Strategic Management Assignment Sample

Introduction of Microsoft Inc. Strategic Management Assignment

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Organizational competitiveness may be improved by strategic management (SM), which involves creating goals, processes, and priorities (Fuertes et al., 2020). In general, strategic management focuses on how to best allocate human and material resources to accomplish these objectives. When it comes to providing overall direction, strategic management establishes goals, formulates strategies to attain those goals, and then allocates resources to carry them out (Lynch, 2018). Hence, this report is focused on a critical analysis of the strategic management of the global tech business of Microsoft.

Many organisations have made significant changes in the world, but few have had such a profound influence on the globe as Microsoft. Many individuals use Microsoft goods and services for both work and personal reasons. Due to its ever-evolving product line, the corporation was the most valuable in the world at the end of 2018 (Stravium Intelligence LLP, 2019). Windows and other Microsoft software are now commonplace in the workplaces of many businesses. Redmond, Washington, is home to this well-known multinational software manufacturer, which maintains a presence in more than 60 countries across the world. An increasing number of firms are relying on the company’s expertise to guide them through their digital transformations. Hence, it is critical to identify the company’s current market and industry challenges faced between 2019 and 2021 and analyse its strategies in these three years, using advanced strategic management tools.

2. Key Strategic Issues Faced by Microsoft

Battle of Cloud Service

Cloud computing makes it easy for developers to support a wide range of systems. Consequently, Microsoft’s Windows revenues are expected to fall. Windows 10 was made available to the public for free by Microsoft, but the company still battled to convince people to use it. If cloud gaming is not the future of video games, Xbox and PC gaming will have nothing to do with the rest of Microsoft (Ojha, 2020). Maintaining a strategic focus will be tough. Even though it’s a wholly-owned subsidiary, they could consider separating that component of the corporation. AI research at Microsoft is powerful, and Azure has a wide range of users. However, they don’t have any widely accepted AI-based consumer products. As a result, they may lag in their efforts to collect certain types of data.

Amazon Web Service (AWS), Amazon’s public cloud service, controls 40% of the market for public cloud services, as per Synergy Research Group, keeping Microsoft in second place for the time being. As of the third quarter, Azure has a market share of little under 20%. While Microsoft’s Azure has been steadily gaining market share in tandem with global cloud service growth, the business recently won a huge and contentious Pentagon contract against Amazon. Azure, however, grew by just 59% in the third quarter of 2019, compared to 76% growth in 2018 (Gaus, 2020). There is a lot of optimism among investors about Azure, but Microsoft still has a long way to go before it can claim supremacy in the cloud.

Cyber Security Issue

Living in the digital world has its downsides. One of the most significant roadblocks to successful digital transformation is ensuring a company’s information systems are safe and secure. Throughout the previous year, cyberattacks have dominated the news cycle. The software supply chain has been tampered with, on-premise systems have been attacked, and critical government information has been compromised (Winder, 2020). Schools, hospitals, and a crucial national pipeline have been targeted by criminal ransomware gangs. There is a new international age that stops short of war but is plagued by persistent foreign cyberattacks on companies, schools, healthcare, and everyday life. Ransomware threats like the recently found strain of NetWalker that can inject malicious code into the Windows 10 explorer executable process are bad enough, but they are only the tip of a very scary cyber iceberg. “Most impactful trends in cyberattacks” today, according to Microsoft’s threat prevention intelligence team, are ransomware assaults that target corporate users.

National Economy and Investor

Last year, several investors were concerned that a slowdown in the global economy would lead to a decrease in business technology expenditure. According to a Morgan Stanley poll performed in the third quarter of 2019, CIOs (“chief information officers”) expected IT spending to expand at a slower rate in 2020 than it did in 2019 (Gaus, 2020). It is not known yet what the implications for Microsoft of any such retreat would be. Even though it’s one of the world’s top IT companies, its goods are essential to many businesses. It was Microsoft’s CFO Amy Hood who emphasised the company’s emphasis on areas of growth and potential and to invest in those that have a significant “total addressable market” (TAM) on October’s earnings call. However, investors will continue to carefully monitor economic data and what they represent for Microsoft in the coming years.

Competitive Market

Desktop computing is on the wane, and Microsoft has fallen short in practically every growing computer industry. Mobile, wearable, audio and entertainment, home automation, and communications are just a few of the areas where they are falling short. Windows, Server Products, Office, X-Box, Azure, and other Microsoft products are among the company’s most valuable assets (Eitzman, 2019). Although Microsoft’s server products are required if users are running an MS LAN, Google and Apple already offer desktop OS, hardware, as well as office productivity applications. Azure Cloud Hosting also lags considerably behind Amazon, which implies that Microsoft’s sole uncontested sector is the Xbox. Using Microsoft at work but Android and iOS at home will lead to a gradual shift away from Microsoft in favour of platforms that are more familiar to workers.

3. Business and Corporate Strategies of Microsoft

3.1 Strategic Management Analysis Using Perceptual Mapping

Mergers and acquisitions play a vital part in business strategy in this era of fierce competition. Microsoft, for example, uses mergers and acquisitions to expand its capabilities, product line, and value proposition. In 2021, Microsoft also bought a share in Rubrik, a start-up that specialises in ransomware detection and cloud-based data recovery, and signed into a strategic arrangement with Rubrik (Alto, 2021). Customers of both firms may expect data security for Microsoft 365 and integrated cloud services on Microsoft Azure as a result of the agreement. When it comes to information security and IT, Microsoft’s acquisitions and strategic investments are timely. According to MOMENTUM CYBERSECURITY GROUP (2021), a cybersecurity advice business, there were 593 acquisitions worth $51 billion in the first half of the year. There were 163 mergers and acquisitions for $39.5 billion, as well as 430 financing agreements worth $11.5 billion, in total. Both Proofpoint and Auth0 were bought by Thoma Bravo for $12.3 billion in cash (Alto, 2021).

 Merger and Acquisition Activities of Microsoft

(Source: Alto, 2021)

Based on the discussion above, the biggest area of competition for Microsoft now is a cloud service, since desktop computing is diminishing day-by-day and Windows has been dominating the OS market for a long time, and the company is focusing on merger and acquisition to take on the expected competitive position in the market. The area that the company lags and must focus on right now is a cloud system, Azure, against its biggest competitors like Google Cloud Platform (GCP) from Google and Amazon Web Service (AWS) from Amazon. With the help of the following table and a perceptual map, it can be analysed which of these three cloud-service giants were ahead of that the rest in 2021. The mapping has been done on two variables, such as revenue and percentage of share in parent company’s total revenue.

(Source: Microsoft, 2021; Palmer, 2022; Vailshery, 2022; Johnson(a) 2022; Johnson(b) 2022)

 Perceptual Map of Microsoft, Google and Amazon’s Cloud Services

(Sources: As created by author)

3.2 Strategic Management Analysis Using Theory of Change (TOC)

As part of the TOC model, companies identify their long-term objectives and then work “backwards” to achieve them (Dhillon and Vaca, 2018). With the approach, firms begin with a long-term aim in mind. The TOC goes through eight steps:

 Eight Steps in Theory of Change

(Source: Van Es, Guijt & Vogel, 2015)

• Purpose of TOC

Using cutting-edge technology, Microsoft is making it easier for its clients to maintain end-to-end security and conduct safe operations throughout the globe. Every day, these operations evaluate more than 6.5 trillion security signals using enterprise-class technologies and wide cybersecurity relationships (Stravium Intelligence LLP, 2019). Tech intensity is an approach to making the Azure platform the world’s most powerful machine while attracting more and more businesses. In addition, the company believes that research should concentrate on having the greatest effect on consumer security.

• Desired Change

The corporation intends to develop artificial intelligence (AI) using a variety of approaches and to keep up the momentum in 2019 and beyond. For clients that are wanting to incorporate artificial intelligence into their applications, Azure provides AI developer tools and services. Also, AI is used to enhance the company’s internal processes. The “Azure Sphere Security Research Challenge” is a three-month initiative by Microsoft to spur new high-impact security research and test Azure Sphere’s security promise against the finest competitors in their area (Hunt & Abendroth, 2020).

• Current Situation

In the long run, Windows and MS Office will remain popular, but Microsoft has a huge challenge ahead of it is moving from on-premises to the cloud. A cloud service market is a competitive place. However, in such a turbulent market, anything can happen. Microsoft is doing great. Despite the pandemic’s expanded business prospects, hostile actors persisted to strike the company’s IT infrastructure. After claiming to be security measures, they are now under threat (Jones, 2021).

• Change Domains

One may argue that new addition to Microsoft’s corporate strategy is its emphasis on technological acuity and complexity. Creating a safe cyber environment for their customers is at the heart of their company and corporate strategy at this moment. With this in mind, Microsoft is incorporating AI into everything from its software to its computers.

• Strategic Priorities

Because its productivity and business process as well as Intelligence Cloud divisions account for the bulk of Microsoft’s income, the corporation places a high value on AI, cloud computing, and future security solutions.

• Change Pathways

With the help of the “Microsoft Security Response Center”, Azure encouraged some of the world’s greatest researchers to attempt to breach their gadget using the same sorts of methods that any bad actor would (Hunt & Abendroth, 2020). Two high-priority scenarios demonstrating code execution in Microsoft Pluton or Secure World can earn up to $100,000, demonstrating the company’s commitment to a tech intensity approach. The company has provided six research circumstances with extra rewards of up to 20% on top of “Azure Bounty” of up to $40,000. Participants received a development kit, privileged access to the OS “Security Engineering Team”, weekly office hours and email assistance as well as the publicly accessible OS kernel source code to ensure their progress.

• Monitoring, Evaluation and Learning (MEL) Priorities and Process

Microsoft discovered many high-risk flaws in Azure Sphere thanks to the aid of several contributors. Quality is a testimonial to the participants’ knowledge, grit, and hard work. During the research challenge, the Microsoft team learned a lot and will investigate and announce other possibilities to cooperate with the security research community in the upcoming time.

• Use and Adaptation

To create an end-to-end digital feedback loop, breaking down data silos and smoothing information flow are key components of the growing trend of tech intensity, which benefits the creation and improvement of digital capabilities by fusing cultural mindsets with business procedures (Stravium Intelligence LLP, 2019). The perceptual map shows that despite the upcoming drawbacks for the company explained in the previous section, the most strategic intention of the company is still in the game. In terms of revenue, Azure has been successful in maintaining its place right behind AWS, while contributing more share in the overall company revenue than Google.

4. Microsoft Experiences Strategic Success

Microsoft’s digital transformation gives it the ability to have a significant effect across the sector and drive global results. The firm has a wide range of goods and services that are all related to productivity and business operations. Some of these items have become quite successful on a worldwide scale because of their ability to support digital work and living for users. Since Satya Nadella became CEO, Microsoft has shifted its attention to humanising the corporation through enhancing its organisational culture. This person improved the organization’s ability to coordinate operations across divisions and teams. Technology intensity is a major component of Microsoft’s business strategy. Additionally, the IT giant is concentrating on mergers and acquisitions and the exploration of the cloud service sector by delivering the greatest level of cyber security.

Microsoft’s valuation has risen by about 200% since Satya Nadella succeeded Steve Ballmer as CEO in February 2014 (CB Information Services, 2018). Cloud, AI, and gaming have all seen significant increases in recent months, thanks in part to new leadership emphasising these high-growth sectors. Nadella outlined two important organisational changes in 2018, such as the deprioritisation of Windows while promoting AI. When it comes to long-term competitive advantage for a firm, a strong lead in the cloud sector may be a powerful source of strength. When it comes to cloud computing, Microsoft is making a concerted effort to ensure that Azure is the best option for clients’ data estates. Investors and experts were surprised to see the company’s share price rise beyond expectations.

Microsoft is exploiting its global data centre location and expertise to become the dominant cloud host and service provider. For disruptive technologies, the corporation is significantly investing in AI, computing and secured servers. Despite the ever-evolving nature of technology and business prospects, Microsoft has set the bar sufficiently high to maintain its position as an industry leader. Microsoft positioned itself as the preferred solution to deliver consumers a holistic, end-to-end solution, which provided a smooth, secure experience to thrive in an environment dominated by remote work (Weaise, 2021).

5. Evaluation of the Strategic Management of the Company

Microsoft’s soaring stock price has prompted investors to believe that the company’s results would exceed expectations by a significant margin. Investors no longer dispute the company’s turnaround under CEO Satya Nadella after years of investment to make Azure a solid second position in cloud services following Amazon.com Inc. Even if the momentum is not diminishing, some stakeholders are starting to become worried. Investors in Microsoft are very concerned about Azure’s slowing down the pace. Some investors were disappointed by Azure’s revenue growth of 51% in the period since it was mainly fuelled by currency changes; the figure reduces to 45% without that boost, which represents a slowdown from the preceding quarter (Bass, 2021).

While Amazon and Google’s cloud services are becoming more and more popular, Microsoft continues to be one of the most valuable companies in the world. Microsoft’s strategy seems to be working effectively so far, as the firm announced higher-than-expected profitability in its most recent quarter, mostly due to the excellent success of its cloud products and commercial services. In the long run, Microsoft’s Azure cloud is vital to the company’s success. Additionally, Azure serves as a basis for Microsoft’s software, gaming, and personal computing products in addition to being a stand-alone service from Microsoft. Among other things, Microsoft is using AI technology to enhance security in the corporate as well as gaming and advertising. Several companies, including research projects and acquisitions, have invested in the cloud from Microsoft during the last several years.

This discussion establishes the point of the very argument of whether Microsoft’s growth in market shares is a result of good strategy or good luck. The company has been overcoming all its hurdles through the effectual implication of business and corporate strategies, proving that through focusing on the appropriate area, it is going to the counted as a leading entity for a long time.

6. Conclusion

It is the ultimate goal of strategic management to provide organisations with an advantage over their rivals in the marketplace. Microsoft’s goal is to make it possible for everyone and every organisation to fulfil their full potential, along with introducing Azure as one of the world’s best computing services, a similar way it did with Windows. Successful consumers and business partners are critical to the company’s business plan. As a result of the company’s efforts, every town in the country now can harness the potential of modern technology to solve pressing issues, using cloud services. However, the company is now focusing on expanding the cloud service, Azure, for a competitive edge, along with increasing the level of cyber security. For this, it is implicating approaches like mergers and acquisitions, and research and development. The more than expected growth in market share during 2021, despite high competitiveness from Amazon and Google, indicates the point that this tech giant is still implementing strong strategic management.

References

Alto, P. (2021). Rubrik Announces Strategic Agreement with Microsoft to Mitigate Ransomware Threats and Tightly Integrate Cloud Services. Retrieved on 24^th March, 2022 from https://www.rubrik.com/company/newsroom/press-releases/21/strategic-agreement-with-microsoft-to-mitigate-ransomware-threats

Bass, D. (2021). Microsoft Tops Estimates; Azure Growth Trend Spooks Investors. Retrieved on 24^th March, 2022 from https://www.bloomberg.com/news/articles/2021-07-27/microsoft-posts-sales-profit-gain-shares-drop-on-azure-concern

CB Information Services, Inc. (2018). Microsoft Strategy Teardown: Cloud, AI, & Subscriptions And The Next Trillion-Dollar Company. Retrieved on 24^th March, 2022 from https://www.cbinsights.com/research/report/microsoft-strategy-teardown/

Dhillon, L. & Vaca, S., (2018). Refining theories of change. Evaluation, 14(30), pp.64-87.

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Gaus, A. (2020). Microsoft’s 3 Biggest Challenges for 2020. Retrieved on 24^th March, 2022 from https://www.thestreet.com/investing/microsoft-3-biggest-challenges-2020

Hunt, G. & Abendroth, B. (2020). Why we invite security researchers to hack Azure Sphere. Retrieved on 24^th March, 2022 from https://www.microsoft.com/security/blog/2020/10/06/why-we-invite-security-researchers-to-hack-azure-sphere/

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Lynch, R (2018). Strategic management. Pearson UK.

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Ojha, A. (2020). A Review on Cloud Computing. International Journal of Research in Engineering, Science and Management, 3(11), pp.88-90.

Palmer, A. (2022). Amazon shares soar on cloud revenue beat and huge profit gain from Rivian stake. Retrieved on 24^th March, 2022 from https://www.cnbc.com/2022/02/03/amazon-amzn-q4-2021-earnings.html

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Vailshery, L. S. (2022). Amazon Web Services: Annual revenue 2013-2021. Retrieved on 24^th March, 2022 from https://www.statista.com/statistics/233725/development-of-amazon-web-services-revenue/

Van Es, M., Guijt, I. & Vogel, I. (2015). Theory of change thinking in practice: a stepwise approach. Den Haag: Hivos.

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Winder, D. (2020). Microsoft Warns Of ‘Devastating’ Cybersecurity Threat: Here’s What You Need To Know. Retrieved on 24^th March, 2022 from https://www.forbes.com/sites/daveywinder/2020/03/06/microsoft-warns-of-devastating-cybersecurity-threat-to-windows-users-heres-what-you-need-to-know/?sh=690faf161af8