The impact of Microsoft's Mission, Vision, and Primary Stakeholders on its Success
The Mission and Vision statement of Microsoft express its strategic directions and priorities to its prime stakeholders. These two statements have a significant importance for the company's success as all its strategic moves and efforts are aligned according to what these statements entail. They show Microsoft's true concern for the key stakeholders as well as for the community in which it operates. The prime stakeholders of Microsoft include customers, investors, regulatory authorities, employees, suppliers, distributors, and business development firms. Each of these stakeholders has a significant role to play in the company's success and sustainability in its industry. For example, the suppliers provide it the required raw material to produce highest quality of technological products whereas distributors deliver it to the potential retailers and final customers. Similarly, employees act as an intellectual capital of the company and contribute towards its competitiveness and continuous growth (Microsoft, 2012).
SWOT Analysis of Microsoft Corporation
Microsoft enjoys a number of core competencies and distinctive strengths in its industry. Being the largest IT giant in the world, Microsoft is recognized for its wide range of computer hardware and software products and technical services, huge scale of operations around the Globe, and exceptionally high sales and financial performance in its major target markets. Microsoft also enjoys a high level of customer appreciation, a strong brand image, and trust of stakeholders. By capitalizing these strengths effectively, Microsoft has become one of the most innovative and competitive organizations in the Global IT industry (Microsoft, 2012).
One of the major weaknesses of Microsoft is low sales in different developing markets of the world. Microsoft has failed to ensure a high sales volume due to availability of competitive products in those markets at lower prices. The employee turnover of Microsoft is showing an increasing trend for the last few years which is a critical sign for the Management. Moreover, Microsoft has to downsize its low-demand product lines which negatively impact its operational performance. This downsizing decreases its competitiveness in those particular product lines. Some IT giants like Google have left Microsoft behind in the race of internet and communication by introducing innovative products and services.
Microsoft can expand its business operations in new potential target markets and introduce more innovative products in order to cater the changing expectations of its customers and target larger market segments (Cadle, Paul, & Yeates, 2010). The major focus areas for Microsoft for its future competitiveness can be software, communication, and virtualization which can help it to achieve a distinctive position in its industry. It can further diversify its product lines to strengthen its market positioning in both high and low sales areas (Kurtz, MacKenzie, & Snow, 2010).
Microsoft faces various threats from its external environment. The biggest threat is its industry rivals which not only snatch its potential customers, but also negatively impact the way Microsoft operates and strategizes to stay competitive. In its diversification strategies in new product lines, Microsoft faces a big threat from existing well-established businesses that manufacture those products. The costs of production, Research & Development, and high employee turnover are also among the big threats for the company's profitability and overall performance.
Michael Porter's Five Forces Model for Microsoft
1. Rivalry among Existing Competitors:
Microsoft faces a stiff competition from top industry rivals in each of its product lines. For example, the top competitors for Microsoft in the computer hardware market are Dell, HP, IBM, Sony, etc. Similarly, the top industry rivals in the software market are Adobe, Google, Symantec, Oracle, SAP, etc. In order to beat this biggest competitive force and maintain its market leadership, Microsoft has to keep itself abreast of the changes in its external environment, adopt a continuous growth strategy, and keep on introducing innovative products as a first-mover in its industry (The New York Times, 2011).
2. Threat from the New Entrants:
In addition to the existing well-established businesses, Microsoft also faces an intense competition from new entrants in the Computers and IT industry. These new entrants try to penetrate this industry by introducing innovative products at comparatively lower prices than existing competitors. Microsoft takes them as a big threat for its sales and customer base because they significantly decrease them in the short run
3. Threats from the Substitute Products:
Microsoft operates in a highly diversified and saturated industry where there are a large number of manufacturers producing both identical and non-identical products in the same product lines. The substitute software and hardware products directly impact the company's sales and level of acceptability. For example, Microsoft's top-rated product, MS Office has various substitute and competitor products like Open Office, Kingsoft Office, Google Docs, etc. Therefore, Microsoft considers substitutes as an equal threat for its business.
4. Bargaining Power of Suppliers:
The bargaining power of suppliers is quite strong in the IT industry. Reason being, there are large number of buyers (IT manufacturers) who are regular customers of these suppliers. These buyers have to bargain for a good price of raw material from these suppliers. In order to counter this issue, Microsoft has entered into contractual agreements with the most reliable suppliers from its industry so that it may not face any problem regarding raw material availability or price bargaining.
5. Bargaining Power of Customers:
Being a top-quality and reliable product manufacturer, Microsoft can charge a good price for its products. However, customers have a wide array of choice to choose a particular IT product from different alternative manufacturer brands. Therefore, Microsoft has to charge a competitive price so that it can ensure an attractive profit margin without disturbing its customer base. The overall bargaining power of customers in this industry is weak due to the fact that high-quality manufacturers are charging high prices for their reliable and innovative products.
Strategies in the light of SWOT Analysis
Microsoft can capitalize on its strengths and overcome its weaknesses if it gives emphasis on innovation and new product development. It can use its sound financial strength to invest more in the Research and Development areas and expend more on the promotional efforts for its products. It can diversify in new product lines, manufacture its raw material itself, become a distributor of itself, and target new markets to expand its business operations both horizontally and vertically. Microsoft can beat the stiff competition from both new and existing industry rivals by keeping itself on the most competitive edge through cost-leadership and first-mover strategy.
Strategies to Maximize Competitiveness and Profitability
Microsoft can increase its competitiveness if it produces its products by keeping in view the exact requirements and needs of the customers of 21st Century. It should not excessively rely on its hardware product line. Rather, making investments in software, virtualization, and communication can greatly help it in becoming the top market leader in these industries as well. Microsoft can maximize its profitability if it captures a greater number of potential target markets and strategize to increase its sales volume in those markets. It can run effective marketing campaigns to promote its newly introduced products to the customers and make strong relationships with the supply chain members to ensure regular and cost-effective supply or required raw material. It should also focus on providing superior customer services on both before and after purchase and make investments in Corporate Social Responsibility efforts. It will also increase the brand loyalty of customers and trust of the key stakeholders which is helpful for both competitiveness and profitability.
Microsoft can use various mediums to communicate its strategies to its key stakeholders. The first and the foremost is its internal and external publications including annual reports, Corporate Social Responsibility reports, company broachers, bulletin, circulars, newsletters, etc. These reports and publications can communicate its strategic objectives, growth strategies, operational and financial performance, environmental protection initiatives, public relations policies, and other strategies to its prime stakeholders including investors, employees, regulatory bodies, supply chain members, auditors, etc. Similarly, to communicate its new product offerings, geographical expansions, new store locations, pricing, specification, and comparison to its potential customers, Microsoft can use various promotional mediums like electronic, print, social networking, and in-store displays.
Corporate Governance Mechanisms at Microsoft
1. Internal control procedures:
There is a strong internal control instituted at Microsoft which ensures that organizational affairs are in accordance with the laws and regulations set by the Board of Directors and the Regulatory authorities of the IT industry. Internal Control mainly looks over the financial reporting and operational efficiency of the organization and assesses whether managerial actions are contributing towards the organization's success and sustainability or not. The internal auditors periodically review the organization's affairs and present reports which contain both strengths and inefficiencies in the organizational setup (Microsoft, 2012).
2. Balance of Powers:
Balance of power is a mechanism which ensures that all organizational members subordinate their personal interests to the interests of the organization; do not make illegal or unauthorized use of their powers, and…