Analyse the impact and influence which the macro
environment has on an organisation.
Business strategy is very important for an organisation as
it can help to achieve a list goals and objectives. A business strategy is used
by the organisations management to obtain higher levels of performance within
the organisation. A businesses strategy plan shows the way in which management
wants to achieve their goals and by when they want them achieving. Within a
business strategy, the organisation may find it hard to compete with their
market competitors. However, even with a good business strategy, the success of
the organisation is not guaranteed and can fail due to external factors that
the organisation cannot control.
To be able to create a successful business strategy, the
organisation needs to be able to conduct strategic planning. Strategic planning
determines the organisational strategy, direction, and resource allocation for
achieving the desire goals. For determining the direction of the organisation,
it is needed to know the current situation of the organisation and what will be
the future of the organisation. To be able to conduct strategic planning,
management needs to be aware of; the mission, the vison, goals and objectives.
The mission of any business or organisation is the basic aim
of the business. The aim of the business gives a description of why the
business is there and what it will do to obtain the businesses vision. It is
important that the organisation has a mission statement as this will motivate
and inspire the workforce to work together so that the organisation can achieve
the overall vision.
The vision of a business is a description of what it wants
to be in the future. This can be where the business wants to operate in the
future or other goals that the organisation wants to achieve in a period of
time. Vision statements are often created based on long term goals of the
Goal is something that man desires, and it is an end result
and a specific target. It is the main step to achieve the targets of an organisation.
Goal is the destination of an organisation and it is the contextual planning to
achieve a target. Top managements decide the goals of a company and every other
person will follow the contextual planning to attain the goals
An objective is the measure of progress which is needed to
reach the target whereas a goal is the details of the destination. Objectives
are the steps to attain goals that means objectives are the part of a goals,
but goals are not a part of objectives.
Microsoft Corporation is a technology firm that deals with
most goods and services related to personal computers. Microsoft creates
produces, licenses and sells computer software such as Microsoft Office.
Microsoft also offers free internet services such as Internet Explorer and
The external environmental impact on organisations such as
Microsoft is highly important as it directly impacts its performance and
dictates how management needs to development appropriate strategies in dealing
Government rules and regulations have great influence on the
businesses. Microsoft as being in the computer technology business should focus
on all of the political features of the business environment like, Environment
rules and safety issues, taxation, global trading policies, height of customer
security, the level of political stability and enforcement rules. These will
help to penetrate in the markets with the support of regulated bodies. For a
technology based company that has been around for so many years and is so
heavily involved with several other business ventures, it also becomes
imperative for Microsoft to abide by all government policies to ensure seamless
operations throughout the world.
Environmental factors have become increasingly important for
businesses in recent years. Microsoft and other technological companies that
make laptops, PCs and smartphones hold a major responsibility towards the
environment and the wellbeing of the planet. These products are difficult to
dispose and contain dangerous materials which can have a significant negative
effect on the environment if they are not disposed properly. So, apart from
proper disposal of the products, environmental impact of the entire brand also
becomes a major concern for any technological company.
Microsoft has also focused on maintaining a low
environmental impact during its manufacturing processes and has made
significant investments. Overall, it has been carbon neutral since June 2012.
The brand has also invested in renewable energy as a part of its sustainability
Social and cultural factors can have an impact on the
businesses and their revenues and growth. Businesses cannot stand away from
these forces as they can be seen as one of the most influential external
factor. In the recent years, people have switched to mobile devices with larger
screens. The growing popularity of smartphones has not worked in the favour of
Microsoft. Its products are mainly designed for use on laptops and PCs.
However, the growing use of mobile devices has created opportunities for the
other businesses. Social trends and demographic changes can be favourable or
unfavourable for businesses. Similarly, in terms of marketing, culture is an
important factor that international businesses have to mind when operating in
the foreign countries.
Microsoft operates within the technology industry and so the
technological changes are bound to affect it massively. New technologies come
and leave the old ones out of date and no good anymore, therefore, Microsoft
need to make sure that they conduct innovation, if it is to remain ahead in the
race. The pressure from competitors such as Google and Apple is intense and if
Microsoft fails on any point, it can result in severe losses.
Legal factors are another major force which can have a deep
impact on business. Law is virtually everywhere and for businesses a legal
tussle can mean a big loss. A tussle with the law can be very bad for the
financial health of the company as well as the company’s reputation. There are
several laws related to labour and products that affect the business of
Microsoft. Also, technology and IT related laws affect its business. Microsoft
and all other big technological companies need to remain careful about laws and
The economic factors in terms of increasing threats of
cyber-attacks are posing threats to the organisation like Microsoft in coming
up with newer technology in addressing customer needs
Stakeholder Analysis is a pragmatic way of identifying and
understanding multiple (often competing) claims of many constituencies. As part
of a general stakeholder approach, SA is a method to help understand the
relationships between an organisation and the groups with which it must
interact. (Weiss, 2014)
Stakeholders Analysis involves identifying and prioritising
key stakeholders, assessing their needs, collecting ideas from them and
integrating this knowledge into strategic management processes such as the
establishment of strategic direction and the formulation and implementation of
strategies. (Harrison & St. John, 2009)
List of stakeholders
Porters 5 factors
Porter’s Five Forces is a model that identifies and analyses
five competitive forces that shape every industry, and helps determine an
industry’s weaknesses and strengths. Frequently used to identify an industry’s
structure to determine corporate strategy, Porter’s model can be applied to any
segment of the economy to search for profitability and attractiveness.
These factors include:
Threat of New Entry
Treat of Substitution
Although Microsoft is the market leader for many of the technologies
of personal computers, the technological industry in today’s world is very
competitive. Many of Microsoft’s products and services such as operating
systems (Eg. Windows 10) and other computer software (Eg. Microsoft Office) are
also being produced by other large companies that provides the same features
Microsoft’s but also has other features that Microsoft’s products do not
include. The competition within the technology industry depends on the rate of
innovation for each company as falling behind a company with such scale of that
of Microsoft can be hard to catch up to.
For each of the different companies and the various products
they produce, customers do have a large feeling of loyalty. This is based on
the known quality of the products but also, they can they can be used as it may
take time to get used to a new product from a different organisation.
Competitive Rivalry in different areas of the technology industry
will be different for Microsoft. For example, Microsoft’s Windows operating systems
holds a large portion of the OS market, so the rivalry is low. However, gaming
console market has a relative even share between Microsoft and Sony so the
rivalry between them is high.
Threat of New Entry
The Threat of new entrants to the technology industry is incredibly
low as a result of the major companies that have become well-established in the
technology industry. This is also due to significant industry barriers relating
to financial investments and technological know-how that small, new companies
would not be able to compete the with the market leaders. Moreover, due to its
global size and scale of operations, Microsoft offers huge cost advantages because
of its size and popularity and this advantage is not available to new entrants
of the industry, at least during the initial stages of operations. However, by
then there is a major possibility that the new company has ran its course and collapses.
Another consequence of the huge market share of the top three industry
competitors is the low chance of new companies being able to come up with
innovative ideas that the large companies have already thought of. This leads
to a low change that angel investors and venture capitalists will fund new
However, with the increase popularity of digitalisation and
the internet, there is always a slim chance that new companies can squeeze
themselves into the market.
Customers of Microsoft’s software will not easily switch to
software produced by a different company (Eg. Apple) although they will perform
in very similar manners. The main reasons why customers are unlikely to switch
is the because of the time and money. Starting on a new software will have
slightly different ways of doing tasks which will take time to get used to.
Also starting from scratch on a new software can be costly to re-format all the
old files into a format that will work best with the new software. Even though it is possible that customers of
Microsoft will leave for another company, Microsoft are able to increase their
prices and most buyers will continuing using it.
Unlike different software, hardware products are more
commonly switched between different companies because the switching cost is
very low because of the large variations available in the market. Overall, this
leads to a moderate level of bargaining power of buyers.
The bargaining power of suppliers of Microsoft is low
because of the size of Microsoft as well as what they produce. As most of
Microsoft’s products are software based, they are intangible and produced at
Microsoft therefore there is limited need for tangible supplies. However, for
the tangible products such as the tablets and game consoles, the supplies
needed are in large quantities therefore suppliers cannot risk losing a major
income source. As well as the risk of losing a large income from Microsoft,
suppliers may also lose income from other companies as they can use the
prestige of supplying Microsoft to increase costs to other businesses.
Treat of Substitution
Microsoft’s Windows operating
Windows is to Mac’s desktop and operating system. So, if users were interested in changing
products, they would have to completely change their computer, their comfort
with a PC and their knowledge of how PCs work. If the users were to change to a Mac, they may
not be able to view its operating system in the same light as Window as it is a
“As one of the most important frameworks for understanding
strategic directions, the Ansoff matrix can be adapted to model the risks that
are inherent with any new business direction. Wherever a business engages with
a new product or a new market, there is a chance that things will not work out
as well as hoped and anticipated. These product and market risks can be
modelled on the Ansoff matrix using the idea of risk contours” (Campbell, Edgar, & Stonehouse, 2011).
The Ansoff matrix has two comparing factors, one relating to
products and the other relating to the market in which the product is sold.
With the two-by-two matrix, there are four possible outcomes for the
organisation who are using it;
Market penetration is the strategy of selling more to an
existing customer base. Microsoft sells to both individuals and organizations.
Since it has been selling affordable computing solutions, the brand has been
able to build a large customer base.
However, it has added a large series of products and services to its
product line which it sells to its existing customer base too. Since it has a
very large customer base already, the brand is able to sell the new products it
makes to the individual and organizational customers.
Product Development is also an important strategy adopted by
Microsoft to grow its market base and revenue. The brand has grown its sales
worldwide and kept adding to its diverse array of products. Apart from software
products, it makes a diverse array of products like servers, CRM and other
business solutions, developer tools, PC games and other accessories. This
product line has kept growing and adding to Microsoft’s revenue.
Market development is the process of entering new markets
and new regions to expand the customer base and to grow sales and profits.
Overtime, Microsoft has expanded its market globally from Europe and Asia
Pacific. This vast market base means high sales and revenue. Apart from market
penetration, Market Development is the other main strategy adopted by Microsoft
to develop its market base and market share.
Diversification could be seen as one of the last resort
options for a business with such size and reputation of Microsoft.
Diversification is a strategy of entering a new market of industry in which the
business doesn’t currently operate in. Within recent years, Microsoft have
started to work in the gaming industry as well as continuing to work within the
computer industry which has helped increase revenue.
Assess an organisation’s internal environment and
Huge Worldwide Reach: Microsoft has been producing quality
products for over 40 years, and have built themselves a name doing so. Their
computers and software appear in almost every household in the West, showing
their immense popularity. With this, they have a great (and often loyal)
customer base and a platform for advertising, through their existing products.
Plenty of Capital: Microsoft is 5th when it comes to the
world’s largest companies which shows just how much money they have available
to spend. With this, they can adopt much more aggressive marketing strategies
and invest more time and money into developing great products.
A Good Track Record: With great power comes great
responsibility. Microsoft may not produce much free software, but they do offer
plenty of customer support options and have a line of products which generally
work as advertised.
High Price Point: With some of Microsoft’s competitors
offering free versions of publishing and operating systems (OpenOffice and
Linus respectively), you can see how much Microsoft charge for their products.
This does have its benefits regarding to the increase of revenue, but it also
can the possibility of deterring customers to other companies that offer free
software or cheaper versions.
Plenty of Competition: While this will be discussed further
under the topic of ‘Threats’, it’s worth mentioning now that Microsoft has
plenty of competitors in the technology space. Of the four largest companies
above Microsoft on the list which was mentioned early, two of them (Apple and
Google) are also multinational technology companies battling Microsoft. Plenty
of alternatives exist to the products that Microsoft offer.
Making the most of their current standings: As mentioned,
Microsoft have plenty of money lying around. They have a great opportunity to
develop the world’s best software with their talented programmers and large
chunks of money to invest.
Microsoft is primarily a software business that heavily
relies on the popularity of the Windows operating system. In this regard, the
company has the opportunity to grow based on diversification. For example,
Microsoft can diversify through new business development or mergers to
establish operations in new markets or industries. In this way, the company can
take advantage of other avenues of business growth
Another opportunity is for Microsoft to innovate computer
hardware products, so as to increase revenues from hardware sales. At present,
the company’s hardware products are not as competitively strong as the products
from other firms in the computer hardware market.
Losing out on new markets: Compared to their competitors, Microsoft
was late for the mobile revolution. Companies such as Apple and Samsung saw
opportunity in this, and managed to capitalise on it. If Microsoft doesn’t
manage to stay current, its products will quickly grow out of date, and as a
company they will be pushed aside.
Static pricing models: Microsoft products are typically big,
expensive purchases that consumers only consider every few years. Microsoft
doesn’t really offer any particularly cheap products, and so lose out on market
share. Unless they change this to a more modern system, they might lose out to
the microtransactions other companies already employ today.
The objective of benchmarking is to understand and evaluate
the current position of a business or organisation in relation to best practice
and to identify areas and means of performance improvement.
Benchmarking involves looking outward (outside a particular
business, organisation, industry, region or country) to examine how others
achieve their performance levels, and to understand the processes they use.
In this way, benchmarking helps explain the processes behind
excellent performance. When lessons learned from a benchmarking exercise are
applied appropriately, they facilitate improved performance in critical
functions within an organisation or in key areas of the business.
The application of benchmarking involves four key steps:
in detail existing business processes
the business processes of others
own business performance with that of others analysed
the steps necessary to close the performance gap
Benchmarking should not be considered a one-off exercise. To
be effective, it must become an integral part of an ongoing improvement
process, the goal being to abreast of ever-improving best practice.
Types of benchmarking include:
Performance or Competitive Benchmarking