Analysis of Macro and Micro Environment of Microsoft Corporation - Research Paper Example

Running Header: Business Environmental Analysis Analysis of Macro and Micro Environment of Microsoft Corporation College Analysis of Macro and Micro Environment of Microsoft Corporation In today’s globalised world, organisations are exposed to a greater degree of turbulences in both its micro and macro environments. The process of environmental scanning allows a company to align its resources to take advantage of business opportunities while safeguarding against threats. The micro-environmental factors are in direct relationship with the company where the organisation is capable of exerting a certain degree of influence in modifying the conditions. Macro-environment on the other hand, impacts on the company but related indirectly and therefore beyond the control of the organisation (Armstrong & Kotler 2000). The essay analyse the micro and macro environments of the Microsoft Corporation, the world market leader in software industry. The company, founded by Bill Gates and Paul Allen in 1975, revolutionized the concept of personal computer usage by introducing the Graphical User Interface (GUI) Windows Operation system in 1985. Microsoft Corporation, working with a vision of seeing a computer at every desk and in every home, operates in over 60 countries. The essay will also provide a strategic situational analysis (SWOT) on the company. Analysis of Macro Environment For a company to make correct strategic choices in crafting its long-term business strategies, it should gain a clear understanding of the organisational environment. The trends in the macro environment will not only indicate current market conditions but also the long-term implications, which the company should gear itself to intercept in the future (Thomson & Strickland 2003). Macro environment analysis can be facilitated by a PESTLE analysis, which assess Political, Environmental, Social & Cultural, Technological, Legal and Economic influences, which bears upon the organisation. Some of the current developments in the Political environment include the liberalization of closed economies and greater level of foreign trade. While this opens up new markets as China, it also fuels competition from the likes of India offering cheap outsourcing options. Recent turbulent conditions marked by escalated terrorist attacks disrupt the overall operations of the world markets. The political instability is also curbing potential for industrial development, which is crucial for the growth of companies such as Microsoft Corporation. Environmental factors such as scarce natural resources, conservation of eco systems through recycling and reduced use of paper are promoting the concept of paperless age. These trends have beneficial impact upon IT industry, which is replacing paper modes of communication and data processing & storage with electronic means. Natural disasters as the Asian Tsunami and the series of hurricanes in US can also impact upon the organisation adversely. Social & Cultural factors consist of changing demographics, patterns of employment, lifestyles and attitudes. More and more people are becoming technology savvy and the new generations are highly computer literate. A higher percentage of women across the world are employed, increasing the consumer base for computer products. The concept of home computers is well accepted. The ageing population of the world may hold adverse effects for the industry in the time to come, as the number of people working will be drastically reduced up to 35% of population while over 50% will be retired. Technological developments include wide scale use of personal computers, rapid growth of Internet usage and integration of information technology to drive key processes of organisations. IT solutions as Decision Support Systems, Data Mining and Warehousing, IT Aided Customer Relationship Management programs, Computer Aided Designing and Production Facilities, Transaction Processing Systems and host of other IT integrated business processes are increasingly used as a leverage of competitive advantage. The convergence of multi media options of audio, video and data is providing powerful usage options, further expanding product potential. Legal factors impinging upon companies as Microsoft can be seen in the Anti Trust laws, regulation of mergers and acquisitions an monopolistic market practices. Legislature is also impacting upon the company in the form of renewed focus on copyright and intellectual property laws striking hard against software piracy activities. Economic forces can be noted in the slowdown in the global economy and the increased competition from cheaper sources as India. The turbulent currency markets also affect large-scale global companies as Microsoft, increasing financial risks. The aging population of the world will retire in time to come, leaving smaller percentage of world population in the workforce. This trend is likely to affect the world economy adversely, slowing down growth and development across the world. Micro Environmental Analysis The microenvironment of an organisation consists of the company itself, the suppliers, marketing intermediaries, customers, competitors and the public groups. A micro-environmental analysis, assess the degree of positive or negative impact each group bears on the organisation. Company comprises of its internal departments as well as the top management. Managing the company aspects of the micro-environment includes internal marketing in terms of informing of company vision and objectives and gaining the commitment of different divisions of the company. In the case of Microsoft Corporation, which operates over 110 subsidiaries and branch operations, managing the internal public of the company becomes a key priority. Suppliers are a critical aspect of the microenvironment and companies depends upon its supplier base for timely and cost effective supply solutions. Microsoft has entered in to strategic alliances with its suppliers to ensure the supply chain management is effective and reliable. Quality of the company products largely depends upon the reliability and quality of the suppliers. Microsoft Corporation carries out global procurements, which increase the uncertainty factors associated with supply chain. Marketing Intermediaries are those agents who are utilised in the process of marketing the company’s products and in the case of Microsoft Corporation, many software retailers and vendors make up the network of intermediaries. Customers comprise of individual, corporate and government customers and in the case of Microsoft, spread across the world. The different product categories of the company address the needs of different market segments and developments and innovations in technology will create new user groups. The entrance in to electronic games segment brings in a new customer base to the company and will pose new set of marketing challenges. Competitors make up a critical component of a company’s microenvironment. Competitor analysis will allow the company to modify its own strategies and plan positioning against the competitor offers. Microsoft’s competition is not only from the established US based software developers as IBM, AOL, Sun Microsystems and game developers as Sony & Nintendo but also from Indian sources as Infosys, Polaris & Wipro which offer cheap but functional options. Publics of a company represent important group of stakeholders and includes financial public, media public, government, local public and citizen action publics. Their needs are varying and complex and demands of some groups are driven by non-profit motives. Financial public of the company will include bankers, auditors and stock exchange personnel while the media public are catered to through the company’s press and media office. Microsoft has been largely affected by the actions of government in terms of being charged with anti-trust lawsuits. SWOT analysis Following SWOT analysis on Microsoft Corporation provides an insight to the company strengths and weaknesses as well as the market opportunities and threats, which impinges upon company’s overall business potential. Strengths of the company lies in areas of financial performance, innovation, managing core competencies, customer focus and agile and flexible organisation structure despite its large scale and size. Above average financial performance with a US$ 12.25 Billion net income for year 2005, which is a 50% growth over previous year indicates financial stability (Microsoft Reports First-Quarter Earnings 2005). With a network of over 650,000 Microsoft business partners and presence of 110 subsidiaries in 60countries, the market dominance of the company is a key strength. The reputation of the company and its brand image, is reflected in being chosen as the top Most Respected Company in year 2005 (Coggan 2005). Company’s high caliber human resource and autonomous high performance team structures are at the core of the company strengths (Gates 2000). Company’s continued drive for innovation coupled with learning culture is yet another plus point. Microsoft invest over US$ 7 billion in terms of R&D commitment per annum, reflecting its strength in driving innovation (Microsoft Corporation Annual Report 2005). Weaknesses of the company can be identified in the perceived predatory image of the company, associated with its aggressive market practices. Its over emphasis on personal computer segment is another weakness. The dominant leadership of Bill Gates, which may lead to “one-man-style” decisions may have negative implications. Male dominance in the workforce with only 25% female representation of the 61,000 workforce can be a negative aspect (Fast Facts- Microsoft Corporation 2005). Weakness in anticipating future technologies, as was in the case of its late entrance to the Internet browser segment. Relatively low market-share in key product segments as electronic gaming is another weakness. (King 2004). Opportunities for the company lies in the massive developments in the communication and Information technology and the wide spread use of the Internet. Rapid globalisation opens new markets as China and India with its massive markets sizes. The “Paper less office” concept is rapidly catching up along with the use of personal computers and computerized communication modes as e mail and instant messaging. Pester power offer opportunities for expansions through game product category. Development of Copyright laws can benefit the company by curbing the large revenue losses due to software piracy. Threats for the company can be identified in the increased global competition and trends in outsourcing from cheaper sources. Increasing legislature aimed at regulating large scale monopolistic operations can be a threat to the company. Piracy and copy right violations in high potential markets as China and India can be a threat to potential growth. Open system software development projects as Linux can pose threats. Internet and information technology security issues are also a key area of threat, which is slowing down the expansions of e commerce industry. Organisations as Microsoft are exposed to a myriad of factors in its business environment and most forces remain beyond the control of the organisation. While continued scanning of the environment will yield insight to trends and forces bearing impact on the organisational operations, how these information are being utilised in shaping and crafting the organisational strategies will ultimately decide how successful the organisation be at surviving in the market. It is therefore of critical importance that companies place due importance upon monitoring and managing its macro and micro environmental conditions so that opportunities for growth are not missed out or adverse impacts are undetected and left to take the company by surprise. References Abell, D. F. (1980). Defining the Business: The Starting Point of Strategic Planning. Englewood Cliff, New Jersey: Prentice Hall. P. 169. Armstrong, G. & Kotler, P. (2000). Marketing: An Introduction. 5th ed. Singapore: Person Education Inc. Coggan, P. (2005). New economy takes the spotlight at last. FT.com. Financial Times. November 17 2005. Retrieved November 20, 2005, from news.ft.com/cms/s/24dea4c0-56ce-11da-b98c-00000e25118c,dwp_uuid=099 Fast Facts, Microsoft Corporation Web Site. Retrieved November 20, 2005, from http://www.microsoft.com/mscorp/info. Gates, B. (2000). Business@ the Speed of Thought:Succeeding in the Digital Economy. London: Penguin Books. King, D. K. Dr. 2004. Enhancing SWOT Analysis Using TRIZ and the Bipolar Conflict Graph: A Case Study on Microsoft Corporation. Retrieved November 20, 2005, from http://www.triz-journal.com/archives/2004/08/07.pdf#search=Microsoft%20SWOT Microsoft Reports First-Quarter Earnings. (n.d.) Retrieved November 20, 2005, from http://www.microsoft.com/presspass/press/2005/0ct05/10-27Q1EarnPR.mspx Microsoft Corporation Annual Report 2005. Retrieved November 20, 2005, from http://www.microsoft.com/msft/ar.mspx PESTLE Analysis. (n.d.) Faculty of Professional Studies, e-learning unit. Retrieved November 16, 2005, from http://www.trainingessentials.org.uk/pestlesitecopy/ Thomson, A. A. Jr. & Strickland, A. J. (2003). Strategic Management Concepts and Cases. 13th ed. New York: McGraw-Hill Publishing Company Ltd. Understanding and Using SWOT Analysis. (2005) About Education. Retrieved November 20, 2005, from http://businessmajors.about.com/cs/casestudyhelp/a/SWOT.htm Read More