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 - – technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , increasing commodity prices, increasing transportation and logistics costs, geopolitical disruptions, increasing household debt because of falling income levels,
customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, 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 -
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.
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.
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.
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.
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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Diversification Event digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Diversification Event has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
Cross disciplinary teams
– Horizontal connected teams at the Diversification Event are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
Effective Research and Development (R&D)
– Diversification Event has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Microsoft's Diversification Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Diversification Event is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Ali Farhoomand, Samuel Tsang can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Training and development
– Diversification Event has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Microsoft's Diversification Strategy Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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 -
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.
Increasing silos among functional specialists
– The organizational structure of Diversification Event is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Diversification Event needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Diversification Event to focus more on services rather than just following the product oriented approach.
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.
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.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Microsoft's Diversification Strategy, is just above the industry average. Diversification Event needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow decision making process
– As mentioned earlier in the report, Diversification Event has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Diversification Event even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
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.
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.
No frontier risks strategy
– After analyzing the HBR case study Microsoft's Diversification Strategy, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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 -
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.
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.
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.
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.
Manufacturing automation
– Diversification Event can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Diversification Event can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
Using analytics as competitive advantage
– Diversification Event has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Microsoft's Diversification Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Diversification Event to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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 -
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.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Diversification Event can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Technology acceleration in Forth Industrial Revolution
– Diversification Event has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Diversification Event needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Diversification Event needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
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.
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.
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 .
Consumer confidence and its impact on Diversification Event demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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.
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.
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.
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.
