Strategic Business Management Research for Microsoft Corporation

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Business Management of Microsoft Corporation

Introduction

Microsoft Corporation is an American multinational organization that has its headquarters in Redmond. The history of Microsoft began back in the year 1975 when it was founded by Bill Gates and Paul Warren. Its area of specialization is developing, manufacturing, and selling personal computers, electronics, and computer software. The Microsoft products that have been most predominant are the Microsoft Office suite of productive software and the Microsoft Windows operating system.

The corporation also offers a Windows server system and other servers such as SQL server, small business server, and systems management server. However, the company became dominant in the industry in the mid-1980s along with its introduction of MS-DOS (Kirkman, Lowe, & Young, 1999). Throughout its operational existence, Microsoft Corporation has been subject to criticism that pertains to the nature of its monopoly status.

Mission and Vision Statement for Microsoft Corporation

The mission statement of Microsoft is to help individuals and businesses worldwide to realize their full potential. The company values honesty, personal excellence, mutual respect as well as constructive self-criticism. The mission statement of the corporation holds it accountable to its stakeholders by ensuring the highest possible quality and honoring its commitments. The vision statement is getting a workstation running the Microsoft software on every computer in the workplace and eventually in every home. The vision statement of the company also seeks to build a top-notch professional service that is customer-oriented in offering information technology consultancy services. The corporation also looks forward to building long-term relationships with its team members and stakeholders, in general.

Utilization of Public Methodologies

The public methodology that Microsoft has undertaken is changing the product names of Navision, Axapta, and Microsoft Dynamics GP. Microsoft has also embraced the Vertical Solutions Design methodology (VSDM), which is a methodology that offers an effective description of vertical solutions or add-ons. Quick start and quick plan methodologies are the predefined products or services that Microsoft has established to be offered to customers for a price.

Definition and Assessing of Organizational Strategies for Microsoft Corporation

Organizational strategies are a set of actions that a company embarks on to achieve its long-term goals and objectives. Organizational strategies of the corporation collectively make up the organizational plan of the company. The dynamics of the organizational strategy stem from the mission and vision statement of the corporation (Kirkman et al., 1999). Similarly, the organizational strategies for Microsoft Corporation revolve around product development, market development, and market penetration. Strategic plans for Microsoft Corporation are functions of the adoption of technological advancements. Microsoft focuses on differentiating itself from competitors such as Apple, IBM, and Intel Corporation.

In the 21st century, for example, Microsoft Corporation has redesigned MSN in an attempt to increase its market share. The company also concentrates on the telecommunication and IT market in Europe as it will secure exclusive contracts with the multinational corporations that are headquartered there (Shelly & Vermaat, 2012). The strategy concerns the development of operating systems that will suit the advancing technology. It, therefore, keeps up with the changing technology and changing customer preferences. Similarly, Microsoft has come up with Windows 8 which is an operating system that is compatible with portable devices such as MacBooks and laptops. The company is also working on the introduction of Windows 10 which will be on the market shortly.

Another organizational strategy is the creation and sustenance of a precise strategic option by maintaining the senior staff in the management. Even in the quest for its organizational strategies, the company has been motivated by how businesses and individuals use Microsoft services in coming up with business solutions and developing breakthrough ideas. The company has been adopting a market penetration strategy to increase its market share. The strategy has not only been useful in increasing the market share of the company but also aids in increasing the value of sales. The company is also improving its existing products and services to enhance the customers’ experience.

The company has, for instance, made persistent improvements in Microsoft Office that is one of the products that Microsoft Corporation offers. The company came up with new features of Microsoft Office in the year 2010, even though; the software retained the name Microsoft Office 2007. Recently, the company came up with Microsoft Office 2010 which best suits the needs of contemporary consumers.

Customers and Competitors of Microsoft Corporation

A Microsoft customer is perceived as anybody who works on a computer and places much reliance on computer software for the effective achievement of their tasks. However, the company has revamped the customer perception through recent software developments such as Windows 8. The customers of Microsoft comprise enterprise clients that have a strategic sales force partnership. The company also targets the contemporary customer who is technologically savvy and acknowledges the impact of technological advancement on mundane day-to-day operations.

Microsoft Corporation is clear in its customer service and strives to provide service to multinational corporations (MNC). The company believes that its core strength has been the provision of software solutions. The provision will help multinational corporations to manage their network services and global communications while at the same time understanding the individual needs of the business (Hancock, 2005).

The company has clearly defined its customer target and segmentation. It focuses on specific multinational corporations by providing IT services and seamless global connectivity. The company has embraced behavioral market segmentation by breaking down its market first on breadth and size to identify the large MNCs. It, therefore, targets only those organizations that have a great number of offices in multiple countries. The completing of primary segmentation has led to both the spread of operations and the increase of size. Microsoft Corporation then segments the smaller markets into industry verticals. Each vertical is then set to target a precise marketing approach and sales.

Communicating with a customer on matters that pertain to their businesses using referencing events and jargon can insinuate the perception that the BT Group perfectly understands their line of business and they offer not only telecommunication and IT services but also customer advice and consultation. The company has therefore strategically structured its sales team in distinct verticals that serve to promote the business advantages of utilizing the products and services of the company. This directly correlates with the vision statement of the company of value provided to customers by embracing expert knowledge in the customer’s industry.

The customers value not only the product features but industry knowledge that the company shares with its multinational customers (Colombo & Stanca, 2006). The major competitors of Microsoft Corporation include some of the corporations that have been predominant in the industry. Such corporations include Google, Apple, IBM, and Oracle. The company faces cut-throat competition from several organizations because it has diversified its areas of operations to offer various competitive products and services. The main software companies that show stiff competition in the software production industry include SAP, Ultimate software group, and Oracle.

Microsoft Corporation Organizational Structure

Microsoft Corporation announced its extensive reorganization to come up with a structure that aligns the company with a single strategy. The firm has been structured in nine major groups that comprise application and services, engineering, device and studios, cloud and enterprise, dynamics, and advanced strategy and research. The rest of the group comprises finance, business development, and evangelism, finance, human resources, marketing, and operation as well as legal and corporate affairs.

Informal Entities and the Formal Organization Structure

The board of directors of Microsoft Corporation comprises seven independent directors, the current CEO Satya Nadella, Bill Gates, who is the founder and technology advisor, and Steve Ballmer, who is the former CEO. The major role of the board of directors is to oversee major committees such as the audit committee and regulatory and public policy. The new organizational structure that has been adopted by Microsoft goes by the name ‘One Microsoft’ and the re-alignment enables the company to focus on motivation with great speed, efficiency, and capabilities within a dynamic world (Shelly & Vermaat, 2012).

As part of the new structure, all the operating systems developed by Microsoft and applicable in smartphones, tablets, and personal computers will fall under one department. The hardware development such as Xbox and the Surface tablet will similarly fall under another distinct division. The organizational structure of the company puts it in a better position to compete with its rivals and obtain a competitive advantage over its competitors. The major rivals are Apple and Google. The structure has changed from the original organizational structure that was as shown below.

The Decision-Making Process

Microsoft Corporation embraces an efficient decision-making process because it acknowledges that corporations that cannot come up with effective and strategic decisions are more likely to achieve greater success. Within the decision-making process of Microsoft, the company first puts much emphasis on its key decisions that are those decisions that matter most for the operational existence of the corporation. The decision-making methodology helps in the improvement of the corporate decision-making process by allowing enhanced accountability. After emphasizing its key decisions, the company then gathers all the relevant information and facts because of the inherent nature of the decision-making process. After gathering the necessary information, the decision-making model will then embrace an identification of the alternatives (Shelly & Vermaat, 2012).

Subsequently, weighing alternatives will be efficient in determining the impact of implementing the resultant alternatives. After doing so, the corporation will look through the various alternatives and choose the most efficient alternative that focuses on the core aspects of the company. The next step in the decision-making process of Microsoft Corporation is taking action and finally reviewing the decisions and consequences. Decision-making is at the coin of the realm in every business. A company can also exercise its full potential based on its ability to make good and consistent decisions. Microsoft Corporation has shown that the corporate decision-making process can only be successful so long as there is a glue that aids in binding the corporation in an organizational culture that imposes stability and values coherence (Huselid & Becker, 2005).

The Organizational Change Management

Change management is a transition that is aimed at achieving a desirable future state. The change management of Microsoft Corporation rolls out because of various reasons such as service packs, security updates, and enterprise-wide synchronization. The change management process started taking place in the era of Windows 2000. The customers of the company were obtaining the software licenses and subscriptions that would enable them to use the latest versions as they were rolling out. The company has also been embracing continual change in its smartphones and personal computers as well. The change management has made the corporation more reliable because it is now in a position whereby it develops software updates and antivirus updates.

Leadership Style

Satya Nadellla, who is the current Chief Executive Officer of Microsoft Corporation, came up with a leadership strategy that seeks growth in devices and cloud services. Nadella also replaced the executives who had left during Ballmer’s management in the quest of tuning and evolving the organization for maximum force and impact. The leaders who work at Microsoft possess coercive, legitimate, expert, and reward power. The adopted leadership style is an autocratic style that has been used in the monopolization of the worldwide software market that exhibits issues with the department of justice.

The organization’s heroes are Satya Nadella, who is the Chief Executive Officer, Chris Capsella, the Executive Vice President, and Chief Marketing Officer, and Scott Guthrie who is the Vice President of Microsoft Cloud and the Enterprise group. Other leaders include Kathleen Hogan in the department of human resources, Peggy Johnson, who heads business development, and Qi Lu, who heads the Applications and Services department.

The Microsoft team embraces a highly motivated environment because it is always successful in motivating the development teams to a great extent (Shelly & Vermaat, 2012). In fact, for this reason, the company has been known as a ‘velvet sweatshop’ implying that it does a good job of motivating its employees. The organization’s communication system has also been very successful in fostering employee motivation within the company (Colombo & Stanca, 2006).

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Process Controls

Microsoft has observed the engineering discipline that handles the algorithms of maintaining and controlling some of the organizational processes. The company has well utilized the process controls by ensuring that the processes that take place are consistent, stable, and predictable. As a result, the processes have consistently been in operation with normal variations. The type of controls includes financial controls and operational controls.

The financial controls include the control procedures that have been established to ensure that the reliability of the financial records is by the Generally Accepted Accounting Principles. The financial controls thus encompass the accurate maintenance of financial records ensuring that transactions have been recorded as performed.

The operational controls instill some sense of authority in the business operations at operational levels and not the tactical levels. They cover up the control of the execution of normal business processes. However, operational controls do not cover high-level business priorities. The operational controls that Microsoft has established include master data controls, configurable controls, and master data controls.

The roles of information systems include information storage analysis, assisting in decision-making, and carrying out business processes. In decision-making, the systems develop strategic plans that will make prosperous decisions for the company. The systems aid in decision processes through the development of a large number of value-added systems that will ensure the quality of the product meets the requirements of the quality control department.

Ratio Analysis

Microsoft Corporation has been considered the most prosperous corporation as is reflected by its financial records and performance as well. The corporation dominates the telecommunication industry and utilizes a unique Business to Consumer (B2C) before the model for a better part of its fiscal period. The company has consistently met and exceeded stakeholders’ expectations and posted non-Generally Accepted Accounting Principles (GAAP) net income of $2.1 billion or $1.58 per diluted share, a GAAP net income basis of $2.4 billion or $1.83 per diluted share, and $8.7 billion in revenue.

GAAP operating margin decreased from 22.3% to 7.6% for the quarter while comparing with the same period of 2008. The most recent financial report, released by Microsoft Corporation had recorded an increment from 9% to $4.9 billion compared to the same period of 2013. GAAP earnings were $936 million ($0.75 per diluted share), and Non-GAAP earnings were $1.1 billion or $0.90 per diluted share, driven by enabled commerce volume growth of 21%2.

The commerce and payment ecosystem developed by Microsoft Corporation has continued to flourish because mobile payment volume increased by 58% in the fourth quarter to $45.6 billion for all year counting for 20% of the total volume. Mobile commerce volume increased by 30% in the fourth quarter to $27.9 billion for the whole year representing 34% of the total volume. Cross-border trade increased by 20% in the fourth quarter, representing 21% of total company ECV2. Subsequently, the Revenue that the company earned increased to $2.2 billion. PayPal also obtained 18.9 million new active registered accounts for all year, up 13% to 162 million which is 4.6 million in the quarter.

Microsoft’s innovative payment method and safety improve the payment process in the company that allows the customer to trade efficiently without any worries. As of the fourth quarter, the transaction growth increased by 25%, counting for more than 3.6 billion transactions for the whole year. Microsoft’s marketplace has been so profitable because the company specializes in a diverse product portfolio that thus guarantees greater returns. Gross merchandise volume (GMV) of marketplaces increased by 2% overall, which consists of an increase of 3% for domestic GMV and 1% international GMV. Revenue increased to $2.3 billion. In the fourth quarter, marketplaces got 2.9 million new purchasers which resulted in 14.9 million for the whole year.

According to the latest report, in the fourth quarter, Microsoft’s Enterprise gross merchandise sales increased by 9%. Thus, the profit grew to $443 million. This particular business module allows customers to develop their online trading or retailing store, which increases sales by 12%. In 2014, the enterprise has helped more than 1,000 new clients signed up and extended or renewed the contract for more than 1,700 additional customers. In addition, the enterprise has continued to expand the limits of its users.

The profitability ratio for Microsoft Corporation has experienced an upward growth from 2012 to 2013. The returns on capital employed (ROCE) increased from 29% in 2012 to 34.7% in the second quarter of the year 2013. The returns on assets (ROA) also increased to 2.04% and then declined to 1.78% (Colombo & Stanca, 2006). The decline of profit margins has a direct correlation with the increase in costs that is a result of the expansion of the company and the development of new computer software.

In the event of a sales increase or the new operations becoming more profitable, the company will recover any experienced losses in the following financial period. The liquidity ratios for Microsoft have been above the minimum threshold of 1.23. In prior financial statements, the liquidity ratio was ranging from 2.73 to 3.25 times. A lower liquidity ratio implies that some parts of the liquid assets of a corporation have been tied as part of the inventory of the corporation and it should, therefore, increase working capital to retain its solvency and meet its short-term accruals (Peterson & Fabozzi, 2012).

Regarding leverage ratios, the Debt ratio for the financial period ending December 2013 was 1.4 times higher. The debt to equity ratio was 1.2 while the interest coverage was 2.6. Higher interest coverage is an indication that the company is not maximizing the shareholder value as it is cautious with its leverage.

SWOT Analysis for Microsoft Corporation

Strengths

The strengths that the corporation exhibits include a strong brand image, an extensive product portfolio, efficient research and development, and robust financial performance. The strong brand image has been such since its inception while the extensive product portfolio encompasses developing, manufacturing, and licensing software products for computing devices. The corporation also emphasizes the realm of research and development to introduce more innovative products and continue acquiring a competitive edge.

It has ensured a strong distribution channel by working in close liaison with main computers hardware producers such as Toshiba, Dell, Lenovo, and Samsung. The distribution channel ensures that the personal computers are sold with a readily installed version of the Microsoft operating system. The acquisition of Skype has also been a major strength of Microsoft Corporation because it boosts its online presence and generates income from online advertising.

Weaknesses

The weaknesses of Microsoft Corporation comprise a decline in the search engine market share as other search engines such as Google and Yahoo dominate the industry. The company also places much reliance on the hardware manufacturers in the installation of the operating systems and has a history of poor investments and acquisitions. The corporation has also been perceived as a cut-throat competitor that utilizes the dominant market share in the marginalization of competition by decreasing the availability of the competitors’ products and stifling product innovation. Even though Bill Gates has been the chief software architect of Microsoft, he has not yet come up with a substantially new line of products.

Opportunities

The opportunities that Microsoft Corporation has at its disposal include its growth through acquisitions, mobile advertising, and the launch of new products that are subject to consistent improvement and updating. The acquisition strategy has also enhanced the company's growth through expansion of its scope of operation and enlarging the market share. Companies that Microsoft Corporation has acquired in its growth strategies include Tellme Network, Screen tonic, Med story Inc and AdECN. The Corporation is also taking advantage of the increasing demand for personal computers within the global markets by coming up with advanced software solutions that will meet the needs of the contemporary consumer.

Threats

Microsoft Corporation deals with an array of products and services and has not differentiated its line of operation to serve a specific customer need. In this respect, the corporation has been susceptible to cut-throat competition with various companies such as Apple, IBM, and Oracle. The competition in terms of software products has thus been intense. The internet that serves as a distribution channel, as well as a non-commercial software model, has further reduced the entry barriers. Microsoft faces a threat of maintenance of computer networks and security of computers which has been a critical issue in its area of operation.

It has, therefore, been compelled to invest in mitigation technologies that will seek to protect its consumers from emerging attacks. However, the costs that the company will incur in the maintenance of computer networks and security will hurt the operating margins, and this amounts to a threat. The Corporation also faces the threat of privacy whereby personal computers are sold with a pirated version of Microsoft Windows, which translates to a loss of revenue for the company.

Conclusion

Microsoft has come up with Windows 8 which is an operating system that is compatible with portable devices such as MacBooks and laptops in the quest of enhancing customer satisfaction. The company has been improving and developing its products to keep up with the expectations of its target market. The corporation also emphasizes the realm of research and development to introduce more innovative products and continue acquiring a competitive edge. Microsoft Corporation has shown that the corporate decision-making process can only be successful as long as there is the glue that aids in binding the corporation in an organizational culture that imposes stability and values coherence.

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