STRATEGIC ANALYSIS REPORT OF MICROSOFT

CORPORATION

SUBMITTED TO:
Sir Dr. Shahid Tufail
SUBMITTED BY:

MUHAMMAD USMAN 20134

UMAIR JAFFAR 20133
SHAHEEN NAWAZ 20115

MBA 7TH (MORNING)

GOVERNMENT COLLEGE UNIVERSITY FAISALABAD
Acknowledgement

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All praise to ALMIGHTY ALLAH alone, the omnipresent and the most merciful
and compassionate. The words are bound, knowledge is limited and time is short to
express His dignity. It is one of infinite blessings of ALLAH that he bestowed me
with the potential and ability to contribution towards the deep oceans of knowledge
already existing. I pay hum-age to greatest personality of the universe; HOLY
PROPHET HAZARAT MUHAMMAD (PBUH) who is forever torch bearer and
spring of guidance in every sphere of life. I am deeply indebted and also express my
gratitude to my respected teacher SIR DR.SHAHID TUFAIL for his support. Last,
but not least we are thankful to all the mates at GOVERNMENT COLLEGE
UNIVERSITY especially our Essential for strategic management fellows who
supported us a lot. We could not achieve what little we have without the support of
all of them.

1-Executive Summary
Microsoft is a American public multinational corporation founded by Bill Gates and Paul Allen in
April 4, in 1975, with a vision by a Harvard drop-out, to see a PC on every desktop. Its headquarter
in Redmond, Washington. The company operates office locations in more than 60 countries
worldwide. Its major operations centers are in Dublin, Ireland; Hu Macao, Puerto Rico; Reno, Nev;
and Singapore. Today, Microsoft is a dominating the world and a leader in multiple industries. .
Microsoft had record revenues of $73 billion in fiscal year 2012 that ended on June 30, 2012.
Microsoft is listed in the Fortune 100 and has amassed an impressive portfolio of resources,
alliances, global operations, customers and critics. The Microsoft Corp. trades publicly on the
NASDAQ stock exchange. The symbol "MSFT" represents the company on the exchange. Its
products are operating systems, Office suits, Xbox for games, Internet explorer, Search engines,
Mails, Security, Servers, Visual studio, calling devices. The firm also offers consulting services,
and training certifications as well as online products such as Bing, MSN, adCenter, and Atlas.
Microsoft has strategic alliances with Nokia, NIIT, and Dominion Enterprises. The Company
introduced a windows Phone and a windows tablet computer named Surface.

Microsoft Corporations primary competitors include some of the most prominent technology
companies in the industry. The list includes well-known brands such as Apple, Google, SAP, IBM
and Oracle, Nintendo, Cisco. Because Microsoft is a diversified corporation that offers many types
of products and services, the company faces stiff competition in several key areas of the technology
sector.

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 TABLE OF CONTENTS

Serial # Contents Page #

1 Executive summary 1
2 Introduction to Microsoft Corporation 4-5
3 Swot Analysis 6-9
4 Microsofts Vision Statement 9
5 Microsofts Mission Statement 9
6 Input stage: internal audit 10
6.1 Internal Factor Evaluation (IFE) matrix 10
6.2 External audit 11
6.3 Competitive profile matrix 12
7 Matching stage: 13
7.1 Tows Analysis 13
7.2 Space Matrix 14-15
7.3 Internal external matrix 16

8 Decision stage: 17
8.1 The Quantitative Strategic Planning Matrix (QSPM) 17

9 Recommendations 18

10 Appendix 19

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 2-Introduction to Microsoft Corporation

The word "Microsoft" is a portmanteau of "microcomputer" and "software". The Microsoft

Corporation is a publicly traded worlds largest software company founded by Bill Gates and Paul
Allen in April 4, 1975 to develop and sell BASIC interpreters for the Altair 8800. it rose to
dominate the personal computer operating system market with MS-DOS in the mid-1980s,
followed by Microsoft Windows. The company's 1986 initial public offering (IPO), and
subsequent rise in its share price, created three billionaires and an estimated 12,000 millionaires
among Microsoft employees. Since the 1990s, it has increasingly diversified from the operating
system market and has made a acquisition of Skype Technologies for $8.6 billion in May 2011 in
its largest-ever acquisition. The first product the company sold was Microsoft BASIC, a computer
programming language system for creating software. The company released its first version of
Windows on Nov. 20, 1985.
The Microsoft Corp. has its headquarters in Redmond, Washington. The company operates office
locations in more than 60 countries worldwide. Its major operations centers are in Dublin, Ireland;
Humacao, Puerto Rico; Reno, Nev.; and Singapore.
Microsoft basicaly known for producing and selling the Windows operating system such as
window 8 operating system for personal computers, windows phone 7 operating system for mobile
phones, Windows server, Windows Azure, Microsoft SQL, Visual studio, Silverlight, and the
popular Xbox gaming and entertainment console. Its hardware products as well as software
programs such as Microsoft Word, Microsoft Outlook and Microsoft Internet Explorer. Many PC
makers such as Acer, Lenovo, Dell, Hewllet-Packard, and Toshiba pre-installed Microsoft
operating systems and software on devices. The firm also offers consulting services, and training
certifications as well as online products such as Bing, MSN, adCenter, and Atlas. Microsoft has
strategic alliances with Nokia, NIIT, and Dominion Enterprises. The Company introduced a
windows Phone and a windows tablet computer named Surface.

Following the release of windows phone 7, Microsoft underwent a gradual rebranding of its
product range throughout 2011 and 2012.Its logos, products and 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. Then in May 2012,
Microsoft introduced its own tablet computer, the Microsoft Surfaces the company continue to
diversify away from operating systems, it paid $1.2 billion to buy the social network firm Yammer
and then launched its windows phone 8.To cope with the potential increase in demand for products
and services. Microsoft is slowly but surely opening its own stores across the USA.

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 In 2010, Fortune 500 ranked the company as 36th on its annual rankings of America's companies.
Microsoft had record revenues of $73 billion in fiscal year 2012 that ended on June 30,
2012.Microsofts third quarter of fiscal 2013 results reported April 2013 were outstanding, with
its business divisions revenues up 8% to $6.32 billion, its server and tools revenues of $5.04
billion up 11 percent. Its windows division revenues of $5.07 billion up 23%, its online services
segment revenues up 18% to $832 million, and its entertainment and devices segment revenues up
56% to $2.53 billion.

Microsoft Corp. had 94000 employees worldwide and owned more than 14 million square footage
of commercial real estate around the world. The company's net revenue was $62.48 billion at that
time.
The Microsoft Corp. trades publicly on the NASDAQ stock exchange. The symbol "MSFT"
represents the company on the exchange.

Microsoft Corporations primary competitors include some of the most prominent technology
companies in the industry. The list includes well-known brands such as Apple, Google, SAP, IBM
and Oracle, among others. Because Microsoft is a diversified corporation that offers many types
of products and services, the company faces stiff competition in several key areas of the technology
sector.

The extremely popular Windows operating system is perhaps the most prominent Microsoft
product. In this area, the company competes with a number of smaller firms, such as Red Hat, that
distribute open-sources operating systems such as Linux.

Microsoft faces competitive pressures in all areas of its operations. The pressure comes from a
diverse mix of technology companies, both large and small.
Microsoft developing technologies that increasingly enable touch screen and voice to be more
radily understood by Pcs, tablets, and phones.

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 3-SWOT ANALYSIS
Strengths
Dominant brand image.
Strong Alliance with other
Firms.
Largest acquisition of
Skype.
Easy to use software.
Proficient in hardware.
Robust financial
Performance.
Weaknesses
. Slow to Innovate.
. Low earning per share as
Compare to its competitors.
. Dependence on hardware
Makers.
. Pc markets have matured.

Opportunities Threats
Cloud based services. . Intense competition.
Improvement in mobile . Changing consumer behaviour.
Device industry.
Stronger security against . Cybercrime.
Cybercrime.
Growth through . Threats of new entrants.
Acquisitions.
Innovation in computer
Hardware products.

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3.1Strengths
3.1.1 Dominant brand image:
Over the years, Microsoft has been the leading OS and software provider, which resulted in more than 90%
market share for PC OS. Few other brands are capable to compete with Microsoft for this reason. Even
open source OS, which are completely free and well suited to use for common user, find it hard to attract
users. Microsofts brand is the 5th most valuable brand in the world, valued at $ 57.8 billion. Brand
reputation leads to higher sales and greater market share.

3.1.2 Strong alliance with other firms:

Many PC makers such as Acer, Lenovo, Dell, Hewllet-Packard, and Toshiba pre-installed Microsoft
operating systems and software on devices. Microsoft has strategic alliances with Nokia, NIIT, and
Dominion Enterprises.

3.1.3 Largest acquisition of Skype:

With nearly 300 million users, Skype is a significant boost to Microsofts online presence and have a lot of
potential in generating income from online advertising.

3.1.4 Easy to use software:

Microsoft products including its flagship Windows operating system are popular among the masses because
of great quality and many decades of experience that Microsoft has put into its development.

3.1.5 Proficient in hardware:

The company works with all the major computer hardware producers like Dell and Samsung and major
computer retailers to make sure computers would be sold with already pre-installed Windows software.
The company also invested in Dell and Nokia to tighten its relationships with these companies.

3.1.6 Robust financial Performance:

Microsoft grew its revenues by 20% from 2008 to 2012 and holds more than $63 billion of cash and cash
equivalents that can be used for acquisitions and substantial investments into R&D.

3.2 Weaknesses
3.2.1 Slow to Innovate:
Microsoft has huge R&D resources and great position to enter new markets with innovative products but
constantly failed to do so. It had an opportunity to be the first player in online advertising but missed the
opportunity. Its entrance to mobile OS was also too late, while Google and Apple captured the market share.

3.2.2 Low earning per share:

Microsoft has low earning per share as compared to its competitors like Apple, Google, and Oracle.

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3.2.3 Dependence on hardware manufacturers:
Microsoft is a giant software corporation but it does not produce its own hardware and depends on
computer hardware manufacturers to develop products that run Windows OS. If cheap and popular
alternative OS would appear, hardware manufacturers may simple choose the alternative and
Microsoft could do little to change the situation.
3.2.4 Pc markets have matured:
Only recently has Microsoft entered the mobile technology sector and still heavily depends on its
OS and software sales for standalone and laptop computers. The market for these products has
matured and Microsoft will find it harder to grow revenues in these sectors.

3.3 Opportunities:
3.3.1 Cloud based services:
Microsoft could expand its range of cloud services and software as the demand for cloud-based services is
expanding.

3.3.2 Improvement in mobile device industry:

Smartphones and tablets markets are growing steadily so Microsoft have opportunity to improve
its mobile industry.
3.3.3 Growth through acquisitions:
With a huge reserve of cash Microsoft could start acquiring new startups that would bring new
technology, skills and competences to the business.
3.3.4 Innovation in computer Hardware products:
Microsoft have opportunity to produce its own hardware products through its own manufacturing
plant.

3.4 Threats

3.4.1 Intense competition in software products:

Microsoft is more than ever on the pressure to introduce successful OS both in PC and mobile markets as
such competitors like Google and Apple have already established positions.

3.4.2 Changing consumer behaviour:

Customers shift from buying laptops and standalone PCs to buying smartphones and tablets, the
markets, where Microsoft has only a modest market share and may never establish itself.

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3.4.3 Cybercrime:
Today the rate of cybercrime increasing day by day in shape of hackers. So the Microsoft have
also threat of it.
3.4.4 Threats of new entrants:
Microsoft have also threat of new entrants companies in the market.

4-Microsofts Vision Statement

Microsoft Corporations vision statement is to help individuals and businesses realize their full
potential. This vision statement is based on the value of the companys computer technology and
software products. Microsofts vision statement has the following significant components:
1. Individuals and businesses
2. Help realize
3. Full potential

The first component of the vision statement partly defines Microsofts target market. For example,
instead of selling software products to individual customers only, the company also sells its
products to organizations. The second component of Microsofts corporate vision statement shows
what the business intends to do. For instance, the company aims to provide products that assist
customers toward the achievement of their full potential, which is specified in the third component
of the corporate vision. Thus, Microsofts vision statement presents the target market, what the
companys technology products do, and what customers can achieve through such products.

5-Microsofts Mission Statement

Microsoft Corporations mission statement is to empower every person and every organization
on the planet to achieve more. This mission statement reflects the companys vision statement
on its computer technology and software business. The following components are significant in
Microsofts mission statement:
1. Empower
2. Every person and every organization on the planet
3. To achieve more
The first component of the corporate mission shows what Microsofts products can do for
customers. For example, such empowerment can take the form of speedy processing in offices and
enhanced information access in homes. The second component of Microsofts mission statement
specifies the target market, which in this case involves all individuals and organizations
worldwide. The companys mission statement also specifies that its computer technology and
software products benefit customers in terms of achieving more. Thus, Microsofts mission
statement is highly similar to the companys vision statement, although the corporate mission puts
more emphasis on the practical benefit of achieving more.

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6-INPUT STAGE:

6.1-INTERNAL AUDIT
INTERNAL FACTOR EVALUATION(IFE) MATRIX
Factors Weight Rate Score
Strengths
Dominant brand image 0.15 4 0.60
Strong alliance with other firms 0.12 4 0.48
Largest acquisition of Skype 0.08 4 0.32
Easy to use software 0.11 3 0.33
Proficient in hardware 0.05 3 0.15
Robust financial performance 0.20 4 0.80
Weaknesses
Slow to innovate 0.09 1 0.09
Low earning per share 0.13 1 0.13
Dependence of hardware makers 0.03 2 0.06
Pc market have matured 0.04 2 0.08
Totals 1 3.04

Interpretation:

Microsoft Corporation is internally strong because its score is greater than the
2.5.

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 6.2-EXTERNAL AUDIT
EXTERNAL FACTOR EVALUATION(EFE)
Factors Weight Rate Score
Opportunities
Cloud based services 0.15 4 0.60
Stronger security against cybercrime 0.20 4 0.80
Improvement in mobile device industry 0.10 3 0.30
Innovation in computer hardware products 0.11 2 0.22
Threats
Intense competition 0.13 4 0.52
Changing consumer behaviour 0.12 3 0.36
Cybercrime 0.14 4 0.56
New entrants 0.05 1 0.05
Totals 1 3.41

Interpretation:

Microsoft Corporation is externally strong because its score is greater than

2.5.

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 6.3 CPM

COMPETITIVE PROFILE MATRIX

Microsoft Apple Google
CSF weight
Rate Score Rate Score Rate Score
Market share 0.09 4 0.36 3 0.27 4 0.36
Financial position 0.15 4 0.60 4 0.60 4 0.60
Number of employees 0.05 4 0.20 3 0.15 3 0.15
Revenues 0.10 3 0.30 4 0.30 3 0.30
Net profit margin 0.06 3 0.18 4 0.24 3 0.18
Earnings per share 0.11 3 0.33 4 0.44 4 0.44
Growth 0.10 2 0.20 4 0.40 3 0.30
Website 0.06 3 0.18 4 0.72 4 0.24
Customer loyalty 0.12 4 0.48 4 0.48 3 0.36
Advertising 0.16 3 0.48 1 0.16 3 0.48
Totals 1 3.31 3.76 3.41

Interpretation:

We have taken Microsoft as Sample Company and its two competitors are Apple and Google.
The results which shows that the Apple is stronger than the both Microsoft and Google. The
Google is also stronger than the Microsoft. So it prove that the Microsoft is weak than its
competitors.

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7-MATCHING STAGE:

7.1 TOWS ANALYSAIS

Opportunities Threats
Cloud based services Intense competition in
Improvement in software products
mobile device industry Changing consumer
EXTERNAL Growth through behavior
acquisitions Cybercrime
INTERNAL Innovation in computer Threats of new
Hardware products entrants

Strength SO ST
Dominant brand Invest $200 million in Lower prices by 50%
image. advertising and on the Surface
Strong alliance with marketing to promote tablet.(S1,T1)
other firms the Windows Stronger security
Largest acquisition of phone(S1,O2) Against Cybercrime
Skype Form an alliance with (S6,T3)
Easy to use software telecom providers in
Proficient in hardware the USA to help
Robust financial subsidize the prices of
Performance phones for customers
who sign a two year
contract. (S2,O2)

Weakness WO WT
Slow to Innovate Focus on Cloud base Divest Skype(W1,T1)
Low earning per services to increase Lower prices by 50% on
Surface tablet.(W2,T2)
share the earning per
Dependence on share.(W2,O1)
hardware Invest $200 million
manufacturers in advertising and
Pc markets have marketing to
matured promote the
Windows phone in
China.(W1,O2)

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 7.2 STRATEGIC POSITION AND ACTION EVALUATION
(SPACE)

Internal Analysis External Analysis

Financial Position(FP) Rating Stability Position(SP) Rating
Return on investment 5 Rate of inflation -2
Debt Equity 5 Technological changes -6
Net Income 5 Governmental Regulations -2
Excessive Goodwill 3 Competitive Pressure -6
Company Worth 6 Barriers to Entry into Market -4
Financial Position(FP) Average 4.8 Stability Position(SP) Average -4
Internal Analysis External Analysis
Competitive Position(CP) Rating Industry Position(IP) Rating
Market Share -2 Growth Potential 7
Product/Service Quality -2 Financial Stability 6
Monopolistic Nature of Key Products -1 Ease of Entry into Market 5
Technological Know-How -4 Public's Dependence on Products/Services 7
Access to Capital -1 Profit Potential 6
Competitive Position(CP)Average -2 stability Position(SP) Average 6.2

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 7.3 SPACE Matrix
FP
Conservative Aggressive
7

4
X = 4.2
3 Y = 0.8

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

-2

-3

-4

-5

-6

-7
Defensive Competitive
SP

Microsoft is in the Aggressive Quadrant of the SPACE Matrix. It is important the firm expand
consulting services as well as acquire market share in the smartphone market. SP scores of -6 on
Technological Changes and Competitive Pressure will eventually erode into FP factors such as
ROA and Net Income and move Microsoft into the Competitive Quadrant.

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 7.4 INTERNAL EXTERNAL MATRIX (IE)

Strong Average Weak

(3.0_4.0) (2.0_2.99) (1.0_1.99)
4.0
I II III

High
(3.0_4.0)

Invest ..
- 0 A Position of
+Hold
- MICROSOFT
-
3.0 -
-
2.99
IV - V VI
-
-
Med -
(2.0_2.99) -
-
-
EFE -
-
-
-
-
2.0 -
1.99
VII - VIII IX
-
-
-
Low -
(1.0_1.99)
-
-
-
-
-
-
1.0 -
4.0 3.0 2.99 2.0 1.99 1.0

IFE

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 8-DECISION STAGE:

The Quantitative Strategic Planning Matrix (QSPM)

Promote The
Improve Consulting Windows Phone
Factors Weight And Certification And Surface
Programs Tablet
AS TAS AS TAS
Opportunities
Cloud based services 0.15 1 0.15 1 0.15
Improvement in mobile device industry 0.20 3 0.60 3 0.60
Growth through acquisitions 0.10 4 0.40 4 0.40
Innovation in computer Hardware products 0.11 - - - -
Threats
Intense competition in software products 0.13 3 0.39 3 0.39
Changing consumer behaviour 0.12 4 0.48 4 0.48
Cybercrime 0.14 - - - -
Threats of new entrants 0.05 - - - -
Totals 1
Strength
Dominant brand image 0.15 - - - -
Strong alliance with other firms 0.12 4 0.48 4 0.48
Largest acquisition of Skype 0.08 - - - -
Easy to use software 0.11 1 0.11 3 0.33
Proficient in hardware 0.05 2 0.10 2 0.10
Robust financial Performance 0.20 - - - -
Weaknesses
Slow to Innovate 0.09 1 0.09 1 0.09
Low earning per share 0.13 3 0.39 4 0.52
Dependence on hardware manufacturers 0.03 - - - -
Pc markets have matured 0.04 1 0.04 1 0.04
Totals 1 3.23 3.58

Microsoft should adopt the second strategy which is Promote the Windows Phone and
Surface Tablet because its TAS is greater than the 1st strategy.

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9-Recommendations
Microsoft Corporation has the necessary business characteristics to remain one of the leading
players in the computer hardware and software industry. The strong brand image and positive
externalities are among the major contributors to such market position. Thus, a recommendation
is for Microsoft to continue enhancing its brand image. It is also recommended that the company
must increase its alliances with other firms to improve positive externalities.

The weaknesses and threats in the business point to strategic reform in Microsoft. For example,
the company must continue innovating to develop products that are less vulnerable to
cybercrime. Another recommendation is for Microsoft to diversify its business to boost potential
growth. Moreover, it is recommended that the company must increase its computer hardware
development efforts to increase its revenues from this segment of the business.

Microsoft Should
1. Invest $100 million to improve consulting services.
2. Invest $200 million in advertising and marketing to promote the Windows phone in
Latin America.
3. Spend $30 million to promote X-Box sales in Latin America.
4. Invest $200 million in advertising and marketing to promote the Windows phone in
China.
5. Lower prices by 50% on the Surface tablet.
6. Further develop MS certification programs for $200 million.

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 10-Appendix:

https://www.microsoft.com/en-pk/
http://www.businessinsider.com/microsofts-15-biggest-acquisitions-and-what-happened-
to-them-2011-3?IR=T&op=1
http://bgr.com/2013/09/09/microsoft-business-strategy-analysis/
http://www.bizjournals.com/seattle/blog/techflash/2013/09/investors-see-nokia-
acquisition-as-a.html?page=all

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