Final Strategic Plan

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Environmental Scan: Microsoft Corporation

Taron D. Maddox

STR/581

May 6, 2020

German Ibarra

Environmental Scan

Introduction

Microsoft is a multinational technology company that deals with developing, manufacturing, licensing, supporting, and selling computer software, personal computers, consumer electronics and many more related services. The company operates in a very competitive industry because there are other big companies operating in the same industry like Apple, Cisco, Google, and many more. Therefore, to stay at the top and survive the competitive industry, Microsoft has had to come up with an effective strategic plan. One of the main strategic plans is carrying out an environmental scan. Environmental scanning is basically looking out for both internal and external environmental factors that impact the company and the way it carries out its activities. This paper will therefore discuss how Microsoft has created value and sustained a competitive advantage over its competitors using the environmental scanning strategy.

Microsoft’s External Environment

The best way for evaluating the external environment for Microsoft is by carrying out a PEST analysis. PEST analysis involves analyzing the political, economical, social, and technological factors that impact the company (Rothaermel, 2016). Microsoft uses the results of PEST analysis strategy to create value and sustain its position at the top in the very competitive industry. The following is a PEST analysis of the external environment of Microsoft.

Political Factors Affecting Microsoft

This area majorly looks at the effects that the government has on the company. In this case, there are three major political external factors that impact Microsoft Company. First, there is political stability in the market worldwide which is an opportunity for Microsoft. Microsoft takes advantage of this political opportunity to increase its performance and more investments all over the world. The second factor is the support for automation from the government. This is also an opportunity for Microsoft Company. The company uses this opportunity to increase its sales on computer technology through governmental clients. Organizational organizations make large-scale purchases hence increasing the sales for Microsoft and also expanding the market for its products. Microsoft maximizes this opportunity by ensuring that products are readily available and they are of high quality to serve the high demand from the governmental organizations. The third political factor affecting Microsoft is the increasing international trade agreements. This is both an opportunity and a threat to Microsoft. It is an opportunity in that; Microsoft can expand its sales globally because it can establish easier business deals with markets all over the world. On the other hand, this factor can be a threat because through the same agreements, other in the same industry can increase their competitive force in developed countries like the U.S. this might therefore create stiff competition for Microsoft (Warner, 2019).

Economical Factors that Impact Microsoft

This involves looking at the economic factors both the in the remote area and globally. The economic external factors that affect Microsoft include; economic stability in many of the developed which is an opportunity for the company, high growth of developing countries which is also an opportunity, and growth in middle class disposable income. All the above factors are significant to Microsoft because they increase its sales in the global market generally.

Social Factors

This area of analysis looks at how the social and cultural aspects affect the company especially factors in regard to customer’s expectations and behaviors. The following are the three main social/cultural factors that affect Microsoft; first, there are stable attitudes towards leisure. The society is positive about leisure and this is an opportunity for Microsoft. Microsoft takes advantage of this opportunity to come up with products that align with customer’s preferences of leisure. This is achieved through carrying out a deep research on the needs of the customers. Secondly, there is increased cultural diversity which is both an opportunity and a threat to Microsoft. This is a threat because some customers may find the products not satisfying because the company’s products satisfy the biggest cultural groups. However, Microsoft still has the opportunity to develop products that satisfy those groups of customers by finding the gaps and filling them accordingly.

Technological Factors

Some of the technological factors that affect Microsoft include; rapid adoption of mobile technology, increased use of online transactions, and increasing automation in business. Microsoft used the rapid adoption of mobile technology as an opportunity for innovation. Also, this same factor can be a threat because other firms can use it to enter into the market hence increasing competition. Increased use of online transactions gives Microsoft an opportunity to develop advanced devices and products that support secure online transactions. However, the same factor is a threat to Microsoft because of increased cyber attacks as well. Finally, there is increased automation in businesses which provides Microsoft with an opportunity to develop products that support business automation hence making the company grow and create value.

Company’s General Environment

Microsoft’s performance is significantly affected by the general environment in which it operates in. Its general environment comprises of socio-cultural, demographic, legal, technological, political, and global components. Generally, Microsoft has been affected by penetration of technology and globalization. These are the main elements in its general environment. There is stiff competition in the IT industry because of the penetration of technology and at the same time, the demand for it products is high hence creating an opportunity for the company to increase its sales. Many other firms have entered the industry because of the penetration of technology. However, Microsoft has maintained its top position in the industry because of the strategies it employs to make the most out of the available opportunities and reducing threats. The main strategic plan for Microsoft to beat its competitors it innovation. The company ensures that it produces innovative products to differentiate itself from its competitors (Chao & Kavadias, 2017).

Microsoft’s Industry Operating Environment

Microsoft operates in the computer technology industry environment. Porter’s Five Force Analysis is the best model to analyze the external factors that affect a company’s industry environment. In this case of Microsoft, these five factors are an effect of other companies in the computer technology industry. These factors can also be as a result of the decisions of suppliers and customers. The five forces include; competition, bargaining power of customers or buyers, bargaining power of suppliers, substitution threat, and new entry threat. Out of the above external forces, competition is the most intense factor in the computer hardware and software industry environment.

References

Chao, R. O., & Kavadias, S. S. (2017). Innovation Strategy at Microsoft: Clouds on the Horizon. Darden Business Publishing Cases.

Rothaermel, F. T. (2016). Strategic management: concepts (Vol. 2). McGraw-Hill Education.

Warner, J. P. (2019). Microsoft: A Strategic Audit.