component of Microsoft’s mission statement specifies the target market, which in this case involves all individuals and organizations worldwide. The company’s mission statement also specifies that its computer technology and software products benefit customers in terms of achieving more. Thus, Microsoft’s mission statement is highly similar to the company’s vision statement, although the corporate mission puts more emphasis on the practical benefit of achieving more.

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6-INPUT STAGE:

6.1-INTERNAL AUDIT INTERNAL FACTOR EVALUATION(IFE) MATRIX Factors

Weight

Rate

Score

0.15 0.12 0.08 0.11 0.05 0.20

4 4 4 3 3 4

0.60 0.48 0.32 0.33 0.15 0.80

0.09 0.13 0.03 0.04 1

1 1 2 2

0.09 0.13 0.06 0.08 3.04

Strengths Dominant brand image Strong alliance with other firms Largest acquisition of Skype Easy to use software Proficient in hardware Robust financial performance

Weaknesses Slow to innovate Low earning per share Dependence of hardware makers Pc market have matured

Totals

Interpretation: Microsoft Corporation is internally strong because its score is greater than the 2.5.

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6.2-EXTERNAL AUDIT EXTERNAL FACTOR EVALUATION(EFE) Factors Opportunities Cloud based services Stronger security against cybercrime Improvement in mobile device industry Innovation in computer hardware products

Weight Rate Score 0.15 0.20 0.10 0.11

4 4 3 2

0.60 0.80 0.30 0.22

0.13 0.12 0.14 0.05 1

4 3 4 1

0.52 0.36 0.56 0.05 3.41

Threats Intense competition Changing consumer behaviour Cybercrime New entrants

Totals

Interpretation: Microsoft Corporation is externally strong because its score is greater than 2.5.

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6.3 CPM COMPETITIVE PROFILE MATRIX CSF Market share Financial position Number of employees Revenues Net profit margin Earnings per share Growth Website Customer loyalty Advertising

Totals

weight 0.09 0.15 0.05 0.10 0.06 0.11 0.10 0.06 0.12 0.16 1

Microsoft Apple Google Rate Score Rate Score Rate Score 4 4 4 3 3 3 2 3 4 3

0.36 0.60 0.20 0.30 0.18 0.33 0.20 0.18 0.48 0.48 3.31

3 4 3 4 4 4 4 4 4 1

0.27 0.60 0.15 0.30 0.24 0.44 0.40 0.72 0.48 0.16 3.76

4 4 3 3 3 4 3 4 3 3

0.36 0.60 0.15 0.30 0.18 0.44 0.30 0.24 0.36 0.48 3.41

Interpretation: We have taken Microsoft as Sample Company and its two competitors are Apple and Google. The results which shows that the Apple is stronger than the both Microsoft and Google. The Google is also stronger than the Microsoft. So it prove that the Microsoft is weak than its competitors.

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7-MATCHING STAGE: 7.1 TOWS ANALYSAIS Opportunities  

EXTERNAL INTERNAL

Strength      

Dominant brand image. Strong alliance with other firms Largest acquisition of Skype Easy to use software Proficient in hardware Robust financial Performance

Weakness   



Slow to Innovate Low earning per share Dependence on hardware manufacturers Pc markets have matured

 

SO 





   

Intense competition in software products Changing consumer behavior Cybercrime Threats of new entrants

ST Invest $200 million in advertising and marketing to promote the Windows phone(S1,O2) Form an alliance with telecom providers in the USA to help subsidize the prices of phones for customers who sign a two year contract. (S2,O2)

WO 

Threats

Cloud based services Improvement in mobile device industry Growth through acquisitions Innovation in computer Hardware products

 

Lower prices by 50% on the Surface tablet.(S1,T1) Stronger security Against Cybercrime (S6,T3)

WT Focus on Cloud base services to increase the earning per share.(W2,O1) Invest $200 million in advertising and marketing to promote the Windows phone in China.(W1,O2)

 

Divest Skype(W1,T1) Lower prices by 50% on Surface tablet.(W2,T2)

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7.2 STRATEGIC POSITION AND ACTION EVALUATION (SPACE) Internal Analysis Financial Position(FP) Return on investment Debt Equity Net Income Excessive Goodwill Company Worth

Financial Position(FP) Average

External Analysis Rating Stability Position(SP) 5 5 5 3 6

4.8

Internal Analysis Competitive Position(CP)

Rating

Rate of inflation Technological changes Governmental Regulations Competitive Pressure Barriers to Entry into Market

-2 -6 -2 -6 -4

Stability Position(SP) Average

-4

External Analysis Rating Industry Position(IP)

Market Share Product/Service Quality Monopolistic Nature of Key Products Technological Know-How Access to Capital

-2 -2 -1 -4 -1

Growth Potential Financial Stability Ease of Entry into Market Public's Dependence on Products/Services Profit Potential

Competitive Position(CP)Average

-2

stability Position(SP) Average

Rating 7 6 5 7 6

6.2

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7.3 SPACE Matrix FP

Conservative

Aggressive

7 6 5 4 X = 4.2 Y = 0.8

3 2 1 CP

-7

-6

-5

-4

-3

-2

-1

1

2

3

4

5

6

7

IP

-1 -2 -3 -4 -5 -6 -7 Defensive

SP

Competitive

Microsoft is in the Aggressive Quadrant of the SPACE Matrix. It is important the firm expand consulting services as well as acquire market share in the smartphone market. SP scores of -6 on Technological Changes and Competitive Pressure will eventually erode into FP factors such as ROA and Net Income and move Microsoft into the Competitive Quadrant.

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7.4 INTERNAL EXTERNAL MATRIX (IE)

4.0

Strong

Average

Weak

(3.0_4.0)

(2.0_2.99)

(1.0_1.99)

I

II

III

High (3.0_4.0)

Invest +Hold

3.0

……………………….. -

0 A Position of MICROSOFT

2.99

IV

V

VI

VIII

IX

-

Med (2.0_2.99)

EFE

2.0 1.99

-

VII

-

Low (1.0_1.99)

1.0 4.0

3.0

2.99

2.0

1.99

1.0

IFE 16

8-DECISION STAGE:

The Quantitative Strategic Planning Matrix (QSPM)

Factors

Weight

Improve Consulting And Certification Programs AS

Opportunities Cloud based services Improvement in mobile device industry Growth through acquisitions Innovation in computer Hardware products Threats Intense competition in software products Changing consumer behaviour Cybercrime Threats of new entrants Totals Strength Dominant brand image Strong alliance with other firms Largest acquisition of Skype Easy to use software Proficient in hardware Robust financial Performance Weaknesses Slow to Innovate Low earning per share Dependence on hardware manufacturers Pc markets have matured Totals

0.15 0.20 0.10 0.11 0.13 0.12 0.14 0.05

TAS 1 3 4

-

Promote The Windows Phone And Surface Tablet AS

0.15 0.60 0.40 -

3 4

TAS 1 3 4

0.39 0.48

0.15 0.60 0.40 -

3 4

0.39 0.48

-

-

-

-

-

-

-

-

1 0.15 0.12 0.08 0.11 0.05 0.20 0.09 0.13 0.03 0.04 1

4 -

0.48 -

1 2 -

0.11 0.10

1 3

-

3 2

0.09 0.39

0.33 0.10 -

1 4 -

0.04 3.23

0.48 -

-

1

4

0.09 0.52 -

1

0.04 3.58

Microsoft should adopt the second strategy which is Promote the Windows Phone and Surface Tablet because its TAS is greater than the 1st strategy.

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9-Recommendations Microsoft Corporation has the necessary business characteristics to remain one of the leading players in the computer hardware and software industry. The strong brand image and positive externalities are among the major contributors to such market position. Thus, a recommendation is for Microsoft to continue enhancing its brand image. It is also recommended that the company must increase its alliances with other firms to improve positive externalities. The weaknesses and threats in the business point to strategic reform in Microsoft. For example, the company must continue innovating to develop products that are less vulnerable to cybercrime. Another recommendation is for Microsoft to diversify its business to boost potential growth. Moreover, it is recommended that the company must increase its computer hardware development efforts to increase its revenues from this segment of the business. Microsoft Should 1. Invest $100 million to improve consulting services. 2. Invest $200 million in advertising and marketing to promote the Windows phone in Latin America. 3. Spend $30 million to promote X-Box sales in Latin America. 4. Invest $200 million in advertising and marketing to promote the Windows phone in China. 5. Lower prices by 50% on the Surface tablet. 6. Further develop MS certification programs for $200 million.

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10-Appendix:  https://www.microsoft.com/en-pk/  http://www.businessinsider.com/microsofts-15-biggest-acquisitions-and-what-happenedto-them-2011-3?IR=T&op=1  http://bgr.com/2013/09/09/microsoft-business-strategy-analysis/  http://www.bizjournals.com/seattle/blog/techflash/2013/09/investors-see-nokiaacquisition-as-a.html?page=all

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