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Global Operations of Microsoft Corporation

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Introduction

Microsoft Corporation was founded in 1975 by Bill Gates and Paul Allen. It is a global

technology giant that is known for its quality software, devices, services, and solutions. The

following analysis provides an overview of the firm through an external environment analysis

and an internal analysis. It also examines the firm’s business-level, corporate-level, and

international strategies while assessing the way in which they are implemented and the way

innovation drives competitive advantage in the corporation. There is also an evaluation of the

firm’s performance using market and financial-based measures, a comparison to the industry’s

averages, and consideration of perspectives from multiple stakeholders as a way of

understanding its sustainability and competitive edge.

1. External environmental analysis of Microsoft Corporation

a) Macro-level PESTEL analysis

The table below shows the PESTEL analysis of Microsoft Corporation.

Political  Regulatory Compliance

 Trade Policies and Tariffs
 Political Stability
 Lobbying and Political Influence
Economic  Global Economic Conditions
 Exchange Rates
 Market Growth
 Inflation Rates
Social  Cultural Diversity
 Education and Digital Literacy
 Consumer Preferences
 Work from Home Trends
Technological  Innovation and R&D
 Cybersecurity
 Cloud Computing
 Artificial Intelligence
Environmenta  Sustainability Practices
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l  Climate Change
 Resource Management
Legal  Intellectual Property Rights
 Antitrust Laws
 Privacy Regulations
 Employment Laws
Fig 1.1: PESTEL analysis of Microsoft Corporation

b) Industry environment: Porter’s five forces

Threat of New Entrants

There is a high capital requirement and brand loyalty in the tech industry in which

Microsoft operates (Rothaermel, 2019). Therefore, these come as barriers to new entrants, which

translates to a reduced threat to the firm.

Bargaining Power of Suppliers

There are numerous suppliers on Microsoft’s radar, and this reduces their bargaining

power (Lin et al., 2020). However, there are risks associated with relying on some suppliers for

key components, such as semi-conductors.

Bargaining Power of Buyers

Due to the high volume of their purchases, large enterprise customers have a higher

bargaining power (Rothaermel, 2019). However, the power is mitigated by Microsoft’s strong

brand and its comprehensive product ecosystem.

Threats of Substitutes
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The threat posed by substitutes is moderate at all times (Lin et al., 2020). There are

different alternative software and services on the market, but the firm’s continuous innovation

and integrated ecosystem alleviate the threat.

Industry Rivalry

There are major players in the tech industry who pose intense competition for Microsoft.

They include Google, Apple, Amazon, and IBM, but their threat is quelled by market

differentiation and continuous improvements implemented by Microsoft.

c) Competitive environment

The major segments where Microsoft competes include cloud services, software, AI, and

hardware. The main competitors in these segments include Apple in operating systems and

hardware, IBM in enterprise solutions, Google in cloud services and software, and Amazon in

cloud services (Lin et al., 2020). The diversified portfolio of Microsoft and its strong brand

presence result in a competitive edge, though it also prioritizes strategic agility and constant

innovation.

d) Strategic group analysis

Microsoft belongs to a strategic group with diversified technological portfolios and

extensive R&D investments. The competition for the group is based on global reach, innovation,

and comprehensive service ecosystems.

2. Perform an internal analysis of Microsoft Corporation using the resource-based view:

a) What are the firm’s resources, capabilities and competencies?

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Microsoft’s resources include extensive financial assets, a strong brand, a vast patent

portfolio and intellectual property, and a highly skilled and gifted staff (Rothaermel, 2019). Its

capabilities include cloud computing, the development of software, machine learning and AI,

cyber security, and an excellent sales and distribution network (Patil, 2023). Competencies

include initiating AI and machine learning advancements, creating integrated software

ecosystems, and developing innovative cloud solutions.

b) Does the firm possess valuable, rare, costly to imitate resources, and is it

organized to capture value from those resources: VRIO analysis?

Valuable: The resources and capabilities of Microsoft are highly valuable (Patil, 2023).

They allow the firm to provide innovative solutions that effectively satisfy market demands.

Rare: The firm’s expensive patent portfolio, brand reputation, and proprietary

technologies can be referred to as rare. Therefore, competitors find it hard to replicate them.

Costly to Imitate: Microsoft’s investments in R&D, proprietary technology, and brand

equity are top notch (Rothaermel, 2019). Therefore, competitors cannot match the resources and

capabilities of the firm.

Organized to capture value: The firm is well organized to ensure that value from its

resources has been captured effectively (Patil, 2023). This is achieved by excellent leadership,

strategic partnerships, and organizational structure.

c) What role do leaders play in driving innovation?

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The leaders’ focus on cloud computing, AI, and digital transformation has enabled the

firm to emerge as the leader in these areas. Such leadership fosters continuous innovation and

strategic agility.

3. Analyze Microsoft Corporation current business-level and corporate-level strategies:

a) Business-level strategy: product market positioning

The firm uses a differentiation strategy that offers high quality and unique products and

services (Drotskie & Van 2021). Consequently, these products and services call for a premium

process.

b) Corporate-level strategy: diversification

This strategy encompasses diversification across software, hardware, cloud services, and

AI. Market reach and portfolio have been broadened by acquisitions such as LinkedIn.

c) International strategy: geographic scope and mode of entry

The international strategy has a wide geographic scope, as it operates in more than 190

countries across the globe (Drotskie & Van 2021). It uses strategic alliances, partnerships, and

subsidiaries for international expansion.

d) How are these strategies being implemented? Explain how the firm incorporates

and sustainability into its planning?

Strategies are implemented through strategic acquisitions, innovation, and partnerships

(Drotskie & Van 2021). The firm enhances sustainability through commitments to carbon

neutrality, ethical practices, and sustainable product development.

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e) How does innovation drive strategy and contribute to competitive advantage?

Investing in AI, cloud computing, and new technologies cements the firm’s position in

the tech industry (Drotskie & Van 2021). Innovation is always prioritized in strategy

development, product development, marketing differentiation, and competitive advantage.

4. Analyze Microsoft Corporation performance:

a) Financial and Market-based Measures

The financial performance of Microsoft is strong and is characterized by consistent

growth in revenue, high profits, and rich cash reserves (Kaushik et al., 2021). Its key metrics

include net income, revenue, return on equity, and market capitalization.

b) How does the firm compare to its competitors as well as the industry averages?

Competitors include Apple, Google, and Amazon, and it is evident that Microsoft has

competitive financial metrics and market share that is rich and promising (Kaushik et al., 2021).

It has outperformed all industry averages in revenue, profits, and market value.

c) What trends have been evident over the past 3 to 5 years?

The firm has witnessed growth in profitability, cloud services, and advancements in AI

and machine learning. The stock prices have also been appreciating from year to year.

d) Consider the perspectives of multiple stakeholders (internal and external).

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Employees and management are the internal stakeholders, and they benefit from growth

opportunities and a strong corporate culture. Clients and investors are the external stakeholders

who benefit from high financial returns and innovative products.

e) How does the firm possess a competitive advantage? How can it be sustained?

Competitive advantage in the firm is sustained by continuous innovation and strategic

acquisitions (Kaushik et al., 2021). There is also a diversified product portfolio in the mix, in

addition to effective leadership, and a focus on sustainability.

Conclusion

Microsoft Corporation is well positioned in the tech industry through its comprehensive

strategy, which is driven by innovation and diversification. Its competitive advantage has been

sustained by leveraging valuable, rare, and costly-to-imitate resources and effective leadership.

Additionally, the firm’s success and potential for future growth are emphasized by continuous

innovation, robust financial performance, and a focus on sustainability.

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References

Burgelman, R. A. (2020). Strategy is destiny: How strategy-making shapes a company's future.

Free Press.

Drotskie, A., & Van Wyk, M. (2021). Business-level strategies.

Kaushik, P., Rao, A. M., Singh, D. P., Vashisht, S., & Gupta, S. (2021). Cloud computing and

comparison based on service and performance between Amazon AWS, Microsoft Azure,

and Google Cloud. In 2021 International Conference on Technological Advancements

and Innovations (ICTAI) (pp. 268–273) IEEE.

Lin, R., Xie, Z., Hao, Y., & Wang, J. (2020). Improving high-tech enterprise innovation in a big

data environment: a combinative view of internal and external governance. International

Journal of Information Management, 50, 575–585.

Patil, L. (2023). The business of development: The institutional rationales of technology

corporations in educational development. International Journal of Educational

Development, 97, 102712.

Rothaermel, F. T. (2019). Strategic management. McGraw-Hill.