FACULTY OF BUSINESS AND ACCOUNTANCY

NOVEMBER 2021 SEMESTER – SESSION 3/21/34

STRATEGIC MANAGEMENT
(PMS 3393)

Assignment 2

Company Name : Microsoft

Group :5
Lecturer : Madam Norjiah binti Muslim

Students details
Name Matric No. Program
1 Nurshazrina Shiela binti Adnan 4192007521 BHRM
2 Mohammad Rahmat bin Musa 4192008411 BHRM
3 Nur Izzatul Najwa binti Norzi Azwa 4192009631 BHRM
4 Asmira binti Abdul 4192006541 BHRM
5 Nurul Amanina binti Md Latiff 4192006211 BHRM

Submission date Score Remark

(Received)
 ASSIGNMENT 2
QUESTION:
You must use the same case study given for Assignment 1. You are required to do the external
and internal analysis of your company in Assign 1, further recommend strategies.
(90 marks)

RUBRIC DETAILS

CONTENT FULL
MARKS MARKS

1 THE INTERNAL AUDIT (CHAPTER 6) - CLO 2

Students will be able to analyze the external environment, internal resources and
capabilities to address the major issues faced by a specific organization.

i. Financial Studies
Income statement 3
Balance sheet 3
Ratio: calculation 6
Ratio: calculation - conclusion 4
ii. Internal Factors Evaluation (IFE) Matrix
IFE Table 6
2 Conclusions (2m x 2 conclusions) 4
2 THE EXTERNAL AUDIT (CHAPTER 7) – CLO 2
Students will be able to analyze the external environment, internal resources and
capabilities to address the major issues faced by a specific organization.

i. Competitive Profile Matrix (CPM)

Table 6
Conclusion 4

ii. External Factors Evaluation (EFE)

Matrix
Table 6

2 Conclusions (2m x 2 conclusions) 4

iii. Porter 5 Forces (Table)

 1 mark each for the correct H/L on both column 10
@ 5 forces = table 10 mark
TOTAL MARKS FOR CLO 2

3 STRATEGIC GENERATION AND SELECTION

(CHAPTER 8) – CLO 3
Students will be able to develop strategies to
address major issues in the organization
i. SWOT Matrix Analysis
2 SO strategies (1m x 2 strategies) 2
2 WO strategies (1m x 2 strategies) 2
2 ST strategies (1m x 2 strategies) 2
2 WT strategies (1m x 2 strategies) 2

ii. Strategic Position and Action Evaluation (SPACE)

Matrix

Calculations FP; SP; CP & IP (1m x 4 position) 4

Graph 2

Suggestion for strategies 2

iii. BCG Matrix

Table for each quadrant (1m x 4 quadrant) 4

Conclusions @ each quadrant (1m x 4 quadrant) 4

4 STRATEGY IMPLEMENTATION (CHAPTER 9) –

CLO 3
i. Major issue and recommendations. 10

TOTAL MARKS FOR CLO 3

TOTAL MARKS 90
 Table of Contents
Content Page
1 Introduction 1

2 Internal Studies
1.0 Financial Studies
1.0.1 Income statement 2
1.0.2 Balance sheet 3-4
1.0.3 Ration: Calculation 5-8
1.1 Internal Factor Evaluation (IFE) Matrix 9-11

3 External Studies

2.0 Competitive Profile Matrix (CPM) 12

2.1 External Factors Evaluation (EFE) Matrix 13-15
2.2 Porter 5 Forces (table) 16-17

4 Strategic Implementation and Choices

3.1 SWOT Analysis 18-21

3.2 Strategic Position and Action Evaluation (SPACE) Matrix 22-23
3.3 BCG Matrix 24-25

5 4.0 Major Issues and Recommendations 26-27

6 Strategic Execution

5.0 Recommend specific Annual objective and Policies 28

5.0.1 Annual objective
5.0.2 Policies
5.1 Revise the organization structure 29-30
5.2 Prepare the timetable or agenda or action 31-32
5.3 Conclusion 33
INTRODUCTION
Microsoft was founded by Bill Gates and Paul Allen in 1975. The company rose to dominate
the PC operating system market in the mid-1980s with their MS-DOS software. Microsoft went
public in 1986, creating three billionaires and 12,000 millionaires from employees. Microsoft
underwent a gradual rebranding of its product range throughout 2011 and 2012. Its logos,
products, 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. Microsoft underwent a gradual rebranding of its product
range throughout 2011 and 2012. Its logos, products, services, and websites adopted the
principles and concepts of the Metro design language. Microsoft is opening its own Microsoft
Stores across the USA to cope with potential increase in demand. To cope with the potential
increase in demand for products and services, Microsoft is slowly but surely opening its own
Microsoft Stores across the USA

1
 INTERNAL STUDIES
1.0 FINANCIAL STUDIES
1.0.1 INCOME STATEMENT
Forecasted Income Statement and Balance Sheet

Microsoft’s Income Statements (in millions)

2012 2011 Changes Trends

(%)
Revenue 73,723 69,943 5.42 Increase
Other Revenue, Total 0 0 - -
Total Revenue 73,723 69,943 5.42 Increase
Cost of Revenue, Total 17,530 15,577 12.54 Increase
Gross Profit 56,193 54,366 3.36 Increase
Selling/General/Administrative Expenses, 18,426 18,162 1.45 Increase
Total Research and Development 9,811 9,043 8.49 Increase
Depreciation and Amortization 0 0 - -
Interest Expense (Income), Net Operating 0 0 - -
Unusual Expense (Income) 5,895 -80 72.69 Increase
Other Operating Expenses, Total 0 0 - -
Operating Income 22,061 27,241 -19.00 Decrease
Interest Income (Expense), 0 0 - -
Gain (Loss) on Sale of Assets 0 0 - -
Other, Net 1 -31 1.03 Increase
Income Before Tax 22,267 28,071 -20.6 Decrease
Income Tax, Total 5,289 4,921 7.48 Increase
Income After Tax 16,978 23,150 -26.67 Decrease
Minority Interest 0 0 - -
Equity in Affiliates 0 0 - -
U.S. GAAP Adjustment 0 0 - -
Net Income Before Extraordinary Items 16,978 23,150 -26.67 Decrease
Total Extraordinary Items 0 0 - -
Net Income 16,978 23,150 -26.67 Decrease
Total Adjustments to Net Income 0 0 - -
Basic Weighted Average Shares 8,396 8,490 -1.11 Decrease
Basic EPS Excluding Extraordinary Items 2.02 2.73 -26.01 Decrease
Basic EPS Including Extraordinary Item` 2.02 2.73 -26.01 Decrease

2
 1.0.2 BALANCE SHEET
Microsoft Balance Sheet (in millions)

2012 2011 Changes Trends

(%)
Assets
Cash and Short-Term Investments 63,040 52,772 19.46 Increase
Total Receivables, Net 15,780 14,987 5.29 Increase
Total Inventory 1,137 1,372 -17.13 Decrease
Prepaid Expenses 0 0 - -
Other Current Assets, Total 5,127 5,787 -11.40 Decrease
Total Current Assets 85,084 74,918 13.57 Increase
Property, Plant, and Equipment 8,269 8,162 1.21 Increase
Goodwill, Net 13,452 12,581 6.92 Increase
Intangibles, Net 3,170 744 3.2 Increase
Long-Term Investments 9,776 10,865 -10.02 Decrease
Note Receivable, Long Term 0 0 - -
Other Long-Term Assets, Total 1,520. 1,434 6.00 Increase
Other Assets, Total 0 0 - -
Total Assets 121,271.0 108,704.0 11.56 Increase

Liabilities and Shareholders’ Equity

Accounts Payable 4,175 4,197 -5.24 Decrease
Payable/Accrued 0 0 - -
Accrued Expenses 3,875 3,575 8.39 Increase
Notes Payable and Short-Term Debt 0 0 - -
Portability Long-Term Debt Capital Leases 1,231 0 100 Increase
Other Current Liabilities, Total 23,407 21,002 11.45 Increase
Total Current Liabilities 32,688 28,774 13.60 Increase
Total Long-Term Debt 10,713.0 11,921 -10.13 Decrease
Deferred Income Tax 1,893 1,456 30.01 Increase
Minority Interest 0 0 - -
Other Liabilities, Total 9,614 9,470 1.52 Increase
Total Liabilities 54,908 51,621 6.37 Increase
Redeemable Preferred Stock 0 0 - -
Preferred Stock, Nonredeemable, Net 0 0 - -
Common Stock 65,797 63,415 3.76 Increase
Additional Paid-In Capital 0 0 - -
Retained Earnings (Accumulated Deficit) –856 –8,195 -89.55 Decrease
Treasury Stock, Common 0 0 - -
ESOP Debt Guarantee 0 0 - -

3
Unrealized Gain (Loss) 1,523 1,658 -8.14 Decrease
Other Equity, Total –101 205 -1.49 Decrease

Total Equity 66,363 57,083 16.25 Increase

Total Liabilities and Shareholders’ Equity 121,271 108,704 11.56 Increase

4
 1.0.3 RATIO: CALCULATION

Ratio 2012 2011 Conclusion

A. Liquidity Ratios

1. Current ratio =
Total Current Asset / 85,084 / 74,918/ The current ratio is increase
Total Current 32,668 28,774 from 2.60 in year 2011 to 2.61
Liabilities = 2.61 = 2.60 in year 2012. Microsoft can
pay the liabilities more
efficient.

The quick ratio is increase

2. Quick ratio = 85,084 - 1,137.0 – 0 74,918 - 1,372 – from 2.55 in year 2011 to 2.57
Current Asset – / 32,668.0 0 / 28,774 in year 2012. Is means that
Inventory – Prepayment = 2.57 = 2.55 Microsoft are more faster in
/ paying the liabilities
Current Liabilities

B. Leverage ratio

1. Debt to Asset ratio =

Total Debts / 54,908 / 51,621/ Microsoft debts has decrease
Total Assets 121,271 108,704 to 45% in 2012 compared to
= 0.45 = 0.47 the 47% in year 2011.

2. Debt to Equity ratio =

Total debts / 54,908 / 51,621/ The debt to equity ratio of
Total equity 66,363 57,083 Microsoft is decrease from
= 0.83 = 0.90 0.90 in year 2011 to 0.83 in
year 2012 which show that
Microsoft are using the debts
efficiently.

3. Long Term Debt to

Equity ratio =
Total long term debts / 10,713 / 11,921/ The long-term debt to equity
Total equity 66,363 57,083 ratio is decrease from 0.21 to
= 0.16 = 0.21 0.16 in year of 2011 and 2012
and this help to lower risks.

5
C. Activity Ratio
The inventory turnover ratio is
1. Inventory Turnover = decrease from 0.93 in year
Sales / Inventory of 73,723 / 69,943/ 2011 to 0.87 in year 2012. This
finished goods 85,084 74,918 indicates that Microsoft
= 0.87 = 0.93 changes the inventory is
slower.

2. Fixed Asset Turnover The fixed assets turnover ratio

= 73,723 / 69,943/ is decrease to 2.04 in year
Sales / Fixed Asset 36,187 33,786 2012 compared to 2.07 in year
= 2.04 =2.07 2011. This means that
Microsoft fixed assets is
unstable.

3. Total Asset Turnover The Microsoft total asset

= 73,523 / 69,943/ turnover is decrease from 0.64
Sales / Total Assets 121,271 108,704 in year 2011 to 0.61 in year
= 0.61 = 0.64 2012. That’s mean Microsoft
are generates more income
from the assets.

Financial Ratio Calculation

4. Account Receivable The account receivable

Turnover ratio = turnover ratio is decrease in
Annual Credit Sales / 73, 723 / 69,943/ year 2012 (4.671) compared
Account Receivable 15,780 14,987 to year 2011 (4.667). The
= 4.671 = 4.667 Microsoft account receivable
pay more slowly.

5. Average collection Microsoft has to use up to 78

period = days to collect the payments
Account Receivable / Total 15,780 / 14,987/ from the account receivables.
credit sales x 365 73,723 x 365 69,943 x 365
= 78 days = 78 days

D. Profitability ratio The Microsoft gross profit

margin is decrease in year
1. Gross profit margin = 2012 of 0.76 compared to
Sales - Cost of good sales / year 2011 of 0.78 as the cost
sales 73,723 – 69,943- of the marketing is not being
17, 530 / 15,577/ managed efficiently.
73,723 69,943
= 0.76 = 0.78

6
2. Operating profit margin Microsoft operating profit
= 22,267 / 28,071/ margin is decrease from 0.40
EBIT/ Sales 73,723 69,943 in year 2011 to 0.30 in year
= 0.30 = 0.40 2012 due to inefficient cost
managements.

3. Net profit margin = The net profit margin

Net income / Sales 16,978 / 23,150/ decrease year 2012 of 0.23
73,723 69,943 compared to year 2011 of
= 0.23 = 0.33 0.33 due to the decrease of
the Microsoft net profit.

4. Return on Total Asset = Return on total asset is

Net income / Total asset 16,978 / 23,150/ decrease from 0.21 in year
121,271 108,704 2011 to 0.14 in year 2012 due
= 0.14 = 0.21 to the high total
administrative expenses.

5. Return on Equity = The Microsoft return on

Net income / Total equity 16,978 / 23,150/ equity is decrease in year
66,363 57,083 2012 (0.26) compared to year
= 0.26 = 0.41 2011 (0.41) due to inefficient
capital management.

6. Earnings Per Share ratio The earnings per share of

= Microsoft is increase from
Retained Earnings / –856.0 / –8,195 / 1.29 in year 2011 to 1.51 in
Number of shares (65,797 – (63,415- year 2012. Its means that
66,363) 57,083) Microsoft has no difficulty in
= 1.51 = 1.29 pay the dividends to the
investor.

7. Price Earnings Ratio = The share price is decrease

Market price per share / from 2.12 in year 2011 to 1.34
Earnings per share 2.02 / 1.51 2.73 / 1.29 in year 2012. Microsoft need
= 1.34 = 2.12 to develop a new plan to
increase its shares market’s
price.

Growth Ratios Microsoft percentage growth

in total sales from year 2011
1. Sales 73,720 – 69,943 to 2012 is increasing by 5.40%
Annual percentage growth = 3,777
in total sales

7
 3,777 / 69,943 x
100
= 5.40%
2. Net income 16,978 – 23,150 Microsoft percentage growth
Annual percentage growth = -6,172 in profit is decreased by -
in profit -6,172 / 23,150 26.66% from year 2011 to
= -26.66 2012.

3. Earnings per share 2.02 – 2.73 Microsoft percentage growth

Annual percentage growth = -0.71 in EPS was decrease by -
in EPS -0.71 / 2.73 x 100 26.01% from year 2011 to
= -26.01 year 2012.

4. Annual percentage 0.23 – 0.20 Microsoft percentage growth

growth in dividends per = 0.03 in dividends per share from
share 0.03 / 0.20 x 100 year 2011 to year 2012 is
= 15.00% increase by 15%

8
1.1 INTERNAL FACTOR EVALUATION (IFE) MATRIX

NO STRENGTH WEIGHT RATING WEIGHT

SCORE
1. Microsoft develops a variety of software 0.10 3 0.3
product and service for customer around
the world, including a window office,
window 8, operating system for personal
computer (PC & Others).

2. The window division received 0.12 4 0.48

approximately 75% of its revenue coming
from equipment manufacturers such as
Dell, Sony, Toshiba, and others reinstalling
window and their machines for customer.

3. Revenue increase by 12% in the division 0.07 1 0.07

mainly attributed to growth in the SQL and
window server.

4. In the fiscal year, Microsoft’s advertising 0.11 2 0.22

and online advertising revenues grew 13
percent to $2.6 billion.

5. Microsoft’s Server and Tools Division is 0.10 3 0.3

Microsoft’s third most profitable division,
producing name brand products such as
Windows Server, Microsoft SQL,
Windows Azure, Visual Studio, Enterprise
Services, and others.

9
 NO WEAKNESS WEIGHT RATING WEIGHT
SCORE
1. Microsoft has a history of using poor 0.07 1 0.07
judgement in acquisitions as indicate by
the company good will being more than
$13 Billion.

2. Sales of Microsoft surface tablet are not 0.10 2 0.2

good, analyse expect the company to set
between 500,000 and 600,000 surface
tablets in their second quarter of fiscal
2013 much lower than the company’s
original estimate of 1 to 2 million.

3. With skype purchase price of $8.5 0.10 1 0.1

Billion, Microsoft is essence paying
around $1000 for each customer who is
worth it around $30 each.

4. Microsoft operations has the lowest 0.11 2 0.22

Earning per Share than the other rivals
which is Google, Apple and Oracle.

5. Microsoft in early 2013 introduced its 0.12 2 0.24

new Office 365 product, a subscription
service for $99.99 or $9.99 per month
pay-as-you-go option.

TOTAL 1.00 2.20

10
Weigh mean: 0.0 = least important, 1.0 = most important
Rating mean: 1 = the response is poor, 2 = response is average, 3 = response is above average,
and 4 = the response is superior

Conclusion:

1. Regardless of the number of components included in the IFE Matrix, the overall
weighted score might range from 1.0 to 4.0. A total weighted score of less than 2.5 indicates
that the organisation is weak internally, whereas a score of more than 2.5 indicates that the
organisation is strong internally.

In order to conclude this internal factor evaluation (IFE) above, the weight core on the
matrix shown the total is 2.2 which indicate that Microsoft organization are weak internally
because the total state below 2.5.

2. IFE = TWSS + TWSW

= 1.37 + 0.83

= 2.20

TWSS = 2.20

TWSW 0.83

= 2.65 > 1

11
 EXTERNAL STUDIES

2.0 COMPETITIVE PROFILE MATRIX (CPM)

Critical Success Microsoft Apple Google

Factor

(weight) Score Rating Score Rating Score Rating

3 0.54 3 0.54 4 0.72

Advertising

0.18

2 0.3 4 0.6 4 0.6

Global Expansion

0.15

2 0.32 4 0.64 4 0.64

Customer Loyalty

0.16

4 0.72 4 0.72 4 0.72

Financial Profit

0.18

2 0.34 4 0.68 4 0.68

R&D

0.17

4 0.64 4 0.64 4 0.64

Product Quality

0.16

12
2.1 EXTERNAL FACTORS EVALUATION (EFE) MATRIX
EXTERNAL FACTOR EVALUATION (EFE)
No Opportunities Weight Rating Weighted
Score
1. In 2012, China surpassed the USA as the 0.12 4 0.48
world’s largest smartphone market, yet there are
millions of untapped customers remaining in
China.
2. Nevertheless, cloud service are expected to 0.10 3 0.3
yield revenues of $100 billion in 2016, up from
$40 billion in 2011.
3. Cloud computing, supplying computing 0.11 4 0.44
services via the internet without having to use
hardware or platform support.
4. Microsoft is developing technologies that 0.07 2 0.14
increasingly enable touch screen and voice to be
more readily understood by PCs, tablets and
phone.
5. Smartphone shipments have risen dramatically 0.10 3 0.3
since 2005 from 50 million phones shipped
worldwide to more than 650 million phones
shipped in 2012.

13
 No Threats Weight Rating Weighted
Score
1. Aside from traditional phone providers, 0.12 3 0.36
companies such as Apple, Google, Dell, and
others are all continually offering new products
and features to differentiate their handsets.
2. Also, as the tablet’s video gaming experience 0.11 2 0.11
increase and closer to the experience on an
Xbox, PlayStation, or Nintendo’s market share
for traditional gaming consoles may decline.
3. Technology is changing so rapidly every day 0.10 2 0.20
and new rival firms arising globally in the
industry.
4. Cloud computing offers less security, and 0.07 1 0.07
increased dependability on a third-party vender
such as Google to continually provide the
service at an appropriate network speed.
5. Millions of consumers globally are skipping 0.10 1 0.1
over PCs altogether and going straight to
mobile devices.
TOTAL
GRAND TOTAL 1.00 2.5
Weights mean: 0.0 = least important, 1.0 = most important
Rating mean: 1 = the response is poor, 2 = response is average, 3 = response is above average
and 4 = the response is superior.

14
Conclusion

An external factors evaluation model is based upon the external audit and evaluates key
external factors that effect a firm and also studies how well a firm respond to these factor. In
our evaluation of Microsoft we found the following factors that affect Microsoft industry,
having a high effect on Microsoft.

Based on the weight assigned it can be concluded that the growth of technology and the ever
growing competition are perhaps the most important factors and having a high effect on
Microsoft.

Total weighted score of 2.5 is above average (midpoint) of 2.5, so that this Microsoft business
has been able to manipulate the opportunities and have been able to counter threats and is doing
rather well but its business isn’t still great. In example, Since the development of cloud services
continues to expand and the technology is quickly growing, the key driver is the need to remain
competitive in the market by capitalising on possibilities from the outside environment.

Microsoft is facing a challenge from competitors, with new rival firms emerging abroad. In
contrast, millions of customers throughout the world are abandoning PCs in favour of mobile
devices. The most significant influence for Microsoft is the competitiveness of the smart phone
among competitors.

15
 2.2 PORTER 5 FORCES

Porter 5 Strategic Reasons Industry

Forces Significant Profitability
High/Low
Rivalry Strong -Large numbers of competitors. Across Microsoft’s High
among various markets, there are a plethora of competitors.
Competing With tech powerhouses such as Google, Amazon,
firms Apple, Facebook, and Microsoft all of them need to
compete to get stay in the industry

-Rate of growth of the industry. Some products are

easier to switch between than others, but, for the most
part, the cost of switching isn’t too high, so companies
must continuously put in effort to keep their grasp on
customers
Potential Moderate -many operating systems have been created, most don’t Low
Entry of New have the users or previous knowledge like Apple or
Suppliers Microsoft to make a dent in the operating systems
market, so threat of new entrants is low in that regard

-the threat of new entrants is low for Microsoft across

its various markets because of its brand, users, and
enterprise experience.
Potential Low - There are no direct substitutes. Microsoft's product High
Development line includes operating systems for computers, servers,
of Substitutes phones, and other intelligent devices; server
Product applications for distributed computing environments;
productivity applications; business solution
applications; desktop and server management tools;
software development tools; video games; and online
advertising. In addition, the company designs and sells
hardware such as PCs, tablets, gaming and

16
 entertainment consoles, phones, other intelligent
devices, and related accessories.

- Buyers have a low proclivity to substitute. The buyer

proclivity to choose substitute products or services to
Microsoft's products and services is low. This is due to
Microsoft's mission of "empowering every person and
every organisation on the planet to achieve more."
Microsoft products and services are extremely easy to
use.
Bargaining Low - suppliers hold low to moderate power in this industry. Low
Power of -Microsoft’s line of personal computers and gaming
Suppliers consoles may require specific materials, which some
could say gives the supplier a bit more power
-Pegatron wouldn’t make any moves to jeopardize its
relationship with Microsoft when the cost of switching
suppliers is low

Bargaining Moderate - Customers are likely to opt out of a company's Low

Power of services if other services offer a better value.
Buyers Customers prefer Microsoft over Google if they require
a cloud services platform with more enterprise
experience. However, if customers require
a cloud services platform with industry-leading
artificial intelligence or data analytics tools
analytics, they would almost certainly prefer Google
("AWS vs. Azure vs. Google)
- information about the industry's products and services
is easily accessible online, buyers can easily compare
competitors and determine which would provide them
with the best value.

17
 STRATEGIC IMPLEMENTATION AND CHOICES
3.0 SWOT MATRIX ANALYSIS
Strengths
1. Microsoft develops a variety of software
and hardware products and services for
customers around the world, including its
Windows Office, Windows 8 operating
system for personal computers (PCs) and
others.
2. The Windows Division receives
approximately 75 percent of its revenue
from the Windows operating system, with
the bulk of this revenue coming from
equipment manufacturers such as Dell,
Sony, Toshiba, and others pre-installing
Windows on their machines for customers.
3. Revenues increased by 12 percent in the
division mainly attributed to growth in the
SQL and Windows server.
18
Weakness
1. Microsoft has a history of using poor
judgments in acquisitions, as indicated by
the company’s goodwill being more than
$13 billion.
2. Sales of Microsoft’s Surface tablet are not
good; analysts expect the company to sell
between 500,000 and 600,000 Surface
tablets in their second quarter of fiscal
2013, much lower than the company’s
original estimate of 1 to 2 million.
3. With Skype purchase price of $8.5 billion,
MS is essence paying around $1000 for
each customer who is worth around $30
each.
4. Microsoft operations has the lowest
Earning per Share than the other rivals
which is Google, Apple and Oracle.
 4. In the fiscal year, Microsoft’s advertising 5. Microsoft net income decrease by 26.67%
and online advertising revenues grew 13 in year 2012, based on its financial
percent to $2.6 billion. statement.
5. Microsoft’s Server and Tools Division is
Microsoft’s third most profitable division
producing name brand products such as
Windows Server, Microsoft SQL,
Windows Azure, Visual Studio, Enterprise
Services, and others.

Opportunities SO Strategies WO Strategies

1. In 2012, China surpassed the USA as 1. Invest 10% of the revenue to open new branch 1. Develop new marketing strategies ( W1, W2,
the world’s largest smartphone at China to create new brand market ( S3, S4, W3, O1 )
market, yet there are millions of S5, O1 )
untapped customers remaining in 2. Offer stock in the market and update the
China. 2. Invest also 10% of the revenue for R&D in business policies ( W4, W5, O2, O4, O5 )
2. Nevertheless, cloud service are developing the cloud computing system and
expected to yield revenues of $100 the other technology ( S1, O2, O3, O4 )
billion in 2016, up from $40 billion in
2011.

19
3. Cloud computing, supplying
computing services via the internet
without having to use hardware or
platform support.
4. Microsoft is developing technologies
that increasingly enable touch screen
and voice to be more readily
understood by PCs, tablets and phone.
5. Smartphone shipments have risen
dramatically since 2005 from 50
million phones shipped worldwide to
more than 650 million phones shipped
in 2012.
Threats ST Strategies WT Strategies

1. Aside from traditional phone 1. Develop new products that satisfy the needs 1. Do market analysis and product quality
providers, companies such as Apple, and the wants of the customers ( S1, T1, T3, assurance (W2, T1, T3, T4, T5 )
Google, Dell, and others are all T5 ) 2. Close any segments that not contribute much
continually offering new products and 2. Cooperate or do joint venture with the others to the income and the revenue (W4, W5, T1,
features to differentiate their handsets. competitors which has a high potential to T2, T3, T5 )

20
2. Also, as the tablet’s video gaming create the best products in the market ( S2, T2,
experience increase and closer to the T4 )
experience on an Xbox, PlayStation,
or Nintendo’s market share for
traditional gaming consoles may
decline.
3. Technology is changing so rapidly
every day and new rival firms arising
globally in the industry.
4. Cloud computing offers less security,
and increased dependability on a
third-party vender such as Google to
continually provide the service at an
appropriate network speed.
5. Millions of consumers globally are
skipping over PCs altogether and
going straight to mobile devices.

21
3.1 STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
1. SPACE Matrix of Microsoft Corp.

Internal Strategic Position External Strategic Position

Financial Position
Return on investment
Working capital
Earnings per share
Cash flow
Liquidity
Stability Position
3 Price range between competitor -5
4 Risk involved in the business -2
3 Barriers to entry the market -2
5 Demands variability -4
6 Technology changes -2

Total 21/5 Total -15/5

= 4.2 = -3
Competitive Position Industry Position
Product quality -3 Growth potential 6
Customer loyalty -3 Profit potential 5
Control over supplier -4 Resources utilization 4
Product life cycle -2 Ease of entry into market 5
Capacity utilization -2 Financial Stability 4

Total -14/5 Total 24/5

= -2.8 = 4.8

Formula of rating for FP and IP = +1 (Worst) and +7 (Best)

Formula of rating for SP and CP = -1 (Best) and -7 (Worst)

2. Plotting

Y axis = FP +SP
= 4.2 + (-3)
= 1.2
X axis = IP + CP
= 4.8 + (-2.8)
=2

22
3.

FP

*
1

0
CP -1 -2 -3 -4 -5 -6 -7 1 2 3 4 5 6 7 IP
-1

-2

-3

-4

-5

-6

-7

23
3.2 BCG MATRIX
RELATIVE MARKET SHARE POSITION IN MICROSOFT

High 1.0 Medium 0.50 Low 0.0

+20

2) 28% 5) 1%

4) 59%
0 3) (-30%)

1) 43%
-20

DIVISION REVENUES PERCENT PROFITS PERCENT RELATIVE INDUSTRY

REVENUES PROFITS MARKET GROWTH
SHARE RATE
(%)
1 18,373 25 11,460 43 0.86 -13
2 18,868 25 7,431 28 0.56 +13
3 2,867 4 -8,121 -30 -0.60 +8
4 23,991 33 15,719 59 1.18 +7
5 9,593 13 364 1 0.02 +20
TOTAL 73,510 100 26,853 101 2.02 61

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Conclusion

The BCG Matrix does show if different divisions or Microsoft are growing over time.
According to the BCG Matrix, the first division, Windows, represents the cash cow in Quadrant
III, which is located at the lower left. This demonstrates that the Windows division generates
cash in excess of their needs, and that the cash cow was frequently milked. Cash cow divisions
should be managed so that they can maintain their dominance for as long as possible. Product
development or diversification may be appealing strategies for companies with large cash
reserves. However, as a cash cow division's performance deteriorates, retrenchment or
divestiture may be more appropriate.

The second division, Server and Tools, is located in Quadrant I (upper left) and represents the
organization's best long-run opportunities for growth and profitability, and is thus referred to
as stars. Divisions with a high relative market share and a rapid rate of industry growth should
receive significant investment to maintain or strengthen their dominant positions. These
divisions should consider strategies such as forward, backward, and horizontal integration,
market penetration, market development, and product development.

The third division, known as Online Services, is plotted at Quadrant I (upper right) and
corresponds to the Question Marks quadrant. Divisions in Quadrant I (upper right) compete in
a high-growth industry despite having a low relative market share position. In general,
Microsoft firms' cash requirements are high, while their cash generation is low. These
companies are referred to as "question marks" because the organisation must decide whether
to strengthen them through an intensive strategy (market penetration, market development, or
product development) or to sell them.

Furthermore, according to the BCG Matrix, the fourth division, Microsoft Business, is located
in Quadrant II, while the second division, Server and Tools, reflects the Stars. The strategies
that should be used in this division are the same as those used in the second division, which are
forward, backward, and horizontal integration; market penetration; market development; and
product development.

The final division is Entertainment and Devices. This division was plotted in Quadrant I, along
with the third division, which is online services, and both divisions reflect question marks in
the BCG Matrix. This division's appropriate strategies include (market penetration, market
development, or product development) or selling them.

25
 4.0 MAJOR ISSUE AND RECOMMENDATIONS
MAJOR ISSUE LEVEL OF
STRATEGY
Microsoft has a history of using poor Corporate level
judgments in acquisitions, as indicated
by the company’s goodwill being more
than $13 billion.
Technology is changing so rapidly Corporate level
every day and new rival firms arising
globally in the industry.
Cloud computing offers less security, Functional level
and increased dependability on a third-
party vender such as Google to
continually provide the service at an
appropriate network speed.
Sales of Microsoft surface tablet are not Functional level
good, analyse expect the company to set
between 500,000 and 600,000 surface
tablets in their second quarter of fiscal
2013 much lower than the company’s
original estimate of 1 to 2 million.
Functional level
26
RECOMMENDATION
Integration strategies
Horizontal integration-
A strategy of seeking ownership of
or increased control over a firms
competitor. Cooperate or do joint
venture with the others competitors
which has a high potential to create
the best products in the market
Intensive strategies
Market development -
Invest 10% of the revenue to open
new branch at China to create new
brand market
Intensive strategies
Product development-
Invest 10% of the revenue for R&D
in developing the cloud computing
system and the other technology.
Intensive strategies
Market penetration-
Introduction of new product increase
15% advertising. Increase market
share for existing items or services
in current markets through increased
marketing activities.
Intensive strategies
Aside from traditional phone providers, Market development-
companies such as Apple, Google, Dell, Microsoft needs to improve product
and others are all continually offering features and intensify its hardware
new products and features to development efforts to ensure
differentiate their handsets competitiveness with budget 10%
R&D.

27
 STRATEGIC EXECUTION

5.0 RECOMMEND SPECIFIC ANNUAL OBJECTIVE AND POLICIES

ANNUAL OBJECTIVES

i. Developed and provided the right options for customers by working as One Microsoft
ii. Microsoft's board of directors works collaboratively through Microsoft to monitor
ecological sustainability and corporate social responsibility.
iii. Microsoft combines technology and products to create experiences and solutions that
add value to customers' lives.
iv. Significant features of Microsoft's organizational structure include divisions based on
specific and software products or organisational outputs such as product type
divisions, global corporate groups, and geographic segments.

ANNUAL POLICIES

a) Equal Employment Opportunity (EEO) Policy

i. Workplace is free from discrimination.

ii. Provide appropriate accommodation for eligible workers.

b) Corporate governance structure

i. Assure the Board will have the authority and practices to review and evaluate the
company’s business operations and make decisions independent of the company’s
name.

28
5.1 REVISE THE ORGANIZATION STRUCTURE

According to some researchers, executive titles should be more efficiently labelled. Some
observers, for example, are unsure about the distinction between the president of Microsoft
Corp. and the president of Microsoft Business. The organisation does not indicate where
Microsoft Phone, Microsoft Tablet, and Microsoft Stores report. These points should
preferably be made apparent in executive titles. A strategic business unit (SBU) structure could
be more efficient.

29
MICROSOFT ORGANIZATION CHART

Account
Officer
MANAGER
(Accounts & Finance
Finance) Officer

Office Staff

Import Items
MANAGER
Local Items
(Procurement)
Office Staff

HR Officer
MANAGER
(HR & Admin Officer
Admin)
Office Staff

MANAGER Incharge
(Material Stores
planning &
Stores) Store Keeper

MKT.
Director Engineer
Operations MANAGER
Chief (Marketing & Prop. Engineer
Executive Proposal)
General
Manager Office Staff

Design
MANAGER Engineer
(Design &
Drafting) Draftsman

Prod. Engineer
MV
Prod. Engineer
LV
MANAGER Prod. Engineer
(Production) Hvac
Supervisor
Staff

Workers

Testing & QC
engineer
MANAGER
(Testing & Testing
quality supervisor
control)
QC supervisor

Services
Engineer
MANAGER
(After Sales & Field Staff
Services)
Office Staff

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5.2 PREPARE THE TIMETABLE OR AGENDA OR ACTION.
1. Research and development

Months Jan February March

Activities
Develop new products that satisfy the needs and
the wants of the customers.
Developing the cloud computing system and
the other technology
Revise product and new feature

2. Financial Department

Months Jan February March

Activities
Invest 10% of the revenue to open new branch
at China to create new brand market.
Invest also 10% of the revenue for R&D in
developing the cloud computing system and the
other technology
Close any segments that not contribute much to
the income and the revenue

31
3. Human Resource Department

Months Jan February March

Activities
Cooperate or do joint venture with the others
competitors which has a high potential to create
the best products in the market
Set a new policies in implement new strategy to
all level employees.
Training and development, Microsoft provide a
training programme that teaches the technical
and interpersonal skills needed to do the job for
middle and down level employee to be more
productive and effective in monitoring their job
role.

4. Marketing Department

Months Jan February March

Activities
Develop new marketing strategies

Do market analysis and product quality

assurance.
Offer stock in the market and update the
business policies

32
5.3 CONCLUSION
In conclusion, Microsoft has announced a new "One Microsoft" strategy and major restructure
aimed at ensuring that the way its various products and services are developed and marketed
becomes more reflective of how people use various types of technology in their daily lives as
it seeks to compete with rivals such as Apple and Google. Microsoft creates a wide range of
software and hardware products and services for customers all over the world, including
Windows Office and the Windows 8 operating system for personal computers (PCs). Microsoft
offers a variety of cost-cutting solutions, including interoperability, data governance, and data
integration solutions. Process automation is critical in today's businesses. Automation
simplifies work, shortens the production cycle, and increases speed. After that, Microsoft
Corporation's marketing plan generates a competitive advantage while allowing the company
to maintain a broad market scope. Market penetration, on the other hand, is used as the primary
intensive growth strategy to support Microsoft's growth in a highly competitive global
computer hardware and software market. Microsoft needs to develop new marketing strategies
because with a purchase price of $8.5 billion, Microsoft is effectively paying around $1000 for
each customer who is worth around $30 each. Sales of Microsoft's Surface tablet are not good.
Analysts expect the company to sell between 500,000 and 600,000 Surface tablets in its second
quarter of fiscal 2013.

Aside from that, Microsoft should issue stock and update its business policies. Because
Microsoft's operations have the lowest earnings per share than their rivals, which are Google,
Apple, and Oracle. Based on its financial statement, net income decreased by 26.67% in 2012.
The cloud service is expected to yield revenues of $100 billion in 2016, up from $40 billion in
2011. Also, Microsoft is developing technologies that increasingly enable touch screens and
voice to be more readily understood by PCs, tablets, and phones.

After that, it is all financial. A financial plan serves as a road map for the journey of
life. Essentially, it assists you in controlling your income, expenses, and investments so that
you can manage your money and achieve your goals. As a result, Microsoft should invest 10%
of its revenue in opening a new branch in China in order to create a new brand market.
Microsoft's Server and Tools Division is the company's third-most profitable division,
producing name-brand products such as Windows Server, Microsoft SQL, Visual Studio,
Enterprise Services, and others. In 2012, China surpassed the USA as the world's largest
smartphone market, yet there are millions of untapped customers remaining in China. Lastly,

33
34 Microsoft also needs to look at its R & D. Research and development are important for
businesses because they provide powerful knowledge and insights that lead to improvements
in existing processes where efficiency can be increased and costs can be reduced. It also allows
businesses to develop new products and services that will allow them to survive and thrive in
competitive markets

34