Case Study Description of Microsoft's Diversification Strategy
In November 2005, Microsoft launched Xbox 360, its latest game console. It was an extraordinary event, not because of the glamorous business executives and journalists hanging around the event, the super cool festival mood soaking the Mojave Desert, or the graphic technologies dazzling the giant consoles surrounding the conference room. Rather, the air was filled with a mix of trepidation and excitement about the viability of the company's new strategy of moving beyond Windows-based PCs. Everybody in the room wondered whether the company could regain its past glory by entering new territories. What opportunities and challenges, they wondered, awaited the company in markets in which it did not have proprietary advantage? What specific strategies did it have to adopt to capitalize on the opportunities and counter the challenges? How best could Microsoft execute its diversification strategy?
Swot Analysis of "Microsoft's Diversification Strategy" written by Ali Farhoomand, Samuel Tsang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Diversification Event facing as an external strategic factors. Some of the topics covered in Microsoft's Diversification Strategy case study are - Strategic Management Strategies, Joint ventures, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Microsoft's Diversification Strategy casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, there is backlash against globalization,
challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Microsoft's Diversification Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Microsoft's Diversification Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Diversification Event, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Diversification Event operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Microsoft's Diversification Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Microsoft's Diversification Strategy case study
2. Improving business portfolio management of Diversification Event
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Diversification Event
Strengths Microsoft's Diversification Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Diversification Event in Microsoft's Diversification Strategy Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Diversification Event in the sector have low bargaining power. Microsoft's Diversification Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Diversification Event to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Strategy & Execution field
– Diversification Event is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Diversification Event in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Diversification Event is one of the leading recruiters in the industry. Managers in the Microsoft's Diversification Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Diversification Event has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Diversification Event has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Operational resilience
– The operational resilience strategy in the Microsoft's Diversification Strategy Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Diverse revenue streams
– Diversification Event is present in almost all the verticals within the industry. This has provided firm in Microsoft's Diversification Strategy case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- Diversification Event is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Diversification Event is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Microsoft's Diversification Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Diversification Event in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Diversification Event
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Diversification Event does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Diversification Event has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Microsoft's Diversification Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Diversification Event has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Innovation driven organization
– Diversification Event is one of the most innovative firm in sector. Manager in Microsoft's Diversification Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Microsoft's Diversification Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Microsoft's Diversification Strategy are -
Skills based hiring
– The stress on hiring functional specialists at Diversification Event has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Ali Farhoomand, Samuel Tsang suggests that, Diversification Event is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Products dominated business model
– Even though Diversification Event has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Microsoft's Diversification Strategy should strive to include more intangible value offerings along with its core products and services.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Diversification Event supply chain. Even after few cautionary changes mentioned in the HBR case study - Microsoft's Diversification Strategy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Diversification Event vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Diversification Event has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Workers concerns about automation
– As automation is fast increasing in the segment, Diversification Event needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Microsoft's Diversification Strategy, in the dynamic environment Diversification Event has struggled to respond to the nimble upstart competition. Diversification Event has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Diversification Event products
– To increase the profitability and margins on the products, Diversification Event needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study Microsoft's Diversification Strategy that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Microsoft's Diversification Strategy can leverage the sales team experience to cultivate customer relationships as Diversification Event is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Microsoft's Diversification Strategy HBR case study mentions - Diversification Event takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Interest costs
– Compare to the competition, Diversification Event has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities Microsoft's Diversification Strategy | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Microsoft's Diversification Strategy are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Diversification Event to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Diversification Event to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Diversification Event can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Diversification Event can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Loyalty marketing
– Diversification Event has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Learning at scale
– Online learning technologies has now opened space for Diversification Event to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Diversification Event can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Diversification Event can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Diversification Event is facing challenges because of the dominance of functional experts in the organization. Microsoft's Diversification Strategy case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Diversification Event in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Diversification Event to increase its market reach. Diversification Event will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Diversification Event can use these opportunities to build new business models that can help the communities that Diversification Event operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Diversification Event can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Microsoft's Diversification Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Diversification Event has opened avenues for new revenue streams for the organization in the industry. This can help Diversification Event to build a more holistic ecosystem as suggested in the Microsoft's Diversification Strategy case study. Diversification Event can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Diversification Event in the consumer business. Now Diversification Event can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Microsoft's Diversification Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Microsoft's Diversification Strategy are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Diversification Event business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Diversification Event needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Diversification Event can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Stagnating economy with rate increase
– Diversification Event can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Diversification Event can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Microsoft's Diversification Strategy .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Diversification Event will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Microsoft's Diversification Strategy, Diversification Event may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
High dependence on third party suppliers
– Diversification Event high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Diversification Event with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Regulatory challenges
– Diversification Event needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Increasing wage structure of Diversification Event
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Diversification Event.
Shortening product life cycle
– it is one of the major threat that Diversification Event is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Microsoft's Diversification Strategy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Microsoft's Diversification Strategy needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Microsoft's Diversification Strategy is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Microsoft's Diversification Strategy is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Microsoft's Diversification Strategy is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Diversification Event needs to make to build a sustainable competitive advantage.