Microsoft has the 90 percent market share in the operating system industry and there are more than 1.2 billion users. Microsoft also holds significant market share in the productivity software industry as they have a large number of loyal enterprise customers. Microsoft has a strong brand reputation and loyalty as customers are unwilling to leave their services for competition. The organization also has well-developed channels of distribution that helps them to reach their present and potential customers (Sun, 2015).
Microsoft remains overexposed due to their dependence on the Personal Computer market. In coming years, the market growth of PCs is expected to fall as there are new gadgets that are better than PCs. The number of smartphones running on Windows Phone remains significantly low. Microsoft has continuously invested in and acquired businesses that have failed to get customer’s attention (like Zune). There are several criticisms of the security flaws and technical issues that makes the company lose their market share to Apple, Google, etc (Sun, 2015).
Acquisition of Nokia presents a significant growth opportunity for Microsoft as they can now compete on the mobile device market. The organization also can invest in cloud based services and link them with their Windows OS. Mobile advertising remains another area where Microsoft can invest and develop an alternate option to the customers. Finally, Microsoft has been known for their acquisition strategy that has been seen through the purchase of Nokia, Skype, Green Button, etc (Sun, 2015).
Apple is the main threat to the Microsoft business as they can provide free OS and earn from the advertising revenue. Microsoft has already been forced to drop their rates as Google and Apple have launched their own OS. Competition in the Cloud industry is reducing the price expectation and revenue growth has been reduced. Potential lawsuits also reduced the organization revenue and result in PR disaster. Changing needs of customers are another threat that Microsoft needs to manage as they like other organizations needs to adapt (Sun, 2015).
SPACE (Strategic Position and Action Evaluation) Matrix
Methodology for Ranking
Each factor in the Space Matrix has been rated on the basis of Microsoft’s overall position in the market. This tough as Microsoft has been known to compete in several different industries. But most of these factors have been rated on the basis of Microsoft’s performance in comparison to their competitors in several industries. In case, Microsoft is the worldwide leader in a specific industry, they have been ranked at 6 or -1. But if there are other organizations performing better than them, then they are ranked as 5 or 4 or -2 or -3.
The average score for FS is 4.5, CA is -1.25, IS is 5.25 and ES is -2.5.
Now for creating the space Matrix,
Y= FS+ES= 2
X= CA+IS= 4
According to the SPACE matrix, Microsoft needs to implement aggressive strategy (Bhandari & Verma, 2013, p.232).
Boston Consulting Group Matrix
Microsoft, despite of being present in the market for several years can be classified as either a cash cow in the PC market and a star in all other markets where they have been acquiring other business such as mobile equipment (Nokia), Cloud Computing (GreenButton), etc. Microsoft has significant potential to grow in several technology industries, therefore they should be classified as a Star. BCG Matrix helps in identifying the position of the organization on the basis of two factors relative market share and market growth rate. Microsoft is an organization that has been present in the market for several years and in that time they have managed to gain significant market share and develop a strong reputation. Therefore, it can be classified that the company is either a cash cow or a star on the basis of their market share. Another important element of this matrix is relative market growth rate. In this case, Microsoft remains market leader in the PC industry, but the industry will be going through a decreased market growth. Microsoft is also highly active in other industries such as cloud computing, productivity software and they have also entered in the Smartphone market through the acquisition of Nokia. Therefore, Microsoft remains highly active in several industries, making their market growth rate high. This means that Microsoft remains a Star on the basis of the BCG matrix (Kotler, 2008, p.38).
Strong average weak
4.0 IFE 1.0
External Factor Evaluation (EFE) helps in evaluating the external factors and Internal Factor Evaluation (IFE) helps in evaluating the internal factors. Internal factors include the internal strengths and weaknesses of an organization and External factors include economic, social, legal, and political factors (Bhandari & Verma, 2013, p. 241-243). On the x-axis, an IFE of total weighted score between 1.0-1.99 represents weak internal position, score of 2.0-2.99 is the average position and score of 3.0-4.0 is the strongest position. On the y-axis, an EFE of total weighted score between 1.0-1.99 is believed to be low external position, score of 2.0-2.99 is considered medium and score of 3.0-4.0 is high position. On the basis of the score their internal strength and external market position, Microsoft score high is EFE and strong in IFE. Meaning the business needs to implement the growth and build business strategy. This means aggressive and intensive tactical strategies. The market strategy needs to focus on market development, market penetration and product development. In the operational perspective, a forward, backward and horizontal integration needs to be considered (Bhandari & Verma, 2013, p.242).
Grand Strategy Matrix
The Grand Strategy matrix is another important element of business strategy formulation and preparing businesses to develop alternative strategies. In case of this matrix, most organizations can be divided into four different quadrants. On the basis of their quadrant, organizations can develop strategies for business. The strategic framework is based on two dimensions which are competitive position and market share. Since Microsoft has high market share and a strong competitive position, therefore they need to be placed in the Quadrant I. As an organization based in the Quadrant I, Microsoft has proven that their competitive position is strong and are operating in the rapidly growing market. Most organizations based in the Grand Strategy Matrix’s Quadrant I have excellent market position and they are strategically positioned as a market leader. Microsoft needs to focus on their current market and follow a market penetration strategy to maximize their market share. Also, other strategies that Microsoft needs to implement is market development, product development, backward integration, forward integration, concentric diversification, etc (Rao, Rao & Sivaramakrishna, 2008, p. 256).
Quantitative Strategic Planning Matrix
The QSPM (Quantitative Strategic Planning Matrix) is used as a strategic tool for evaluating alternative strategies. The QSPM is used to incorporate earlier stages detailing to calculate the total score from a multiple strategies for finding the best matching strategy. The QSPM is used in the strategy formulation that is called the stage of choice or decision.
There are several alternative strategies that can be implemented by Microsoft to further their business. Among the alternatives chosen market development and market penetration are among the most common strategies that can be implemented by the organization. Market development would require the organization to maximize their potential and enter new industries. But, market development would require organization invest heavily in new technology and places the organization at risk. Similarly, market penetration is another strategy that can be implemented by Microsoft. Market penetration would allow Microsoft to maximize their market share and penetration can also place excessive burden on the organization to become fixated on one industry.
Bhandari, A., & Verma, R. (2013). Strategic management: A Conceptual Framework. New Delhi, India: McGraw Hill Education.
Kotler, P., & Armstrong, G. (2008). Principles of marketing (12th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.
Rao, C. A., Rao, B. P., & Sivaramakrishna, K. (2008). Strategic management and business policy: Texts and cases. New Delhi, India: Excel.
Sun., L. (June 28, 2015). SWOT Analysis of Microsoft Corporation. Retrieved 16 July 2015 from, http://www.fool.com/investing/general/2015/06/28/swot-analysis-of-microsoft-corporation.aspx