The BCG Matrix is a framework that helps to assess the value of investments in the company’s portfolio management. It was created in 1968 by Boston Consulting Group founder, Bruce Henderson. This BCG Matrix Excel Template has been constructed by four quadrants which are Stars, Question Marks, Cash Cow and Poor Dog and each of them represents.

Microsoft's miraculous Success in business has become a topic to many business experts around the world. What makes Microsoft so successful? This report reveal, analyze and explore the business strategy of Microsoft which make them the world leader in the industry with no close competitors.

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In fact this report expects to discover the competitive position of Microsoft discovering numerous strategic factors including, Macro environment, industry dynamics, resource and capabilities, culture, entrepreneurship style etc. This report also will explain how Microsoft have been effectively articulated it business strategies to create a sustainable strategic lock-in to remain sustainable in their competitive position continuously over several decades. A PESTEL analysis is carried out to identify the key macro environmental drivers to change in order to review the strategy against the challenges from them. Industry forces will be analyzed to identify the nature of competition. To diagnose the strategic capabilities the value chain model is used. The strategic group map is also included to show the competitive market position of, the world leading software industry, Microsoft Corporation.

And finally, some of the valuable suggestions for the Microsoft Corporation are also included in this report. The field of computer software can be divided into three primary segments: corporate information services (IS) departments, software vendors, and consultants.

Corporate IS departments usually implement and support software and hardware products for companies that produce nontechnical items or services. They work with the individual departments or lines of businesses within the company and their software needs. They then fill gaps by creating software the company needs to make it operate more efficiently, or they reprogram and improve existing software. People who work for software vendor companies focus on creating products for sale. These products could be mass marketed for consumers, such as tax programs, home accounting programs, or home budgeting programs.

Or, they could provide enterprise software to business niches, such as the restaurant industry, medical industry, or specific departments within those industries. Consultants are independent contractors who are hired by corporations to help implement new software packages. Consultants may be individuals, or they may be a company with several consultants for hire. While there was a need for computer software in the early days of computer use, it was not until the personal computer hit the market and exploded in the 1980s that the demand for computer software led to the development of the industry. For the first few decades of the software industry, most software was designed to run on a desktop personal computer or a laptop. By the 2000s, there were more devices that contained computer chips and therefore needed software and applications, or apps, for their use or to expand their capabilities. These devices include cell phones, global positioning devices (GPS), personal digital assistants (PDAs), smartphones, and tablet PCs and readers.

Microsoft Corporation (Microsoft) is one of the leading providers of software, and hardware products and services. The mission of Microsoft Corporation is to enable people and organizations throughout the world to do more and achieve more by creating technology that transforms the way people learn, work, play, and communicate. It develop and market software, services, and devices that deliver new opportunities, greater convenience, and enhanced value to people’s lives. Microsoft do business worldwide and have offices in more than 100 countries.

Microsoft Corporation’s products include operating systems for computing devices, servers, phones, and other intelligent devices; server applications for distributed computing environments; productivity applications; business solution applications; desktop and server management tools; software development tools; video games; and online advertising. It also design and sell hardware including PCs, tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories. Microsoft offer cloud-based solutions that provide customers with software, services, and content over the Internet by way of shared computing resources located in centralized data centers. Examples of cloud-based computing services it offer include Bing, Microsoft Azure, Microsoft Dynamics CRM Online, Microsoft Office 365, One Drive, Skype, Xbox Live, and Yammer. Cloud revenue is earned primarily from usage fees, advertising, and subscriptions.

It also provide consulting and product and solution support services, and it train and certify computer system integrators and developers. A SWOT analysis is a structured planning method used to evaluate the strengths, weaknesses, opportunities and threats involved in a project or in a business venture. A SWOT analysis can be carried out for a product, place, industry or person. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective. The strengths, weakness, opportunities and threats of Microsoft are presented below. Considered above PESTEL analysis this report argue that Technology is the key driver which could influence impulsively to Microsoft business Strategy. Microsoft put 13 – 14% of their revenue in Research & Development.

Out of the various PESTEL factors Microsoft's sustainability of business is greatly dependent on the ability of competitors to provide better solutions at competitive low prices. The chance for competitors to challenge Microsoft on price has so far become unrealistic due to the economies of scale Microsoft enjoys. However given the fact that today's cutting edge technology could be obsolete tomorrow due to the dynamic nature of the software industry, If Microsoft fails to acquire or innovate the substitute next level technology for their platforms, the existing strategy have better chances to fail. Porter's Five Forces is a framework developed by economist Michael E. Porter to determine the profitability and attractiveness of a market or market segment.

Porter's framework maintains that the attractiveness of a market segment is determined by five competitive forces. So far Microsoft is the leading software provider in the world in terms of its market share. It has faced many types of competitors from competitive products, and industry regulation challenges from various governments. It has actually thrived on this competition, often worrying more about the technology or customers’ wants and needs (Smith, 2003) while the constant focus with competition has kept Microsoft remarkably agile. Sometimes it has also contributed to Microsoft's overly aggressive tactics.

Eg: ‘bundling’ which was found guilty of illegally maintaining a monopoly, but escaped with permission to bundle products in any way its sees fit, with relatively minor restrictions. Amazingly Microsoft makes the industry favorable to it by tactical control of five forces. There are few substitute products that compete with enterprise software. The old way of maintaining and sharing company information was manual paper archival systems or printed reports from separate databases. The modern way of connecting all of a business’s information requires enterprise software. A business could continue with building multiple disparate systems, however, they would never be able to achieve what an enterprise software business solution could provide.

Therefore, enterprise software is more flexible, scalable, and less expensive than the older types of solutions. The near absence of modern substitutes in the industry is a good sign for the companies within the industry.

Microsoft contracts with multiple suppliers internationally, therefore the company has to maintain highly complicated supply-chain operations without any disruptions. The company sells Microsoft Dynamics AX, sophisticated software to assist with supply-chain management of businesses, and accordingly, Microsoft possesses an in-depth organizational knowledge about supply-chain management and inbound logistics. It is compulsory of all suppliers to adhere to Microsoft Supplier Code of Conduct and The Microsoft Supplier Requirements.

Microsoft manufacturing plants are located all over the world ensuring proximity to suppliers at the same time reducing transportation costs and negative environmental impact. Some of the manufacturing plants are located poorest areas such as Brazil’s Manas and Mexico’s Reynosa, thus creating jobs for local people. Interestingly, unlike many other corporations of similar size, Microsoft does not provide detailed data about the numbers and other details of its manufacturing plants around the globe. A company’s human resources can be measured in terms of its employee’s qualifications, commitment. Microsoft is able to attract and retain the best talent in the information technology business. Their employees are educated, dedicated and committed to their company, and this loyal and intelligent employee base is a very strong resource for Microsoft.

Microsoft recruits from campuses of top colleges and universities from around the world and the company has a highly diversified workforce. Microsoft provides high pay and great benefits in addition to a highly competitive work environment and thus is a magnet for high achievers. Thus, this network or ecosystem of more than 88,000 brilliant minds is the most important strength of the company. Microsoft Corporation are practicing e-procurement tools meet all those challenges, and it’s getting better all the time.

Electronic purchasing is eliminating handwritten requisition forms and long waits for supplies and services. It’s more efficient, provides a better grip on the procurement process, and altogether easier than paper-based methods. Before payment can be approved, every Microsoft supplier has to be approved by the Microsoft Procurement group, have signed an agreement with Microsoft, and have a purchase order in hand. Companies in the Cloud platforms (as known as Platform-as-a-Service or PaaS) strategic group provide complete on-demand development environments and tools, including an abstracted Cloud infrastructure layer and Cloud database, enabling enterprise IT groups develop, test, and deliver custom on-demand business applications without investing in traditional Systems Software or infrastructure. Cloud platforms, such as Microsoft Azure, also offer a stand-alone relational Cloud database, putting them in direct competition with pure-play DaaS firms. Based on the BCG matrix, Microsoft is correctly taking from cows and investing in question marks. They are not following the BCG principles by allowing the dogs to continue to survive.

The ownership test provides some insight as to why this may be. If the Server and Tools segment was an independent company, it would not perform near as well because of the synergies with the Windows Division. Additionally, this demonstrates a good example of the better off test for the Server and Tools segment.

They are better off under the Microsoft umbrella for the same synergies. Neither test would pass for the Online Services Division. Companywide there is a lot of collaboration.

For example, all of the software is designed to work together. The Windows operating system lets clients work with Microsoft servers, but the Windows operating system also lets clients collaborate together through the Office suite. The Xbox is the most independent product because it doesn’t integrate with the Windows operating system for most users, although it can be used to stream media from a Windows operating system.

All of these segments use the corporate-level functions described previously. Each segment can use corporate-level resources like legal, human resources, IT, and R&D, but how much they use each function varies.

Overall, Microsoft’s diversification strategy is related. Microsoft is a very vertically integrated software company. It does all of its design in house, because that is its intellectual property–the code. Other services are outsourced like internal IT (Thibodeau, 2010) and commoditized legal services (Mintzer, 2013). These services are not core competencies for Microsoft. Microsoft should stay with the same level of vertical integration.

They should only outsource elements of the business that are not a core competency for them, because this will ensure no other company can imitate them. Ultimately, Microsoft creates value at the corporate-level for most segments.

The Online Services Division is the only mystery. Bing only has 33% of the search engine market share (MadWire Media, 2013) and MSN.com is ranked 33 rd globally behind Google.com (1 st) and Yahoo.com (3 rd) (Alexa, 2014). This lack of market share and losses shown in Figure 1 would lead anyone to believe the segment should be sold.

With that said, having knowledge of what your customers are doing online through searches and how they configure their personal MSN.com homepage is valuable information that is difficult to acknowledge without inside information. These intangibles seem to be the only business case for the Online Services Division. If there is no insider information that would demonstrate value otherwise, my first recommendation would be to divest the Online Services Division. Additionally, I think the Surface tablet should be moved under the Entertainment and Devices Division. While the tablets run versions of Windows, I feel these products are questions like the other Windows phones and there would be many synergies of having the mobile phone developers’ work with the Surface developers.

The problem trying to be solved by Microsoft is that people want to be productive on the go. The Windows phone and Surface tablet are Microsoft’s answer to that question and therefore should be developed together under the same division. Having the Surface tablet under the Windows Division does not add any apparent synergistic value. Microsoft Corporation is an American multinational software corporation headquartered in Redmond, Washington that develops, manufactures, licenses, and supports a wide range of products and services related to computing. Microsoft is the world's largest software maker measured by revenues. It is also one of the world's most valuable companies and has controlled an overwhelming share of the personal computer operating system market.

Microsoft’s products do not stop at just an operating system; the company supplies the world with a number of other products including their Office Software Suite, their video game console Xbox, CRM Applications, server and storage software, and Zune, their digital music player. The company has had acquisitions to bulk its presence in markets such as online advertising, mobile devices, and enterprise software.

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.

Microsoft Argentina Headquarters in Buenos Aires, 2007. A Porter’s Five Forces analysis of Microsoft Corporation on external factors in the computer technology industry environment stresses the significance of competitive rivalry. (Photo: Public Domain)Microsoft Corporation strategically addresses the issues highlighted in its Five Forces Analysis. Michael Porter developed the Five Forces Analysis model to understand the external factors significant to an organization’s industry environment. In the case of Microsoft, these external factors are an effect of the activities of other firms in the computer hardware and software industry. Such factors are also based on the decisions of customers and suppliers. In relation, substitutes influence Microsoft.

To maintain its market position as a major competitor, Microsoft must consider the issues outlined in this Five Forces analysis of the technology business. A Five Forces analysis (Porter’s model) of Microsoft Corporation shows that competition is the external factor with the highest intensity in the computer technology industry environment. However, a variety of issues affect Microsoft, as shown in the details of the Five Forces analysis. Overview: Microsoft’s Five Forces AnalysisMicrosoft must develop appropriate responses to overcome the impacts of external factors identified in this Five Forces analysis.

The ability to strategically address these concerns influences the company’s resilience. The intensities of the five forces in Microsoft’s industry environment are as follows:. Competitive rivalry or competition (strong force).

Bargaining power of buyers or customers (moderate force). Bargaining power of suppliers (moderate force). Threat of substitutes or substitution (weak force). Threat of new entrants or new entry (moderate force). The results of this Porter’s Five Forces analysis of Microsoft put focus on competitive rivalry as the strongest force affecting the business and the computer technology industry environment.

In this regard, the company must implement strategies that boost competitive advantage. For example, Microsoft must increase its research and development efforts, along with improved product development, to maximize competitiveness against other firms’ products. Innovation also supports. This Five Forces analysis shows that the company must include the bargaining power of buyers, the bargaining power of suppliers, and the threat of new entry in strategic formulation.

These three forces have a moderate and significant effect on Microsoft’s performance. The threat of substitutes is a minimal consideration, although Microsoft can also work on this force to enhance product attractiveness. Competitive Rivalry or Competition with Microsoft Corporation (Strong Force)Microsoft needs to effectively compete to remain successful. This aspect of the Five Forces analysis determines the effects of firms on each other and the related conditions of the industry environment. In the case of Microsoft, the following external factors and their intensities exert the strong force of competition against the company:. Moderate switching costs (moderate force). High aggressiveness of firms (strong force).

High diversity of firms (strong force)Moderate switching costs have a corresponding moderate influence on Microsoft’s business. For example, customers have a moderate tendency to shift to other firms’ products.

While such shifting is not easy, companies upgrading their systems could opt to use computer hardware and software products from Microsoft’s competitors. On the other hand, the high aggressiveness of firms leads to a strong force that significantly affects the company’s industry environment. These technology firms are aggressive in terms of their rate of innovation and their marketing campaigns. Microsoft must also consider the strong force based on the high diversity of firms. For example, the company must innovate products that compete based on a wide variety of features showcased in other firms’ products.

In this aspect of the Five Forces analysis of Microsoft, external factors support the strong force of competitive rivalry, which is a priority issue in strategic decision-making. Bargaining Power of Microsoft’s Customers/Buyers (Moderate Force)Microsoft needs to continue satisfying customers, who significantly determine the company’s performance. The impact of customers or consumers on the computer hardware and software industry environment is evaluated in this aspect of the Five Forces analysis. Microsoft must respond to the moderate force of the bargaining power of customers, based on the following external factors and their intensities:. Low substitute availability (weak force). Moderate switching costs (moderate force). High quality of information (strong force)The low substitute availability represents the difficulty of access to effective substitutes to Microsoft’s products.

For example, customers face difficulties in finding non-computer-network solutions that are as effective and efficient as the company’s products. This external factor exerts a weak force on Microsoft and its industry environment.

However, the moderate switching costs create a considerable force on Microsoft’s business. Because of this intensity of switching costs, customers have a considerable tendency to shift from the company’s products and start using other firms’ products, instead. The external factor of the high quality of information further empowers buyers in terms of adequate information that they can use to compare Microsoft’s hardware and software products to competitors. For instance, such information is easily available from online sources.

Based on the external factors in this aspect of the Five Forces analysis, Microsoft Corporation must include the moderate force of the bargaining power of customers as a significant concern in its business strategies. Bargaining Power of Microsoft’s Suppliers (Moderate Force)Microsoft’s business depends on supply conditions. This aspect of the Five Forces analysis outlines the influence of suppliers on the computer hardware and software industry environment. The following external factors and their intensities maintain the weak force of the bargaining power of suppliers on Microsoft Corporation:.

Moderate size of suppliers (moderate force). Moderate population of suppliers (moderate force). Moderate overall supply (moderate force)The moderate size and population of suppliers enable them to impose a significant but limited influence on Microsoft’s business.

For example, some moderately sized suppliers of computer hardware components can change their pricing, which ripples to a potential adjustment in the company’s prices. The moderate overall supply also creates a significant but limited force on Microsoft. The intensity of this force could increase if the overall supply decreased. Thus, the external factors in this aspect of the Five Forces analysis of Microsoft points to the moderate force of the bargaining power of suppliers as an important strategic consideration in the computer technology industry environment. Threat of Substitutes or Substitution (Weak Force)Substitutes can reduce Microsoft’s market share. The effects of substitutes on firms and their industry environment are determined in this aspect of the Five Forces analysis.

In Microsoft’s case, the following external factors and their intensities impose the weak force of substitution on the business:. Low performance of substitutes (weak force).

Low availability of substitutes (weak force). Moderate switching costs (moderate force)Substitutes, such as non-online or manual-mechanical processes, tend to have lower performance compared to Microsoft’s current products. This external factor weakens the threat of substitution against the company. In relation, the global adoption of increasingly advanced technologies reduces the availability of substitutes and further weakens the threat of substitution that Microsoft experiences. While moderate switching costs help facilitate substitution, this external factor is not enough to significantly strengthen substitutes.

Based on this aspect of the Five Forces analysis, the weak force of the threat of substitution is a minor issue in Microsoft Corporation’s industry environment. Threat of New Entrants or New Entry (Moderate Force)In this aspect of the Five Forces analysis, the focus is on the influence of new entrants on the computer hardware and software industry environment. The intensities of external factors that lead to the moderate force of the threat of new entry against Microsoft are as follows:.

High cost of brand development (weak force). Moderate cost of doing business (moderate force).

Moderate switching costs (moderate force)The high cost of developing the brand of a technology business weakens the effects of new entrants on companies like Microsoft Corporation. However, the moderate cost of developing such a business presents considerable chance for new entrants to find success in competing in the computer hardware and software market. The moderate switching costs also partly contributes to the potential success of new entrants in competing against firms like Microsoft. These external factors have a moderate contribution to the potential competitive concerns of the company. Overall, such condition corresponds to the moderate force of the threat of new entry against Microsoft. This aspect of the Five Forces analysis shows that new entry is a significant issue affecting Microsoft’s industry environment. References.

Dobbs, M. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45. Grundy, T.

Rethinking and reinventing Michael Porter’s five forces model. Strategic Change, 15(5), 213-229. Roy, D.

Strategic Foresight and Porter’s Five Forces.