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External environment analysis of Microsoft

Describe about the External environment analysisis of Microsoft and Constructing a Strategy plan for Microsoft Corporation?

This report has dealt with the strategic planning of Microsoft Corporation. Various types of strategic tools are there in order to analyze the performance of the company. Analysis of external environment can be analyzed by PEST analysis. BCG matrix and product lifecycle, SWOT analysis has been taken into consideration in order to analyze the contemporary strategy of Microsoft Corporation. SWOT analysis has been used to investigate the strengths and weakness of the company. There are several factors those have affected upon the strategic measure of the company.

Microsoft is a multinational company that sells electronic products. Microsoft Corporation develops, manufactures, supports and sells various types of computer software, mobile, personal computers etc. Microsoft Corporation has operating system. It supports windows operating system.

In order to do effective business within the competitive market segment, an organization needs to maintain the external environment. Various factors of external environment impact upon the performance as well as effectiveness of the organization within the competitive market sector. Appropriate strategies for maintaining the external environment is very necessary for the doing effective business within the competitive sector of the market. Political, economical and legal frameworks are there in order to affect upon the business environment of an organization. On the other hand, Analoui and Karami (2009) stated that, the level of performance and legal framework for performance is also very important for dealing with the strategic planning of an organization. External environment of Microsoft therefore can be analyzed through PEST analysis. As stated by, Dess and Lumpkin (2009), PEST refers to the political, economical, social and technological factors of external environmental.

Several types of political factors can affect upon the business activities of Microsoft. For 2004, European Union has imposed fine to this particular company for taking out the media player version from the Windows version of Europe.

Unpredictable behavior of foreign currency, import and export currency has been impacted upon the economical structure of this corporation.  On the other hand, Dobson (2009) stated that, unlimited threats of cyber crimes have been impacted upon the economic condition of Microsoft.

Needs and demand of the customers refer to the social factors. Customers have demanded for high productive as well as technologically advanced element. Customers have the demand of high technological personal computers and other mobile devices (Banker et al. 2011).

This refers to the modernized as well as developed technology of Microsoft Corporation. Microsoft is a business organization that sells various types of electronic products. Therefore, advancement of operating system of personal computer or mobile system has imposed pressure for the creation of new technologically improved product (Battilana and Dorado, 2010).

From the above mentioned analysis of external environment, it can be analyzed that in order to sustain within the competitive sector of market Microsoft needs to implement some changes within the technological aspects. Highly innovative and productive technology needs to be implemented by the Microsoft Corporation. Microsoft Corporation needs to focus upon the technological innovation of the company in order to sustain within the competitive sector of market.





EU fine

Exchange Rates






Cyber crimes

Unpredictable behavior of foreign currency



Demand of customers



Lack of Improved technology



Table: External factor analysis summary based on PEST analysis of Microsoft

Source: As created by author

As stated by, Bücker et al. (2014), stakeholders are those who are directly or indirectly associated with the organization. Various types of decision of an organization influence upon the stakeholders of the organization. Stakeholders are the most valuable as well as essential assets of the organization. An organization has two types of stakeholders; those are internal and external stakeholders. Employees of the organization are the most important internal stakeholders. On the other hand, government, customers, media, various types of financial institutions are the external stakeholders of the organization (Carmen, 2012).

However, Christensen and Knudsen (2010) stated that, employees are the most valuable stakeholder of the company as they produce the most innovative product of the company as per the norms, objectives and purpose of the company. Employees often demand for higher pay and reputation within the company. Therefore, the company should maintain the expectations and demand s as well as needs of the employees in order to maintain a healthy relationship with them. This can also help to retain the employees for a long time frame (Csaszar, 2012).

On the other hand, Microsoft Corporation needs to maintain a healthy relationship with the external stakeholders also, like customers, Government, media etc. This company should maintain effective relation with the customers also. Electronic Customer Relationship management should be maintained by this company. This company also has to maintain the demand of the customers about the products. Customers demand for the innovative and advanced technology of the products. Therefore, Microsoft Corporation should maintain the demand and needs of the customers. Advanced operating system and servers or tools have been demanded by the customers. On the other hand, Dabica et al. (2014) stated that, Microsoft Corporation also needs to maintain some ethical considerations of the government. Government has the expectation that Microsoft should account positively towards environment and also contributes in a positive manner towards economic growth and development.

As stated by, Drnevich, and Croson (2013), value chain analysis consists of some different types of services, like inbound logistics, operations, outbound logistics, marketing and sales, service. Strategy of value chain of Microsoft is considered to be a coordinate approach within different stages. For this Microsoft Corporation, supply chain has been used as a strategy. There are various types of value chain components. Microsoft has created innovative products with effective technology that has affected upon the customers and the society. This business organization has considered the importance of the feedback of customers and partners in order to deliver as well as build value into the every making of its product (Furrer et al. 2012).

On the other hand, Gentry and Shen (2012) argued that, main objective of Microsoft Corporation is to offer best possible and end to end experience for the customers. Microsoft Corporation has paid serious attention to the value chain and become a leader into the competitive market sector of this industry.

Figure: Models of value chain

Value chain analysis of Microsoft Corporation

(Source: Glaister and Dincer, 2009, pp-45)




Weighted Score


Total Weight score

Table: Internal factor analysis summary

Source: As created by author

Within this section current business plan and strategy has been analyzed with contemporary example. Current strategy of Microsoft Corporation should be analyzed in the contemporary example. Contemporary business strategy of Microsoft has been analyzed within the global competitive marker sector. Contemporary business strategy of Microsoft Corporation has been analyzed through product lifecycle and BCG matrix. As stated by Kang (2012), product lifecycle and BCG matrix is the very important as well as essential element in order to indicate the contemporary business strategy of this Microsoft Corporation.

According to Kim et al. (2013), product lifecycle refers to the major steps those include the pass of products. There are different phases those have to be passed by an organization in order to do effective business within the competitive market. Major steps include introduction, growth, maturity and decline of the product into the competitive market sector. Passing these all steps is very crucial for every products of Microsoft Corporation.  

Figure: Product lifecycle

(Source:  Klein and Rai, 2009,pp-760)

As analyzed by, Li et al. (2010), major products of Microsoft like windows, servers, tools, operating system have achieved higher growth. Microsoft has also included its windows operating system within the mobile. The operating system has achieved huge growth within the competitive sector of the market. Newer versions of different operating system have also been included in Microsoft Corporation in order to achieve higher growth among within the market. Operating system of Microsoft stays within the growth phase of the product lifecycle.

On the other hand, Oestreicher-Singer and Zalman, (2013) stated that, Microsoft can be able to apply the strategic human resource management (SHRM) in order to aim the leverage upon the growth of its performance. Therefore, in order to achieve the needs and demands of the customers more innovative products have to be launched by this corporation. For this purpose, human resources of the organization should be strategically utilized by this company in order to achieve more innovative products. Research and Development wing should also be utilized strategically for the purpose of This Corporation (Parnell, 2013).

Human resource should be strategically used by this organization in order to involve more skilled and talented workers within the work. Strategic management of human resource also helps in the purpose of offering more strategic operation in order to lead the organization within the competitive sector of the market. Microsoft Corporation can also be able to take positive as well as strategic decisions in order to achieve higher growth within the competitive sector of the market.

As discussed by (), BCG matrix helps to indicate the position of the products within the competitive market industry by analyzing the market share as well as market growth of the company or the products of the company. Detail analysis of market share and growth can be helpful in order to make strategic decision of the business that aims to achieve higher growth and overall effectiveness within the performance within the competitive market sector of the market.

Figure: BCG matrix and the elements

(Source:  Peng et al. 2009, pp-34)

The Microsoft Corporation falls under the category of Star within the competitive market. The growth of Microsoft Corporation is huge within the industry of information technology. This company has also gained high market share within the competitive market sector of electronic and information technology industry. The star position of Microsoft Corporation indicates that current performance of this company is effective and efficient within the contemporary competitive market sector of IT and electronic industry (Adner and Kapoor, 2010).

However, Badenâ€ÂFuller and Morgan (2010) stated that, Microsoft Corporation needs to make effective innovative product in order to sustain within the competitive sector of this particular industry. In order to achieve competitive position within the competitive market this company also needs to focus upon strategic human resource management. Proper process of training and development should be taken by this company in order to train the employees with the proper goal and objective of the company. Therefore, research and development process should be maintained properly by Microsoft Corporation in order to make more innovative and technologically advanced products for the customers among the competitive sector of the market. The growth of this company can be sustained by applying strategic human resource management process. Future growth and position of this company should be sustained by this company by taking various types of strategic direction among the business activities of the organization.

Figure: GE matrix of Microsoft


• Strong brand image and reputation within market

• strong financial performance

• Tie ups with hardware industry

• Effective distribution channel

• Comprehensive portfolio of product

• Effective activities of research and development


• Dependency on the hardware manufactures

• Criticism over the flaw of security

• Slow activities of innovation of product design

• Pending legal proceedings



• Increased market of cloud computing

• Various types of strategic partnerships

• Achievement in mobile industry

• Inorganic growth initiatives



• strong competition within the competitive market sector of the same industry

• Risk in foreign currency exchange rate

• Demand of the technological changes in rapid manner

• Changing needs and demands of the customers

Table: SWOT analysis of Microsoft Corporation

(Source: Drummond et al. 2012, pp-34)

[i] From the above mentioned strengths, it can be said that, Microsoft Corporation will be able to make strong innovative product by enhancing the process of research and development.

[ii] It is also the fact that there are various types of companies those make innovative products within this industry. Still, the identified strengths will fulfill the deficiency in terms of inclination towards hardware manufacturing. In specific, using effective research and development strategy, it will ensure its flaws regarding security aspects.

[iii] It is the fact that this industry is highly competitive and there are several companies those offer same types of products within the competitive market. Apple, Nexus are the strong competitors of Microsoft. In terms of strong operating system Apple is the closest competitors of Microsoft. Such industry giants are also enhancing their products on frequent basis. This ultimately prevents Microsoft from exploiting its opportunities.

[iv] In specific, the changes in technology on frequent basis as well as stiff competition reduce the opportunities identified in the above section. Though, there is an opportunity in terms of inorganic growth initiates, still the fluctuation in exchange rate make it worst.

[v] There are various types of opportunities for Microsoft Corporation. In particular, there are opportunities of cloud computing. In this context, it is also noted that Microsoft has recently taken over the brand Lumia in order to sustain in the mobile industry also. So, it is expected that in long run it will address the threats identified in the above section.

The Microsoft Corporation needs to implement more innovative products in order to sustain within the competitive sector of the market. The information technology and the electronic goods is the high competitive industry within the competitive market. More advanced operating system and mobile operating system have to be taken by the company. On the other hand, Bücker et al. (2014) stated that there are various types of factors those affect upon the future strategy of the organization. Those are core values those are compared to the objectives, mission and vision, measurement of the strategic plan. The core objective of Microsoft Corporation should be prioritized. The core values of Microsoft need to be followed with due respect of the core organizational objectives.

Microsoft Corporation has maintained higher ethics in order to develop various types of operating system and software. Microsoft has maintained diversified culture of the employees. This company has also made policy of diversity among the customers. This company has tried to maintain the environment. Therefore, it has planned to make software those do not harm the environment.

On the other hand, it can be stated that the future organizational strategy of Microsoft can be based upon the vision and mission of the company.

However, a strategy plan is very essential for the organization. For Microsoft Corporation, the strategic plan has to be taken in order to produce high quality and innovative products. Microsoft Corporation has made effective personal computers and mobile phones. Therefore, this company has to make some innovative products for its customers. It has been seen that Microsoft has not done effective work within the operating system of mobile.

Higher level of innovation can take place by effective effort of the employees of the organization. High expertise employees can impact over the innovative product design of the organization. Therefore, effective training and development process should be maintained by the particular company. Strategic implementation of higher innovation can be very effective for the company. Therefore, the company should be aware about the fact that extensive level of research and development is helpful for this particular purpose. Research and development wing of this organization can be made very effective for the greater performance of the employees of the organization. Innovative idea and better support of research and development is very necessary for the purpose of making effective products of innovation. This company should provide proper training and development techniques for the employees of the organization.  The company should provide rewards and some advantages to the employees. This company should implement strategic management in order to retain the employees. High advancement of various types of application of mobile should be implemented by Microsoft by implementing strategic plan.

This plan for innovative technology will surely affect upon the most effective external stakeholder, like customers of this company. This innovative design of technology can attract the potential as well as loyal and new customers of the market.

Therefore, monitoring and evaluating the system can be very important factors for the organization.  The organization needs to evaluate and monitor whole process of performance of the employees. Therefore, monitoring and evaluation process can be carried out by a positive approach.

As per the analysis concerns, Microsoft Corporation has not make any significant activity with the operating system of Microsoft within the sector of  mobile device. Therefore, effective as well as innovative strategy needs to be acquired by this corporation. New innovative products should be taken by this company. Positive and huge participation of stakeholders is needed for this case. Diversified employees are the main source for doing this type of innovative as well as diversified products. Participation of diversified employees can be managed through informal participation of the stakeholders of various levels.

On the other hand, Csaszar (2012) discussed about the informal interaction among the employees of this company. Informal communication and data sharing process can be very effective for interacting with the employees of the organization. The structure of informal communication within the employees can be done in order to ensure positive participation of all levels of employees from the diversified group of employees. Process of informal communication can also be very effective for sharing the data and information within the employees of the organization. IIt can be able to deliver positive as well as effective objectives of organization.

Therefore, the research and development wing of this organization needs to be considered by this corporation.  The operating system for phone can be made with effective innovation and strategy. New mobile application development is very necessary for Those Corporation in order to achieve the objective of innovative product and technologically advanced product. The improvement over the windows system and mobile can be effective for the customers also. It can attract the potential as well as loyal and new customers also.

However, recently Microsoft Corporation has acquired a phone division of Nokia in order to sell more diversified products to the customers. The phone division of Nokia has seen a significant sell within the business activity of the company. Lots of customers are attracted with this section of Nokia. Therefore, Microsoft Corporation has taken this device for increasing their business activity within the competitive sector of the market. This acquisition strategy of Microsoft Corporation is an important activity. Therefore, the customers will definitely expect several new features from this new division of this phone.

1.8. Conclusion:

Microsoft Corporation should take effective strategies in order to newly introduce the phone segment to the competitive market within the customers. This phone division is a windows phone. After this, Microsoft Corporation can also be able to make effective android phones. The most suitable strategic option for Microsoft Corporation is to make android phones for the customers as because this is the ever challenging as well as demanding market of contemporary era.

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