MICROSOFT CORPORATION ORGANIZATIONAL

STRUCTURE: A Case Study

By: MYLAINE G. INDOC

Microsoft Corporation’s organizational structure enables the business to grow, especially

following the firm’s structural change implemented in 2015. A company’s corporate structure

refers to the anatomy and arrangement of the organization and its components. In Microsoft’s

case, the organizational structure stresses the importance of business output. As a dominant

player in the IBM PC-compatible operating system market, the company uses its structure to

maintain competitive advantage, in accordance to its strategies. The company’s long-term

success depends on the suitability of its corporate structure to market conditions and industry

forces.

Microsoft Corporation’s organizational structure reflects the needs of the computer

hardware and software business in response to market dynamics. A responsive organizational

structure ensures the company’s long-term success.

Features of Microsoft’s Corporate Structure

Microsoft Corporation has a  product type divisional organizational structure. This

structure involves divisions that are based on certain computer hardware and software products,

or organizational outputs. The following characteristics are significant in Microsoft’s

organizational structure:

1. Product type divisions (most dominant structural feature)

2. Global corporate groups

3. Geographic segments

Product Type Divisions. Product type divisions are the primary characteristic of Microsoft’s

organizational structure. In this characteristic, the company uses product or output as the main
 criterion for grouping personnel and related resources. For example, the organization has a self-

contained division for Intelligent Cloud products and separate divisions for other products. This

structural feature contributes to the company’s organizational capacity for product innovation.

The following are the product type divisions in Microsoft’s corporate structure:

1. Productivity and Business Processes

2. Intelligent Cloud
3. More Personal Computing
4. Corporate and Other

Global Corporate Groups. Global corporate groups are a secondary characteristic that defines

Microsoft’s organizational structure. These groups are based on the functions essential in the

computer technology business. For example, the Human Resources group addresses the

company’s workforce needs and related concerns. This structural characteristic ensures that the

organization functions as a whole. The global corporate groups comprise of Office of the CEO,

Worldwide Commercial Business, Marketing, Microsoft Global Sales, Marketing and Operations,

Corporate Strategy and Operations, Microsoft Cloud and Enterprise Group, Human Resources,

Finance, Business Development, Applications and Services Group, Windows and Devices Group,

Technology and Research, Legal.

1. Office of the CEO

2. Worldwide Commercial Business
3. Marketing
4. Microsoft Global Sales, Marketing and Operations
5. Corporate Strategy and Operations
6. Microsoft Cloud and Enterprise Group
7. Human Resources
8. Finance
9. Business Development
10. Applications and Services Group
11. Windows and Devices Group
12. Technology and Research
13. Legal

Geographic Segments. Microsoft Corporation’s corporate structure also involves geographic

segments as the least significant characteristic. Geographic segments are the least significant part

of Microsoft’s corporate structure and these are used to group operations in the company’s

financial reports. The geographic segments consist of the United States and International divisions.

The following are the geographic divisions in Microsoft’s organizational structure:

1. United States

2. International

The heads of engineering groups directly report to CEO Satya Nadella with an

emphasis on new product development initiatives and innovation potential. This has enabled

Microsoft to introduce new products and services to the marketplace in short duration of time.

Additionally, Microsoft has increased flexibility to adapt to changes in the external marketplace

since its organizational restructuring has eliminated bureaucracy in business processes and

procedures. Hence, Microsoft’s long-term success depends upon the suitability of its

corporate structure to market conditions and industry forces. Nevertheless, the company’s

organizational structure lacks consideration for regional market differences. Regions have different

preferences with regard to Microsoft’s hardware and software features.

Understanding Microsoft’s organizational structure

Microsoft has a product-type divisional organizational structure, with each division

focusing on a specific line of goods and services. Furthermore, each has a separate research and

development arm and dedicated sales and customer support staff.

 Since current CEO Satya Nadella was appointed in 2015, the company has undergone

several structural changes. Presently, Microsoft has two core engineering (product development)

divisions:

1. Cloud and Artificial Intelligence Platforms.

2. Experiences and Devices.

3. Artificial Intelligence and Research

Functional structure

Microsoft has a further seven functional divisions:

1. Business Development and Evangelism.

2. Finance.

3. Human Resources.

4. Legal and Corporate Affairs.

5. Engineering (operating systems, devices, studios, applications, services, and cloud and

enterprise units).

6. Dynamics.

7. Advanced Strategy and Research.

Despite each division having some autonomy, divisional heads must still report directly to

Nadella.

Microsoft organizational Structure is divided into divisions according to engineering

groups and business functions. Specifically, on the basis of engineering groups, the company is

divided into four divisions, whereas according to business functions it is divided into 9 divisions.

Microsoft’s Organizational Structure – Implications, Advantages & Disadvantages

The main implication of Microsoft Corporation’s organizational structure is the ability to

focus on product development. For example, the company uses its Intelligent Cloud division to

offer cutting-edge cloud computing services. A corresponding advantage of this corporate

structure is its contribution to the competitiveness of Microsoft’s products.

Advantages

 Streamlined innovation. With a product-based divisional structure, employees work on

projects that suit their skills and expertise. Supportive leadership with access to the CEO

gives product specialists the freedom and resources to innovate. This ties in nicely with

Microsoft’s core strategy of creating a family of integrated devices and services.

 Minimization of internal conflict. With little overlap in the scope of each division’s activities,

there is little chance for conflict over resources or skills. 

 Flexibility and responsiveness. Each division operates as a pseudo-entity, equipped with the

functions and resources necessary to accomplish its mission. As a whole, this makes the

divisional structure of Microsoft more adaptive. Divisions can be added, removed, or merged

as required and do not impact other units.

Disadvantages

 Incompatibility. The divisional structure has led to a scenario where Microsoft’s own
products were incompatible with each other. This occurred when the business software
division was unable to integrate Microsoft SharePoint with Windows Live.
 Minimal consideration for international markets. Microsoft has a sole geographic division for
the rest of the world sans the United States. It could be argued that a single geographic
division fails to capture the nuanced differences of regional markets.
 A disadvantage of the company’s organizational structure is its minimal consideration for

regional market differences. Regions have varying preferences with regard to Microsoft’s

computer hardware and software features, such as in the case of smartphones. Thus, a

recommendation is for the company to integrate regional market differences in its organizational

structural design.

Key takeaways:

 Microsoft has a product-based divisional organizational structure. The company has sought to

streamline product development over the years, with current CEO Satya Nadella creating just

two product divisions. These are Cloud and Artificial Intelligence Platforms and Experiences

and Devices.

 Microsoft has a further seven functional divisions, with each divisional head reporting

directly to Nadella.
 Microsoft’s divisional structure helps it streamline innovation and support a core strategy of

integrated products and services. Divisions also help the company operate as a collection of

flexible and adaptive entities with separate missions and access to resources.