BUS 499 – Business Administration Capstone
PROF ALSTONE
microsoft_corporation.docxRunning Head: BUSINESS ADMINISTRATION 1
BUSINESS ADMINISTRATION 11
Microsoft Corporation’s External and Internal Environment
Student’s Name
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1.Choose the two (2) segments of the general environment that would rank highest in their influence on the corporation you chose. Assess how these segments affect the corporation you chose and the industry in which it operates.
Microsoft Corporation was established by Bill Gates and Paul Allen in New Mexico and was incorporated on April 4, 1975. The company boasts of developing the Microsoft Windows operating system and Microsoft Office application packages that has enabled corporation to be the global leader in computer technology (Kanooni, 2006).
The first general environmental segment that ranks highest in influencing the Microsoft Corporation is the political environmental factors. This involves the government’s control over the operations of the company. For example, the state government has the control to alter policies and regulations that may affect the corporation at the time. Through government directive, the credit crisis and the economic recession can be reduced, in manner that benefits the overall operation of the Corporation. Although this can be a good move for Microsoft Corporation, it also implies the same to its competitors, hence leaving Microsoft Corporation to develop ideas on how to stay ahead of its competitors (Kanooni, 2006).
The rules and regulations that can influence Microsoft Corporation would comprise of new international policies. At the International level, the state government can alter or rather optimize the trade restrictions that would consequently, alter the manner in which Microsoft corporation operates in its trading. The Government as well has the authority to alter minimum wage to employees, tax amount, VAT, import and export duties and other tariffs. These changes should be concentrated on so that Microsoft would ready for any significant global changes. The regulation regarding the minimum wage would make the wage to increase because reports indicate that it has been increasing since Microsoft incorporation (Kanooni, 2006).
The economic environment is another segment of general environmental factor that influences operations in Microsoft Corporation: Under the economic environment, the affect corporation’s operations include personal income, the interest rates and the unemployment rate. These factors influences the consumer’s and firm’s purchasing power. Corporations using software often choose less costly software from other vendors to replace the Microsoft product and services, households as well are prospective to devote less on computer products and services due to the current economic recession (Kanooni, 2006).
Currently the United States is experiencing recession and crisis. The nation can be said to be undergoing the worst economic downfall ever as compared to other years. The shrinking economic growth has led to negative economic and the recession and the credit crisis can be deducted over the years. Due to the economic crisis and the credit crunch, there have been poor exchange rate that has relatively decreased the corporation’s capital on sales internationally. Microsoft Corporation therefore, should be aware of the trading restrictions by the government, the value of U.S dollar in the money market, the economic status of other nations they operate in and the export and import rates. They should conduct feasibility study on the economic status before setting prices for their products and services (Kanooni, 2006).
Producing at higher cost and selling at lower cost due to economic crisis and the credit crunch would make the company to trade on loses. Overall, the company should be aware of the fluctuations and precedent behavior of foreign currency and money banks, trade cycles, disposable income level of people, economic growth rates around the world, demand and supply conditions and finally, tax and import export barriers (Julian, 2010).
2. Considering the five (5) forces of competition, choose the two (2) that you estimate are the most significant for the corporation you chose. Evaluate how well the company has addressed these two (2) forces in the recent past.
The most significant force of competition to the Microsoft Corporation is the bargaining power of customers: The most significant customers in the computer and software the industry are private corporations, individual customers, and government bodies. These customer base can be differentiated into two segments such as the lower end customers who are made up of small and medium companies that aid local and regional firms and the upper end customers who are larger establishments and individual buyers for whom brand and image reputation is of significance. Their buying power is often limited due to fact that, there are fewer alternatives and therefore, Microsoft Corporation’s brand reputation in the market has helped it gain a competitive advantage over its competitors like the Apple Corporation (Microsoft Corporation, 2012).
The second most significant force of competition in Microsoft Corporation is the threat of substitute products and services as those of the corporations. Microsoft Corporation is known for offering a wider range and variety of products. The products being produced by Microsoft Corporation have several substitutes. For example, the operating systems, office application packages, SharePoint, Internet explorer have all substitutes. However, the substitutes are not common because they operate on different platforms (Microsoft Corporation, 2012).
Taking advantage of their operating systems, Microsoft Corporation has discouraged customers from move towards their competitor’s products by stringently restricting support for competitors’ products. Microsoft Corporation as well has effectively managed to standardize the industry by making the industry’s product to relay on the Microsoft platforms hence ensuring no close substitutes to its products (Microsoft Corporation, 2012).
3. With the same two forces in mind, predict what the company might do to improve its ability to address these forces in the near future.
To counter the bargaining power of customers, Microsoft Corporation has been innovative and volatile with their competence in introducing new standards and features to their customers at low prices whom customers find no close substitutes to. Microsoft have also been offering welfares to their most loyal customers by rewarding them with holiday and travel grants whenever they buy Microsoft products (Julian, 2010).
Product’s price elasticity is often influenced substitute products in the market, whenever more substitutes are available in the market, the demand for such products often tend to be more elastic because customers have more alternatives to choose from. The competition that is usually engendered by a threat of Substitute often come from products outside the industry and therefore, Microsoft Corporation should keep an eye on market trends that would spot innovations likely to influence industry (Microsoft Corporation, 2012).
The threat of substitute products cannot be avoided easily and often exists. Apple is one of the competitor to Microsoft Corporation was products are threat to those of Microsoft. Research findings shows that, Microsoft Corporation’s profitability reduced when better Apple software products were introduced into the market. To counter the effects of threats of substitute product, Microsoft has over the years established its products at a lower price than Apple in order to maintain its share in the computer and software market (Microsoft Corporation, 2012).
Buyer power as competition force is a market conditions in which there are several suppliers while there is a single buyer, hence the buyer set the price. Buyers become powerful if they purchase large proportion of corporation’s product or service. Under such market conditions it is possible to become a vendor through integrating with the buyer when the ordering and payment processes are automated , hence permitting the buyer to partially access the corporation’s internal systems as applied by Microsoft Corporation to give it competitive advantage (Microsoft Corporation, 2012).
4. Access the external threats affecting corporation and the opportunities available to the corporation. Give your opinions on how the corporation should deal with the most serious threat and the greatest opportunity. Justify your answer
Some of the threats affecting the operation of Microsoft Corporation are intense competition from other software produces. Competitors like Google and Apple Inc. have successfully introduced operating system working on both personal computers and mobile phone while Microsoft is still on the pressure to introduce the same (Sifert, & Rigby, 2011).
Changing in taste and preference of consumer needs and habits is another threat. When buyers move from buying laptops to buying smartphones and tablets, then Microsoft stands to lose because it has only developed well in the laptop and standalone personal computer market (Microsoft Corporation, 2012).
Another threat to the company’s operation is the open source projects which are free and offers alternative services to Microsoft’s products which are comparatively expensive. For example, the new Linux OS and Open Source Office. Lastly the potential lawsuits are threat to the company. The company has been sued many times and lost some of the judicial battles. The cost of the lawsuits have been very expensive for the company to foot as they require time and money (Sifert, & Rigby, 2011).
Some of the opportunities for the company include Cloud based services. As the demand for cloud based services is expanding, Microsoft has the ability to expand its variety of cloud services and software. Another opportunity is the mobile advertising, where the mobile means of advertising in the markets is anticipated to expand in to double digits for the next few years granting Microsoft Corporation the opportunity to enter into these markets with the new mobile OS (Microsoft Corporation, 2012).
Smartphones and tablets markets have in the past grown steadily and Microsoft Corporation is exploiting this opportunity to venture into mobile device industry by making its own tablets and a new company phones. The huge reserve of cash in the Microsoft Corporation has the opportunity of stating to acquire new startups that would lead to new technology, competences and skills to the business which means growth through acquisitions (Microsoft Corporation, 2012).
5. Give your opinion on the corporation's greatest strengths and most significant weaknesses. Choose the strategy or tactic the corporation should select to take maximum advantage of its strengths, and the strategy or tactic the corporation should select to fix its most significant weakness. Justify your choices
The corporation’s strengths are; Brand loyalty. Microsoft Corporation has been leading OS and software provider for the past years and has claimed the 90 % market share. This has enabled it to build a reputable brand with its easy to use OS which has given it advantage over others. Another strength is the brand reputation. Research findings shows that Microsoft’s brand is ranked as the 5th most valuable brand in the world. This has led to higher sales and greater market share (Computer World, 2012).
Microsoft’s easy to use software is also a strength. Windows OS and Office software are popular due to good quality and ease of use. This coupled with strong distribution channels and good brand reputation makes the product to attract much sales in the market. The company has strong distribution channel and works closely with major, computer hardware producers like Lenovo, Dell, and Toshiba to ensure that computers are be sold with pre-installed Windows software. Finally their robust financial performance in the industry and the acquisition of skype has significantly boosted its online presence Microsoft in advertisement (Microsoft Corporation, 2012).
The weaknesses of the corporation include; poor acquisitions and investments. For example, the Massive, WebTV, LinkExchange and danger are the acquisitions that were made by Microsoft Corporation but failed. The overdependence on hardware manufacturing firms is another weakness. Hardware making companies can shift their preference to Microsoft competitors to acquire cheaper OS hence would render Microsoft Corporation in sales crisis (Microsoft Corporation, 2012).
Criticism over cyber security flaws is one weakness that has made many customer to shift loyalty to other more secure OS. The Windows OS from Microsoft is very weak and can be easily affected by computer virus and other malicious programs that consequently leads to lose of data and corruption of files. Microsoft was also very reluctant to venture into the mobile technology which is the next big innovation but has been operating in the OS and software market which has matured. The corporation is also slow to innovate as compared to Google and Apple in the software industry (White, 2012).
6. Determine the company’s resources, capabilities, and core competencies.
Microsoft Corporation’s resources comprises the tangible and the non-tangible resources. The tangible resources are include the financial resources in which the corporation has not only produced nonstop vast positive net income, but it has also improved cash flow and therefor, owns adequate cash reserves (Julian, 2010). Physical resources is another tangible resource, here, the corporation has globalized its operating centers in tactical geographic sites that supports all features of customer relations such as vendor management and logistics (Julian, 2010).
The intangible resources include the human resources and innovative resources: The Company can maintain its current gifted employees and draw new ones. These employees are credited for donating creative ideas to the company. The company as well obtains new designs and scientific abilities while making several strategic acquisitions (Julian, 2010). The company’s reputational resources are also intangible resources. Microsoft Corporation has built strong enterprise brand name in the market (Computer World, 2012).
The capabilities of the company include research and development: through Microsoft’s able comprehensive and intense research, they have frequently and continuously developed new products that meet customers’ demands. They also have the marketing capabilities by elaborating the new features in their products that are new to customers for the example the introduction of Microsoft vista after XP and later Windows 7 (Julian, 2010).
Microsoft Corporation is one of the competent producers of operating system and software in the market. As core competence, the company produces attractive products and can spend large amount of capital on R& D. it has strong financial base and poses strong brand name internationally as the core competence (Julian, 2010).
7. Analyze the company’s value chain to determine where they can create using the resources, capabilities, and core competencies discussed above
Over the years Microsoft has continually created innovative technology products that have transformed the way people work, learn, play, and communicate. In the product development process the company is interested and is considering the feedback of its partners and customer in delivering and building value into every product they make (White, 2012).
Microsoft Corporation’s goal is to offer its customers and partners the best possible end-to-end experience, and to become a satisfaction leader in the technology industry. The better Microsoft is at building a culture of accountability and trust, listening and responding to customers, simplifying product offerings and services, improving product quality and security, and innovating based on customer feedback, the more it will satisfy its customers and partners. The company values the ways in which input from customers and partners helps it progress as an organization and improve the quality of its products (White, 2012).
Reference
Computer World. (2012). New market share figures shows Window Phone still can’t gain traction. Computer World. Retrieved from http://blogs.computerworld.com
Julian, J. (2010). Strategic Analysis Microsoft Corporation. Retrieved from http://zh.scribd.com/doc/41079619/BA7080-Strategic-Analysis-Microsoft
Kanooni, A. (2006). The Microsoft Corporation – company analysis. Retrieved from http://drarmankanooni.com/research/microsoft financial analysis.pdf
Microsoft Corporation. (2012). Retrieved from http://www.microsoft.com
Sifert , T., & Rigby, B. (2011, 02 03). Microsoft sells $2.25 billion of debt at low rates. reuters. Retrieved from http://www.reuters.com/article/2011/02/04/us-microsoft-bonds idUSTRE7128EZ20110204
White, M. C. (2012, 07 19). Microsoft reports first quarterly loss ever. Market Day. Retrieved from http://marketday.nbcnews.com/_news/2012/07/19/12837611-microsoft-reports-first-quarterly-loss-ever?lite
