Microsoft Corporation’s PESTEL/PESTLE

Analysis & Recommendations

UPDATED ONUPDATED ON FEBRUARY 21, 2017 BY EDWARD FERGUSON

Microsoft Ireland
at The Atrium Building in Dublin. Microsoft Corporation’s PESTEL/PESTLE analysis
shows the need for competitive computer technology products, based on the remote
or macro-environment. (Photo: Public Domain)
Microsoft Corporation’s managers include PESTEL/PESTLE analysis in their
approaches to understanding the company’s business situation. The
PESTEL/PESTLE Analysis model is a tool for identifying the external factors that
influence the remote or macro-environment of firms. In the case of Microsoft, these
external factors reflect the performance of the computer hardware and software
market. Such factors represent the issues relevant to the company’s business.
Through the inclusion of these issues determined through the PESTEL/PESTLE
analysis, Microsoft can develop suitable strategies that create business
competitiveness and resilience.

A PESTEL/PESTLE analysis of Microsoft Corporation reveals the most significant

issues based on the conditions of the company’s remote or macro-environment.
Considering the situation of the computer hardware and software market, Microsoft
can implement strategies that address such issues and their corresponding external
factors shown in this PESTEL/PESTLE analysis.

Political Factors Affecting Microsoft’s Business

This area of the PESTEL/PESTLE analysis model deals with the effects of
governments on the remote or macro-environment of the computer hardware and
software business. In the case of Microsoft, the following political external factors are
significant in strategic decision-making:

1. Political stability in the majority of markets (opportunity)

2. Increasing governmental support for automation (opportunity)
3. Increasing international trade agreements (opportunity & threat)
 The political stability of the majority of markets worldwide creates opportunities for
Microsoft to increase its investments and corresponding performance. For example,
the company can improve its sales and marketing investments in Europe to achieve
a corresponding increase in revenues. On the other hand, the increasing
governmental support for automation presents opportunities for Microsoft to increase
its computer technology sales via governmental clients. This external factor is
significant, considering large-scale purchases involving governmental organizations.
Moreover, increasing international trade agreements develop a remote or macro-
environment that supports an increase in Microsoft’s global sales. Through this
external factor, the company benefits from easier business deals in overseas
markets. However, increasing international trade agreements are also a threat
against Microsoft. In these agreements, foreign firms can increase their
competitiveness in developed countries like the United States. Based on this area of
the PESTEL/PESTLE analysis of Microsoft Corporation, the political factors present
major opportunities to boost the business.

Economic Factors Important to Microsoft

Corporation
The business effects of the economic situation on the remote or macro-environment
are considered in this area of the PESTEL/PESTLE analysis model. Microsoft must
include the following economic external factors in strategies for the computer
hardware and software business:

1. Considerable economic stability of the majority of developed countries (opportunity)

2. High growth of developing countries (opportunity)
3. Growing middle class disposable income (opportunity)

Microsoft benefits from the considerable economic stability of the majority of

developed countries. For example, the company can expect stable performance in
these markets. Microsoft also has potential boosts in sales revenues in high-growth
developing countries. This opportunity translates to steady growth in Microsoft’s
global sales. Moreover, the economic external factor of the overall global rise of
middle class disposable income creates opportunities for the company for higher
revenues. This condition is so because middle-class customers are among the most
significant sources of revenues for Microsoft. Thus, the company can exploit growth
opportunities in its remote or macro-environment. Microsoft must strategically
address such opportunities in the computer hardware and software industry
environment, as highlighted in this area of the PESTEL/PESTLE analysis.

Social/Sociocultural Factors Influencing Microsoft’s

Business Environment
This area of the PESTEL/PESTLE Analysis model considers how the social situation
affects Microsoft’ remote or macro-environment, especially in terms of customers’
behaviors and expectations. In the computer technology market, the following
sociocultural external factors influence Microsoft:
1. Stable attitudes about leisure (opportunity)
2. Increasing cultural diversity (opportunity & threat)
3. Stable demand for high quality customer service (opportunity)

The stable attitudes about leisure present opportunities for Microsoft to develop
products that can satisfy customers’ leisure preferences. For example, the company
can increase its investment in innovating computer gaming products for this purpose.
In addition, increasing cultural diversity is a potential threat against Microsoft in terms
of product-customer mismatch in the remote or macro-environment. For instance,
customer satisfaction could decrease as the company’s products satisfy only the
biggest cultural groups. Nonetheless, Microsoft has an opportunity to improve its
goods and services to address this issue. On the other hand, the stable demand for
high quality customer service creates opportunities for the company to improve its
customer support activities. In this area of the PESTEL/PESTLE analysis of
Microsoft Corporation, sociocultural external factors emphasize opportunities for
growing the computer hardware and software business.

Technological Factors in Microsoft’s Business

The effects of technologies on the remote or macro-environment of the computer
technology industry are identified in this area of the PESTEL/PESTLE analysis
model. Microsoft needs to integrate the following technological external factors in its
strategies:

1. Rapid adoption of mobile technology (opportunity & threat)

2. Increasing volume of online transactions (opportunity & threat)
3. Increasing automation in businesses (opportunity)

Microsoft Corporation can improve its performance through rapid innovation of its
mobile devices. This opportunity is based on the rapid adoption of and rising demand
for mobile technology. However, this technological external factor is also a threat that
facilitates competition against Microsoft. More technology firms could exploit such
opportunity to enter the market. On the other hand, the increasing volume of online
transactions provides opportunities for Microsoft to develop more products that
support secure online transaction processing. However, such increasing volume of
online transactions threatens the company in terms of a corresponding increase of
cybercrime attacks, which is one of the threats identified in Microsoft’s SWOT
Analysis. Moreover, the company has an opportunity to grow through products that
enable businesses to automate more of their processes. As shown in this area of the
PESTEL/PESTLE analysis, Microsoft has significant growth opportunities, although
the related threats could limit such opportunities in the remote or macro-
environment.

Ecological/Environmental Factors that Define

Microsoft’s Situation
In this area of the PESTEL/PESTLE Analysis model, the impacts of ecological issues
on the computer hardware and software industry environment are considered.
 Microsoft faces the following ecological external factors in its remote or macro-
environment:

1. Increasing preference for green products (opportunity)

2. Increasing focus on business sustainability (opportunity)
3. Increasing availability of recyclable materials (opportunity)

Based on the increasing preference for green products, Microsoft Corporation has
the opportunity to enhance its sustainability standing. For example, the company can
develop more environmentally friendly products, and increase the use of green
energy in its business operations. In relation, Microsoft’s efforts to improve its
sustainability directly addresses the opportunity based on the increasing focus of
societies on business sustainability. Also, the increasing availability of recyclable
materials is an ecological external factor that the company can use as basis for
increasing the use of recycled materials in its computer hardware and software
products and packaging. In this area of the PESTEL/PESTLE analysis of Microsoft,
the remote or macro-environment presents a number of opportunities for competitive
advantage.