1.

0 ABSTRACT

This report provides an analysis of the current internal and external factor environment based on

the case study of Microsoft Corporation 2013. The purpose of this study is to develop a new

strategic plan for the upcoming new CEO of Microsoft. The tools used to assess the internal and

external environment of Microsoft are SWOT, EFE Matrix, CPM, IFE Matrix and QSPM. Thus,

this study will also investigate how these factors shaping and affect the formulating strategy of

Microsoft in future. The strategic plan is addresses the constantly changing business environment

of internal aspect such as the vision and mission, organizational structure, the surface tablet

industry, business segment and the financial performance. For the external aspect, the strategic

plan is addresses the level of intensity of rival firms, the smartphone growth, the cooperation

with Nokia and the cloud computing. The result from analysis will reveal how attractive the

alternative strategies and improve the quality of strategic decisions before making a selection of

strategies that suit best to Microsoft.

2.0 INTRODUCTION

Strategic management consists of 3 stages which are strategy formulation, strategy

implementation and strategy evaluation (David, 2013). The function of strategic management is

to assist in making a careful planning in achieving the objectives of the company. When the post

of CEO in the Microsoft is about to changed, the company must perform an internal audit and

external audit to identify strategies that are appropriate to respond to these changes. So it is

important that any information obtained from the audit process should be timely, easy to

understand and able to devise a more effective strategy. There are a lot of tools that can be used

in conducting the internal audit and external audit process.

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What strategy should Microsoft pursue after Ballmer left the company can be identified by using

the SWOT analysis. SWOT is stands for strength, weaknesses, opportunity and threat. One of the

main functions of SWOT analysis is to lead and make decisions about actions that should be

taken after external factors and internal has been identified. Numerous studies provide the

important of using SWOT analysis as a first tool in strategic planning. Research by Ayub, Aslam,

Razzaq, & Iftekhar (2013), SWOT analysis helps in identifying the advantages of the company

itself by exploiting opportunities that exist and minimize the risk of threats that could harm the

performance of company. Extending this idea it is stated that SWOT analysis is used to access

the strengths and weaknesses of competitors from every aspect and give a suggestion which

strategy should be used that suits with the current changes in environment. This is because every

decision taken by the company will result the changes of factors within and outside environment.

Surprisingly, there is a critic on the SWOT approach in assessing the internal and external

environment of company. Some of the disadvantages of the SWOT approach is it relies on

“subjective intuition, unsystematic, eschews quantification, and lacks predictive power”

(Agarwal, Grassl, & Pahl, 2012). Usually, the idea that comes from intuition is difficult to

identify where its resources and this will affect the validity of the information. Made a mistake in

assessing the strength of these factors may lead to an ineffective strategy and not able to maintain

a competitive advantage with other competitor.

For the industry analysis of Microsoft, the external factor evaluation matrix or EFE are tools to

summarize the external factor (David, 2013). He mention that the process start by weighting

those factor according to the level of importance being successful in the industry and rating it to

indicate how effectively the Microsoft’s current strategy respond to the factor. A score of 2.5 is

an average result and the total weight score of 4.0 shows that company are aggressively respond

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to the existing opportunity and threat in industry while a score below than 2.5 shows the opposite

situation.

To identify the major competitor strengths and weaknesses, the competitive profile matrix or

CPM are tools that is suit to answer this type of question. The concept is almost similar to the

EFE Matrix but includes the critical success factor include both the internal and external

environment. The score can be compared to other firm. Some of the advantage of the CPM is it

can assist in giving more attention to areas that need immediate attention (Capps & Glissmeyer,

2012). The extended of this idea is that CPM could provide a visual on how company should

review the strategy of his opponent and make changes to their strategy to secure their

competitive advantage.

David (2013) stated that the internal factor evaluation matrix or IFE is a tool to summarize and

evaluates the strength and weaknesses inside of the business. The process start by weighting

those factors according to the level of importance being successful in the industry and rating it

whether the factor represent the major weaknesses and strength. He also notes that the total

weight score below than 2.5 shows that company is weak internally where the score below than

2.5 shows that company are strong internally.

VRIO is a tools used to identify the competitive advantage by analyze company’s internal

resources and the capabilities. The research of some authors indicates that VRIO are based on

four criteria which are value, rarity, imitation and organization where the managers are supposed

to evaluate the human resource department activities based on this criteria (Pesic, Milic, &

Stankovic, 2012). They also stated that sustainable competitive advantage can be obtain if the

company has the unique resource and not easily imitated by other companies .

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QSPM is a tool used to evaluate the attractiveness of alternative strategies. Research by

Mahmoodi, Chizari and Eftekhari (2014) mentions that QSPM has been use for agri-tourism is

rural area in Iran to to ensure the industry more developed. They also come out with the solution

that conservative strategy is the best for support the development of agri-tourism in Iran. So

QSPM is a tool that helps company in decision process by looking at the total attractiveness of

each alternative strategy.

3.0 COMPANY PROFILE

3.1 History

From the information in Microsoft website, the establishment of Microsoft started on year 1975

where it was founded by Bill Gates and Paul Allen. It is also the same year in which they made

the partnership and creates the name of Microsoft. The company started with a small size but Bill

Gates and Paul Allen has a big vision and they are believed that computer can change the world

and it is a journey to the future (Microsoft Corporation, 2015). Windows 1.0 is the first operating

of system that has been introduced by Microsoft in 1985 and it is designed for the personal

computer users. Windows 98 is the first version that is designed for the consumer in 1998 and it

last version based on MS-DOS. The latest product from Microsoft is the Windows 8.1 which

includes the cloud connectivity and powerful collection of applications. After the retirement of

Bill Gates, Steve Ballmer took the CEO position in the year 2000. In year 2013, Ballmer

announced that he will retire from Microsoft. Satya Nadella took over the position of CEO

Microsoft in year 2014.

3.2 Vision

Vision Statement of Microsoft Corporation is “Computer on every desk, and in every home”

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3.3 Mission

Mission Statement of Microsoft Corporation is “At Microsoft, our mission and values are to help

people and businesses throughout the world realize their full potential.”

3.4 Organizational Chart

Diagram 3.1 : An organizational chart of Microsoft Corporation

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4.0 INDUSTRY PROFILE

Competitors of Microsoft for operating system and phone are Apple and Google.

Iphone is the famous of mobile phone product from Apple. Apple also develops their own

operating system for their customer. Besides that, Apple has a strong brand reputation and high

customer loyalty. Google also come out with their own line of phones. Some of the phones that

catch the attention is the Google Nexus and the famous operating system from google is

Google’s android.

Competitors of Microsoft for server product are Hewlett-Packard, IBM and Oracle.

Oracle is one of the big companies in the world that involve with the business of serves database,

middleware software and application software. One of the products from Oracle is Oracle

Exadata Database Machine for the purpose of generating better report to organization. IBM also

serves the industries that related to the IT services and IT consulting. Business IBM was divided

into 4 divisions such as hardware, software, services and financing. Hewlett-Packard served

almost similar industries like Microsoft. HP offers a variety of products and services in market.

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Competitor of Microsoft for entertainment and devices are Nintendo and Sony

Nintendo is a well-known brand for games. Product from this company can be found all over the

world and it also known as entertainment device for family. Sony have strong brand image and

have been recognized around the world. PlayStation is one of the famous gaming products from

this company and is the close competitor to Microsoft who comes out with the Xbox product.

5.0 ANALYSIS ON VISION AND MISSION STATEMENT

Vision Statement :

“Computer on every desk, and in every home”

Based on the vision statement of Microsoft, the vision statement doesn’t reflect the latest

changes occurring in the world. It is not a good statement because it cannot answer the basic

question of what do we want to become. Besides that, the readability of this statement is poor

and the content is vague.

Mission Statement :

“At Microsoft, our mission and values are to help people and businesses throughout the world

realize their full potential.”

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No Component Statement

1. Customer At Microsoft, our mission and values are to help people

and businesses throughout the world realize their full
potential
2. Product or Services NIL

3. Market At Microsoft, our mission and values are to help people

and businesses throughout the world realize their full
potential
4. Technology NIL

5. Concern for survival, NIL

growth and profitability
6. Philosophy NIL

7. Self-concept NIL

8. Concern for public image NIL

9. Concern for employees NIL

Table 5.1 : Analysis on vision and mission statement of Microsoft Corporation

A good mission statement include nine components which are customers, products or services,

markets, technology, concern for survival, growth and profitability, philosophy, self-concept,

concern for public image and concern for employees (David, 2013). Based on mission statement

of Microsoft, the statement is lack of seven components which are products or services,

technology, technology, concern for survival, growth and profitability, philosophy, self-concept,

concern for public image and concern for employees. Sime Darby only includes customers

(people and business) and includes markets (throughout the world). The mission also doesn’t

mention any philosophy that could guide them to achieve the overall goals of company. Overall,

the mission statement of Microsoft is poor. Therefore, the company should revise back their

mission statement to provide a better communication of the company’s purpose to employees

and other stakeholder.

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6.0 EXTERNAL ASSESSMENT

6.1 Porter 5 forces

Porter five forces model was introduced by Michael E Porter. This model helps to look into

balance power and have a better understanding of the industry they operates. A recent study by

Tavitiyamana, Qiu and Zhang (2011) use Porter five forces model to measure and evaluate US

hotel performance. He also mentions that after the powers has been recognize, it does give an

impact on how to implement the competitive strategy. An appropriate action should be taken to

fit between the industry forces and competitive resources, and this model helps in develop a

better standard to the hotel in order to gain a competitive advantage and to achieve high

performance.

Industry rivalry : HIGH

Microsoft facing a slow market growth especially for Window phone product and causes firm to

fight with Apple and Google to gain their market share. Microsoft is highly diversified thus they

face an intense competition in different segment. Apple and Google have their own operating

system and Microsoft Office package also face a greater competition from Oracle and others.

Microsoft also tried hard in getting the market share with Nintendo and Sony in entertainment

industry. Customer around the world can freely switch from one product to another if they are

not satisfied with the quality and price. This situation is resulting in high rivalry.

Threat of new entrants : LOW

It required a high capital to enter in this type of industry because most of the product has been

patent and intellectual property has been protected by the law. Most of the competitor such as

Apple, Samsung, Google and Oracle already have a strong brand names and gain loyalty from
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their own target customers. So it is difficult for new entrants to compete in this type of industry

without having a superior knowledge, superior technology and highly innovative product.

Besides that, some of this company has developed their own software and program a long time

and create the economics of scales. This is situation where unit cost for production is minimum

and new entrants probably having a difficulty to come out with competitive prices.

Bargaining power of supplier : LOW

Microsoft has already a dominant share of PC operating system since they establish the Window

1.0 in market until now. The main supplier of this industry is hardware and software supplier.

There is a minimum number of supplier that Microsoft have been negotiate to running their

business and then this supplier are selling a large number to PC manufacturer. Most of the

software and hardware application are intangible product and have been patent and licensed so

limit the power of suppliers to control the prices of product. Thus, Microsoft is enjoying a high

profit margin.

Bargaining power of buyers : HIGH

Buyer’s power can be considered high because consumer has better information about Microsoft

product and prices. They can always compare the prices and quality of Microsoft product to

Apple. If customer found a product that performs almost similar function but with the cheaper

price, surely they will shift and buy from other competitor. When the product is not

differentiated in market, buyers become more prices sensitive.

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Threat of substitutes : HIGH

Apple is one of the competitors who are leading in market share. When Apple comes out with

better phone such as iPhone 5s, it will make any product from Microsoft look an unattractive.

Microsoft needs to lower their prices in order to compete with Apple’s product. Most of the

competitor spends huge money for the research and development activity to innovate their

product. Thus, any company who successful offered a unique product surely grabs the attention

of consumers around the worlds to go to their store and buy their product.

6.1 EFE Matrix

Key External Factors Weight Rating Weighted Score

Opportunities
1. The tablet market has be booming 0.15 1 0.15
2. Growth in cloud computing demand 0.15 2 0.30
3. Smartphone growth 0.12 4 0.48
4. Growth through alliance with Nokia 0.05 3 0.15
5. Growing in mobile advertising market 0.10 2 0.20
Threats
6. Intense competition 0.10 2 0.20
7. Rapid development and innovation in mobile devices 0.08 2 0.16
8. Changing of customer behavior 0.05 2 0.10
9. Open source nature 0.08 1 0.08
10. Competitor launched a new product 0.12 2 1.06
(1) response is poor, (2) response is average, (3) respond is above average, (4) response is superior
TOTAL WEIGHTED SCORE 1.00 2.88
Table 6.1 : EFE Matrix for Microsoft Corporation

The average total weighted score of EFE is 2.50. So the total weighted score of Microsoft is

2.88 and it is not much difference from the average score. Microsoft can be considered as

responding to existing opportunities and threat in its industry but the score is not an outstanding.

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6.2 Competitive Profile Matrix (CPM)

MICROSOFT APPLE GOOGLE

CRITICAL SUCCESS FACTOR Weight Rating Score Rating Score Rating Score

Advertising 0.07 2 0.14 4 0.28 3 0.21

Organization structure 0.02 2 0.04 4 0.08 3 0.06
Product Quality 0.04 3 0.12 4 0.16 2 0.08
Price Competitiveness 0.06 3 0.18 2 0.12 4 0.24
Financial Position 0.06 3 0.18 4 0.24 2 0.12
Customer Loyalty 0.06 3 0.18 4 0.24 2 0.12
Global Expansion 0.07 3 0.21 4 0.28 2 0.14
Market Share 0.08 2 0.16 4 0.32 3 0.24
R&D Spending 0.06 3 0.18 4 0.24 2 0.12
Product Design 0.05 2 0.10 4 0.20 3 0.15
Strong Patent Portfolio 0.09 3 0.27 4 0.36 2 0.18
Strong Online Presence 0.07 3 0.21 4 0.28 2 0.14
Innovation in Products & Service 0.09 2 0.18 4 0.36 3 0.27
Successful new introductions 0.05 1 0.05 4 0.20 2 0.10
Cloud Integration 0.07 3 0.21 2 0.14 4 0.28
Customer Satisfaction 0.06 3 0.18 4 0.24 2 0.12
TOTAL WEIGHTED SCORE 1.00 2.59 3.74 2.57

Table 6.2 : CPM Matrix of Microsoft Corporation

For competitive profile matrix, Microsoft is at second place behind Apple. This analysis reveals

that Apple is stronger than Microsoft in all areas except for price competitiveness and cloud

integration. The score of Microsoft is not much difference compare to Google where Google

have a better cloud integration compare to Microsoft and Apple.

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7.0 INTERNAL ASSESSMENT

7.1 IFE Matrix

Key Internal Factors Weight Rating Weighted Score

Strengths
1. Brand loyalty and reputation 0.14 3 0.42
2. Strong revenue growth 0.12 4 0.48
3. Strategic alliance with phone and hardware company 0.11 3 0.33
4. Acquisition of skype 0.04 3 0.12
5. Diversified product portfolio 0.15 4 0.60
6. Surplus cash for R&D purpose 0.08 4 0.32
Weakness
7. Organizational structure is not satisfactory 0.03 2 0.06
8. Poor acquisition and investment 0.06 1 0.06
9. High goodwill 0.05 2 0.10
10. Depends on hardware manufacturer 0.04 1 0.04
11. PC market is declining 0.10 1 0.10
12. Operating loss from Online Service Division 0.08 1 0.08
(1) major weaknesses, (2) minor weaknesses, (3) minor strength, (4) major strength
TOTAL WEIGHTED SCORE 1.00 2.71

Table 7.1 : IFE Matrix for Microsoft Corporation

The average total weighted score of IFE is 2.50. So the total weighted score of Microsoft is 2.71

Microsoft can be considered to have strong internal position.

7.2 VRIO Framework

Resources Value Rarity Imitability Organization Competitive

and Advantage
Competencies
Brand Name Yes No Yes Yes Parity
Simplicity Yes Yes Yes Yes Sustainable
Hardware Yes No No No Parity
Software Yes Yes No Yes Temporary
Table 7.2 : VRIO framework for Microsoft Corporation

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Brand name

The first resource identified in Microsoft is brand name. According to Interbrand (2014),

Microsoft in 5th ranking for the world’s most valuable product in the world and this shows that

Microsoft reputation is strong. The brand name is considered as high value because Microsoft

brand was recognized around the world. Microsoft brand name also considered are rare because

when people thinking of operating system inside laptop or computer, Microsoft is typically the

first company that comes to their mind. Microsoft’s brand name is valuable but most of

Microsoft competitor also have widely recognized such as Apple and Google. So the resource is

not considered as rare. Microsoft’s brand name is imitability because not all competitors can

survive for a long time like Microsoft. It takes a lot of time and money to have a strong position

like Microsoft. Besides that, there are some customers who are loyal to this product just because

of Microsoft's brand name. Microsoft uses their brand value when entering the foreign markets to

dominate their market share. So the company can organized this resource very well. Therefore,

the impact of this resource is parity competitive advantage.

Simplicity

The second resource identified in Microsoft is simplicity. It considered as valuable because

Microsoft have the ability to have a simple design of interface without having a problem of the

functionality. Research and development activity have successfully helped Microsoft to come up

with unique features in their products. The simplicity of Microsoft is considered as rare because

it took long time and fund for research activity to come out with the simple design but yet is look

powerful. So Microsoft use the simplicity to sustained competitive advantage by having a simple

design, relevant features and ease of speed in every product they are produce. This resource also

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considered as imitable because being the first entered to the industry is actually setting a high

standard for any other product to compete with Microsoft. Microsoft is continuously invested in

research and development to come out with innovative products. Obviously, Microsoft can

organize this resource very well. Therefore, the impact of this resource is sustainable competitive

advantage.

Hardware

Revenue from software products is usually much higher than revenue from hardware products.

The Surface tablet seems to have a problem at first in term of the price but this tablet along with

Lumia phone just gained popularity in market. So if these products continue to gain attention,

Microsoft should be in a better position soon. The tablet and Lumia phone have the special

ability to connect with PC and using the latest version application of Windows 8. So the resource

can be considered as valuable. However, this resource cannot be considered as rare. Microsoft

face an intense competition from other related to quality, design and price. For tablet and

smartphone market, it is difficult to set up high price because Apple product such as iPhone has

been known for superior quality and comes with expensive price but Microsoft is seen as not

price competitive if they set a high price for their product. Besides that, this resource is not

considered as imitable because Apple already entered the market early and has set high standards

for other competitors. It seems that Microsoft team having a difficulty to overcome the problem

as they only manage to sell maximum of 500,000 tablets which is much lower than original

estimate of 2 million tablets. Microsoft team should constantly alert with the changes in

technology and responds it immediately. Therefore, the impact of this resource is competitive

parity.

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Software

A beautiful and friendly user interfaces is one of the characteristics that have always been

applied by Microsoft on their product. There is a lot version of Window operating system in

market starting with the Window 1.0 and the latest one is the Window 8.1. This shows that

Microsoft has a great resource for research purpose to come out with a better features and quality

every time they are launched a new product in market. The variety version of the operating

system that suits with the personal purpose and business purpose can be considered as valuable.

Besides that, technology use to create the Microsoft’s operating system can be considered as rare

and unique. By selling high quality software to client is lead to gain a competitive advantage.

This unique feature inside of Microsoft’s software found to be rare in the industry. However, this

resource is not considered as imitable. There is some other operating system that was offered by

other competitor such as Oracle who offered almost similar product like Microsoft. This situation

could harm the Microsoft position in market. Some of the famous product from Microsoft such

as Window 7 operating system is considered to have a high quality. Even though some of the

competitor also produce almost similar product like Microsoft, but it is still difficult for them to

tap the market because most of the clients are loyal and familiar of how the Window system is

operating. Microsoft always comes out with better version of operating system to gain the

market share. So the company can organized this resource very well. Therefore, the impact of

this resource is temporary competitive advantage.

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8.0 STRATEGY ANALYSIS AND CHOICE

8.1 SWOT Matrix and Analysis

STRENGTHS WEAKNESSES
 Brand loyalty and reputation  organizational structure is not
 Strong revenue growth satisfactory
 Strategic alliance with phone and  Poor acquisition and investment
hardware company  High goodwill
 Acquisition of skype  Depends on hardware manufacturer
 Diversified product portfolio  PC market is declining
 Surplus cash for R&D purpose  Operating loss from online service
segments
OPPORTUNITIES THREATS
 The tablet market has be booming  Intense competition
 Growing cloud computing demand  Rapid development and Innovation in
 Smartphone growth mobile devices
 Growth through alliance with Nokia  Changing of consumer behavior
 Mobile advertising  Open source nature
 Competitor launched a new product
Table 8.1 : SWOT Matrix of Microsoft Corporation

Strengths

 Brand loyalty and reputation

Microsoft has been known as a software companies around the world. One of the famous

products from this company is Windows Office. It is widely used for personal computer

and creates a brand loyalty among client since that day. According to Interbrand (2014),

Microsoft at 5th ranking for the world’s most valuable product in the world and this

shows that Microsoft reputation is strong.

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 Strong revenue growth.

Microsoft shows a good record when its revenue grew by 18 % from year 2010 until year

2012. Microsoft had a record revenue of $73 billion in year 2012 which is the highest

compared to the previous 2 years. A good financial result is important because it is a

good indication that Microsoft is on the right track.

 Strategic alliance with phone and hardware company

Microsoft makes an alliance with other hardware company to pre-installing their

operation system such as Toshiba and Sony. From the Window division, 75% of its

revenue comes from pre-installing windows by these companies. Thus, this strategy has

been successful bring a huge returns to Microsoft.

 Acquisition of skype

According to Swider (2013), Skype now has 299 million users which are nearly to 300

million users. Skype has been known as the best platform of connection friends, family

and for business purpose. The combination of Microsoft and Skype will create a greater

chance of potential revenues because both companies are supporting their products at

market.

 Diversified product portfolio

Microsoft portfolio is highly diversified in market by offering a variety of software,

hardware product and services to customers. Microsoft offer an operating system, server

products, consultation service and also involve in gaming entertainment industries. A

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 variety of products and service enable Microsoft to meet any requirement of their

customer regardless any classes.

 Surplus cash for R&D purpose

Microsoft grew its cash by 71% from year 2010 to 2012. They have a total cash of $63

billion that can be used for the research and development purpose. Microsoft operating in

high technology environment and face intense competition from Apple, Google and

Samsung that. Those competitors are regularly come out with creative product and high

innovative. Microsoft can strengthen their research and development activity by using the

cash surplus thus also strengthens their position in market.

Weaknesses

 organizational structure is not satisfactory

The executive titles in Microsoft are not properly named. So it is difficult see the overall

view and function of each department clearly. By having a clear strategic business unit

could help Microsoft being more organized.

 Poor acquisition and investment

Nokia keep losing their market share due to fail to adapt with the latest technology and

the changes in customer behavior. According to Fox (2013), Nokia’s market share has

declines to below 5%. This situation shows that Nokia keep losing their customers around

the world and this may not a strategic decision for Microsoft to acquirer Nokia at this

time.

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 High goodwill

Microsoft’s goodwill keep increased from year 2010 to 2012. It is increased by 8.5%

from year 2010 to 2012. Large amount of goodwill could attract the attention of investor

but it also reflect that Microsoft paying too much to buy or acquirer other company.

 Dependence on hardware manufacturer

To run the Window operating system, Microsoft depends on hardware manufacturer for

this purpose. Microsoft’s revenue especially from the Window division depends heavily

on equipment manufacturer to pre-installing the Window operating system. This situation

may not effective for long-term strategy. Other hardware manufacturer may stop the

agreement and Microsoft is left with no choice to improve the performance.

 PC market is declining

Recently, personal computer market has been declined because most of customers prefer

to use a tab or smartphone. To overcome this problem, Microsoft diversified their

business by introduce the Window phone and Window tablet. However, Microsoft is late

entered the mobile or tab industry compared to Apple which introduce the iPhone 5S just

to win the market share and they are facing intense competition of this segment of

business.

 Operating loss from Online Service Division

Online Service Division contributes the less revenue to Microsoft and also produces

operating loss for 3 years starting 2010 until 2012. Microsoft should shift their focus

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 more on the tablet and smartphone market. MSN and Bing search engines have become a

huge burden investment for Microsoft for so many years.

Opportunities

 The tablet market has be booming

The tablet market is expected to have a high growth in future due the high innovation in

this market. Microsoft should grab this opportunity by introducing more their own tablet

with good features to differentiate their product in market.

 Smartphone growth

There is a high demand for smartphones in market. The demand of smartphones has been

increased by 26% compared to year 2013 (“Press Releases : Smartphone Demand

Remains High,” 2014). Most of the smartphones comes from China and Microsoft should

grab this opportunities by placing more Window’s smartphones to tap into this market.

 Cloud computing

The demand for cloud computing service has been expanding. Microsoft should

capitalize on the growing demand of this service in market by expand its capacity, speed

and range of cloud service

 Growth through alliance with Nokia

Having an alliance with Nokia can enhance the attractiveness of Microsoft’s portfolio. It

enhances the capabilities of file-sharing, sharing the know-how technology, and inclusion

of wide range of Lumia smartphones and tablets.

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  Mobile advertising

Mobile advertising market is keep growing. According to Miners (2015), two-third of

Facebook revenues comes from smartphones advertising. It is a good opportunity for

Microsoft to advertise their mobile by using this medium to create a greater awareness

among cutomer around the world.

Threats

 Intense competition

Microsoft business is highly diversified so they are facing intense competition from

different segments. To introduce a successful tablet and smartphones, Microsoft have to

compete with the Apple who already have strong brand reputation and Samsung who

offer a good features in phones with affordable price.

 Rapid development and innovation in mobile devices cause the PC market declines

Having a strong research and development activity is important to survive in this type of

business. To be able to compete with other competitor, Microsoft must continually

develop and innovate their product to meet the requirement of customers in market.

Failing to do so can cause Microsoft to lose the market share to other competitor.

 Changing of consumer behavior

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 Instead of buying a big personal computer and heavy laptop, customers choose to buy the

smartphones and tables which are more light and easy to carry anywhere. Microsoft

should not depend heavily on sales of Windows operating system and other personal

computer hardware products because the PC market is declining right now. Depends

heavily on this segment could harm the Microsoft performance in future.

 Open source nature

Google android operating system is one of the examples of open source that allowed the

customer to modified and alter the software. This is the reason why it becomes the main

choice of customer around the world. It is usually a free so it will becomes the threat to

the existence of Microsoft’s product and also makes their price uncompetitive.

 Competitor launched a new product

Apple launched iPhone 5S and sell it at discount prices just to win the market share

before other competitor launched a new product. Apple’s strategy could kill the potential

revenue before Microsoft is about to launched their new smartphones.

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8.2 TOWS Analysis
INTERNAL
FACTORS
EXTERNAL
FACTORS
OPPORTUNITY (O)
O1 The tablet market has be
booming
O2 Growing cloud
computing demand
O3 Smartphone growth
O4 Growth through alliance
with Nokia
O5 Mobile advertising
THREAT (T)
T1 Intense competitio n
T2 Rapid development and
Innovation in mobile devices
T3 Changing of customer
behavior
T4 Open source nature
T5 Competitor often
launched a new product
Table 8.2 : TOWS analysis of Microsoft Corporation
STRENGTH (S) WEAKNESSES (W)
S1 Brand loyalty and W1 Organizational structure
reputation is not satisfactory
S2 Strong revenue growth W2 Poor acquisition and
investment
S3 Strategic alliance with W3 High goodwill
phone and hardware company
S4 Acquisition of skype W4 Depends on hardware
manufacturer
S5 Diversified product W5 PC market is declining
portfolio
S6 Surplus cash for R&D W6 Operating loss from
purpose Onlne Service Divison
SO STRATEGY WO STRATEGY
 Increase the range of  Strengthen alliance with
service of cloud Nokia to sustain the
computing. mobile market.
(S2, S6,O2) dominance
Product development (W5 and O4)
 Increase awareness online Divest the online service
presence of all type of segment.
Microsoft’s product in (W7, O1 and O3)
market Divestation strategy
(S3,O5)
Market Penetration
ST STRATEGY WT STRATEGY
 Offer unique product that  Reduce poor investment
comes with the unique by conductiong properly
features and service to investigation.
retain the customer. (W2 and T2)
(S2 and T3, T5)
Differentiate strategy  By making Windows
application free inside the
phone and tablet.
(W4, T1 and T3)
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8.3 QSPM

STRATEGIC ALTERNATIVES
1 2 3
Product development Divest online By making Windows
of cloud computing service segments application free
service
Key External Factors Weight AS TAS AS TAS AS TAS
Opportunities
1. The tablet market has be booming 0.15 1 0.15 2 0.30 4 0.60
2. Growth in cloud computing demand 0.15 4 0.60 1 0.15 2 0.30
3. Smartphone growth 0.12 - - - - - -
4. Growth through alliance with Nokia 0.05 - - - - - -
5. Growing in mobile advertising market 0.10 1 0.10 2 0.20 4 0.40
Threats
1. Intense competition 0.10 2 0.20 3.00 0.30 4 0.40
2. Rapid development & innovation in mobile devices 0.08 - - - - - -
3. Changing of customer behavior 0.05 3 0.15 2 0.10 1 0.05
4. Open source nature 0.08 4 0.32 2 0.16 3 0.24
5. Competitor often launched a new product 0.12 - - - - - -
TOTAL 1.00

Strengths
1. Brand loyalty and reputation 0.14 - - - - - -
2. Strong revenue growth 0.12 3 0.36 2 0.24 1 0.12
3. Strategic alliance with phone and hardware company 0.11 - - - - - -
4. Acquisition of skype 0.04 - - - - - -
5. Diversified product portfolio 0.15 2 0.30 1.00 0.15 3 0.45
6. Surplus cash for R&D purpose 0.08 4 0.32 1.00 0.08 2 0.16
Weakness
1. Organizational structure is not satisfactory 0.03 - - - - - -
2. Poor acquisition and investment 0.06 2 0.12 3 0.18 1 0.06
3. High goodwill 0.05 - - - - - -
4. Depends on hardware manufacturer 0.04 - - - - - -
5. PC market is declining 0.10 3 0.30 1.00 0.10 2 0.20
6. Operating loss from Online Service Segment 0.08 1 0.08 4.00 0.32 2 0.16
TOTAL 1.00
TOTAL ATTRACTIVENESS SCORE 3.00 2.28 3.14

Table 8.3 : QSPM for Microsoft Corporation

Based on the result in QSPM techniques, the analysis indicates that Microsoft should making

Window application free with total attractiveness score of 3.14.

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9.0 RECOMMENDATION

Strategy 1 : By making Windows application free inside the phone and tablet

Based on WT Strategy in TOWS analysis and from QSPM analysis, I recommend that

Microsoft should make Windows application free inside the phone and tablet. Nowadays,

Android operating system from Google has got high popularity in the world. One of the

reasons why this product at a top choice is because Android operating system is free and they

allowed their customers to modified and distribute to anyone around the world. However,

user of Windows phone operating system may have to pay a small fee in order to use it. So

the momentum of Windows phone operating system is not achieved the expected growth

because of this reason. By making Windows operating system is free in market, it certainly

put pressure on Google to maintain their position as a leader in the smartphone marketplace.

Strategy 2 : Increase the performance of cloud computing service

Based on SO strategy in TOWS analysis, Microsoft should increase the performance of

cloud computing service. There is a good signal of the cloud computing service demand

where it continuous to growth in market. It seems that all size of business is looking to move

to a cloud service. As Microsoft shows a good performance result year by year, the cash

surplus should be used in research and development activity to enhance the performance of

cloud computing service. Microsoft Azure is a product based on the cloud computing service

from Microsoft. The main important aspect that any of company is looking is the speed,

RAM needed to run this program, cost per hour and security. Microsoft can conduct a

research and used the valuable information to improve their service if the speed is not stable

and if it consumes more RAM to run the program. Microsoft can obtain a competitive

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advantage if Microsoft Azure is able to lead a business to have more stable network and high

security compare to other competitor such as Amazon and Google.

Strategy 3 : Divest the online service segment.

Based on the WO strategy in TOWS analysis, I suggest that Microsoft should divest the

online service segment. This division contributes the less revenue to Microsoft and already

produces an operating loss for 3 years starting 2010 until 2012. Bing search engine and MSN

has become a huge burden for Microsoft for many years. Sometimes, Microsoft doesn’t need

to be a number one for the search engines but they still need to make a profit from this

segment. Obviously, google search engine is gaining more popularity compare to Bing

search engine. But with the continuous loss, Microsoft should divest the online service

segment to other and shift their focus more on the tablet and smartphone market.

Strategy 4 : Increase awareness online presence of all type of Microsoft’s product

Based on the SO strategy in TOWS analysis, I suggest that Microsoft should spend more on

the advertising to increase the customer awareness and influence purchase decision in future.

AdWords is one of the advertising platforms to increase the brand awareness of product.

Besides spending huge money on this platform, Microsoft should also consider to change

their approach like how Amazon can get an immediately return from their investment. The

approach that Microsoft should consider is by simply using target keyword, provide link

direct to Microsoft and be able to target every specific product. This is one way how

Microsoft can benefit from AdWords by every click lead to potential revenue from customer.

Besides AdWords, Facebook and Twitter also is one of the top social media websites that

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can be used to boost Microsoft brand awareness. Microsoft can use this channel as a way to

listening to customers and getting any feedback and critics related to their new and existing

product.

Strategy 5 : Offer unique product that comes with the unique features and service to

retain the customer

Based on the ST strategy in TOWS analysis, I recommend that Microsoft should offer a

unique product in market. Microsoft has been left behind especially in the mobile and tablet

market. Microsoft should invest heavily in research and development and coming out with

the unique features that could attract the attention of smartphone and tablet users. Microsoft

isn’t the only player in tablet segments because other competitor such as Asus and Lenovo

has their own tablet and set an attractive price for their product. To differentiate from others,

perhaps Microsoft could come out with the tablet that has better design, faster processor,

more memory and friendly Windows phone operating system. Microsoft should also

improve the performance because it seems that their current phone operating system have a

limited ability to run other application. This is how other customers will look at their product

as a rare and valuable.

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10.0 CONCLUSION

Based on the strategic management analysis on Microsoft Corporation, it can conclude that the

technological industries are never been easy to compete without huge cash for research and

development. Other competitor are trying to stole the market share by regularly come out with

new product and willing to sell at discount price only to be a leader in the market. Without

intensive research and development activity, it is impossible for Microsoft to come out with the

same product every year and keep losing to their competitor. Microsoft is struggling to retain

their market share and Apple has been leading almost in all areas. Other competitor also try to

put pressure on Microsoft by come out with highly competitive price with same quality and

produce almost similar operating system like Microsoft. If Microsoft set price higher than that,

Microsoft is seen as not a price competitive if they set a high price for their product. Microsoft

facing a slow market growth especially for Window phone and tablet but the current trends

shows that table and smartphone market are growing. The attractiveness of product is low so

customers become more sensitive on price as the Windows phone and tablet are not consider as

unique in market. Microsoft needs to make a drastic change. Microsoft made a lot of poor

acquisition and they should investigate more before making any decision to acquirer other

company in future.

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