JADSYM- Strategy Group Report

Authored by: Jim Arthurs, Arisma Usman, Daan Khan, Sumayyah

Sabah, Yaseen Abdi, Mansour Alramadhan

APRIL 1

Lecturer: Nilufa Khanom

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Table of Contents

1. Executive Summary...............................................................................................3
2. Vision statement Analyses and recommendation..................................................4
Existing Vision.........................................................................................................4
Analyses..................................................................................................................4
Recommended Microsoft Vision..............................................................................4
Existing Mission.......................................................................................................5
Analyses..................................................................................................................5
Recommended Mission...........................................................................................5
Objectives...............................................................................................................5
Microsoft’s Current Strategies.................................................................................6
4. External Factor Evaluation.....................................................................................6
Interpretation and recommendation.......................................................................7
5. Internal Factor Evaluation – Strengths & Weaknesses...........................................8
Interpretation and recommendation.......................................................................9
6. SWOT Matrix.......................................................................................................11
8 possible alternative strategies............................................................................12
7. BCG Matrix..........................................................................................................14
9. The Quantitative Strategic Planning Matrix (QSPM)............................................16
8. IE MATRIX ...…………………………………………………………………………………………………….15
10. 3 Recommended alternative strategies............................................................17
11. Financial Statement..........................................................................................19
References................................................................................................................21

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 1. Executive Summary
The findings of this report were designed to validate personal and practical awareness,
expertise and abilities to achieve common objectives of information and concepts of
strategic management. By Identifying the already existing vision, mission, strategies and
objectives of the company with the addition of Creating a reflected new vision and
mission statement for the organisation.

Enhance the company's external opportunities and threats whilst also developing an
External Factor Evaluation Matrix (EFE Matrix). In similarity, Identify the internal
strengths and weaknesses of the organisation and establish an internal factor
assessment (IFE) matrix. Furthermore build a Competitive Profile Matrix (CFM).
Formulate a SWOT Matrix, BCG Matrix, and QSPM Matrix. Recommend clear
approaches, alternatives and three long-term objectives.

Including a development of a guideline on the benefits and drawbacks of alternative

approaches. Recommend specific annual targets for the next three years. Evaluate the
Microsoft guidelines with that of the company's actual specific plans and annual goals
arranged by them. Specify how the recommendations can be implemented in line with
IFE Matrix/EFE Matrix/SWOT Matrix and what results are to be expected. Concluding
with a projected financial statement for the next three (3) years with a justification on a
forecast in line with the IFE Matrix/EFE Matrix/SWOT Matrix.

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 2. Vision statement Analyses and
recommendation

Existing Vision
“to help people and businesses throughout the world realize their full potential.”
(About – Microsoft, 2020)

Analyses
- Vague doesn’t answer the questions “what do we want to become?”
- Not specific
- Doesn’t highlight where the company is heading

Recommended Microsoft Vision

“To be the foremost company in technological products designed to help consumers
and business streamline their work.”

Issues addressed
- What we are providing, “technological products and services”
- Who we are targeting, “Consumers and Businesses”
- Direction of the company where Microsoft wants to head in the future.

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 3. Mission statement analyses and
recommendation

Existing Mission
“to empower every person and every organization on the planet to achieve more.”
(About – Microsoft, 2020)
Analyses
- Vague and not specific what the mean by more
- Doesn’t address social and ethical responsibilities

Recommended Mission
“To continually grow as a company by providing better and stronger technological
products through innovation and employee initiative. That will help businesses and
consumers become more effective and efficient at their goals but never at the cost of
the social and ethical responsibilities of a multinational corporation.”

Issues addressed
- Mentions Microsoft’s business industry
- empowerment of employees through innovation
- reflects on the ethical and social responsibility

Why we are addressing the Vision and Mission statements

Addressing issues in the mission and vision statement allows the company to
communicate to customers why they provide the products and services and what they
aim to in the future. These statements exhibit the motives and goals the organisation
intend to accomplish in the future.

Objectives
“Establish and preserve management accountability to Microsoft's owners by appropriately
distributing rights and responsibilities among Microsoft Board members, managers, and
shareholders.

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Provide a structure through which management and the Board set objectives and monitor
performance.

Strengthen and safeguard our culture of business integrity and responsible business practices.
Encourage the efficient use of resources, and to require accountability for stewardship of
those resources.” (Microsoft Investor Relations - Microsoft Corporation Goals, 2020)

Microsoft’s Current Strategies

1. Focus on Cloud and Mobiles “Cloud-first, mobile-first” (Dudovskiy, 2018). Microsoft has a
strong competitive advantage in cloud-based software and continues to focus on that
area. (Dudovskiy, 2018) (Nguyen, 2018)

2. Growth through mergers and acquisitions. The ability of Microsoft to purchase

profitable concepts and products allows it to diversify its product lines. (Dudovskiy, 2018)
(Nguyen, 2018)

3. Product Development/Diversification. Microsoft continues to diverse its business

through the creation and acquisition of new products and software’s. Microsoft
controls its competitive advantages with over 60,000 patents that reduce the
competition of similar products. (Microsoft Strategy Teardown, 2019)

4. Artificial Intelligence has been a focus since 2015 when CEO Nadella said that the
company plans to “infuse everything with AI.” (Microsoft Strategy Teardown, 2019) This has
seen Microsoft acquire AI software and related material (Microsoft Strategy Teardown, 2019)

5. Gaming is a unique market Microsoft has compared to its other more typical
software/computerised focuses. In 2018 alone Microsoft acquired 7 different gaming
focused Companies and owns Xbox which has over 57 Million active users (Microsoft
Strategy Teardown, 2019)

4. External Factor Evaluation

External Factor Evaluation

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 Weighted
  Opportunities - External Weight Rating
Score
Focus on International and emerging
1 0.05 4 0.2
Markets
2 Constant demand for evolving Technology 0.1 2 0.2
3 Enhance Cybercrime Security 0.15 3 0.45
4 Cloud Technology Markets growing 0.15 4 0.6
South Korea is the fastest growing
5 0.1 1 0.1
technological country
         
Weighted
  Threats - External Weight Rating
Score
Consumer preference changing away from
6 0.15 3 0.45
PCs
7 Global threats & Economic Crisis 0.1 4 0.4
8 Increasing competition - Google, Apple, 0.05 3 0.15
9 Increasing software piracy and Cybercrime 0.1 2 0.2
10 Opinions & past controversy 0.05 1 0.05
  Total 1 - 2.8

Interpretation and recommendation

An external factor score of 2.8 suggests the company’s strategies are enough to meet
opportunities and defend against threats. However, this score doesn’t suggest that it’s
invincible.

Opportunities

Focus on International and emerging Markets - penetrating new markets and gaining
higher market share in existing markets through keeping their software simple to use
at competitive prices.
Constant demand for evolving Technology – take advantage of the demand for new
technology by focusing on constant research and development to stay ahead of the
pack.
Enhance Cybercrime Security – with ever emerging threats of cyber hacking there is
always opportunity to improve by hiring cyber security firms and consultants.

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Cloud Technology Markets growing – Microsoft Azure is one of the world leading
cloud platform providers, with the world moving towards cloud computing there is a
huge opportunity to capitalise.
South Korea is the fastest growing technological country – South Korea is an emerging
market in technology as evident with the rise of Samsung and android. Although a
competitor Android is yet to establish itself in the PC market for businesses.

Threats

Consumer preference changing away from PCs – more consumer are looking toward
mobile platforms rather than PCs.
Global threats & Economic Crisis – Staying up to date with the global economic and
political environment.
Increasing competition - Google, Apple – no doubt competitors have similar vision to
Microsoft so it’s important to stay on top on technological advancements.
Increasing software piracy and Cybercrime – threats of cyber-attacks are ever
imminent in a time where hackers are getting smarter and smarter.
Opinions & past controversy – Microsoft has been under public scrutiny for its Xbox
entertainment and gaming platform not allowing for homosexual gamer tags and lack
of female representation in their board.

5. Internal Factor Evaluation –

Strengths & Weaknesses
Internal Factor Evaluation
Weighted
  Strengths - Internal Weight Rating
Score
Software & cloud market leader - in 190 +
1 0.2 4 0.8
countries
Consistently Growing company based on latest
2 0.05 4 0.2
financials
Generate sales through effective and emotive
3 0.1 3 0.3
marketing
4 Manufacturing in India and China creates a 0.05 3 0.15
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 diversified workforce
Easy to use software - user-friendly and high
5 0.05 4 0.2
quality
         
Weighted
  Weakness - Internal Weight Rating
Score
Lack of innovation in hardware - Surface pro and
6 0.15 1 0.15
Phones
Sales of Microsoft surface tablet did not reach
7 0.1 1 0.1
expectations
Internet Browser segment is weak behind Google,
8 0.05 2 0.1
Safari and Firefox
Weaker Cybersecurity of Windows OS & issues
9 0.15 2 0.3
with window updates
10 Over exposure in the PC market 0.1 2 0.2
  Total 1 - 2.5
Interpretation and recommendation
An Internal factor score of 2.5 means the company isn’t as strong against its
competitors as they would like to be but they enough to survive. Perhaps some
attention needs to be paid to the internal structure and operations of the Microsoft.

Strengths

Software & cloud market leader - in 190 + countries – Leading cloud service provider
with Microsoft Azure and over 1.26 billion users of Microsoft office and office 365 for
businesses.
Consistently Growing company based on latest financials – consistent growth in
revenue and EPS over the past 3 years.
Generate sales through effective and emotive marketing – emotive marketing
targeted at ordinary consumers with a vision of achieving extraordinary results
Manufacturing in India and China creates a diversified workforce – diversified
workforce protects against geographical crisis and promotes diverse thought processes
Easy to use software - user-friendly and high quality – key for emerging markets with
lower intellectual demographics.

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Weaknesses

Lack of innovation in hardware - Surface pro and Phones – Microsoft’s bread and
butter is its windows OS and office suites used by majority households and
organisations which has lead to a lack in development of their hardware products.
Sales of Microsoft surface tablet did not reach expectations – the surface tablet was a
let down compared with the Apple IPad and Lenovo Yoga which also provides a hybrid
tablet/pc capability.
Internet Browser segment is weak behind Google, Safari and Firefox – google being
the world leader with their first to market service offering have capitalised since their
inception leaving most competitors playing catch up.
Weaker Cybersecurity of Windows OS & issues with window updates – Microsoft
windows update installations have come under fire in the past couple of years due to
users facing booting issues after completing recommended updates.
Over exposure in the PC market –due to the lack of response to their tablet and
window phone products.

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 6. SWOT Matrix
Organises Internal and External factors in a format to that aids in analysing the
organisations strengths, weaknesses, opportunities and threats in a meaningful
manner to derive alternative strategies the for possible implementation.

S Strengths - Internal W Weakness - Internal

Software & cloud market leader - in 190 +
1 1
countries
Consistently Growing company based on
2 2
latest financials
Generate sales through effective and
3 3
emotive marketing
Manufacturing in India and China creates
4 4
a diversified workforce
Easy to use software - user-friendly and
5 5
high quality
Lack of innovation in hardware -
Surface pro and Phones
Sales of Microsoft surface tablet did
not reach expectations
Internet Browser segment is weak
behind Google, Safari and Firefox
Weaker Cybersecurity of Windows
OS & issues with window updates
Over exposure in the PC market

O Opportunities - External
SO
    WO
Focus growth on cloud computing as
demand for cloud computing grows
Increase R&D in to mobile devise
1 (S1,O4) 1
like phones, tablets (W1,O2)

Focus on International Focus marketing in South Korea as a Tech Increase funding towards Cyber
1 2 2
Markets growing market (S3,O5) security (W4,O3)
Constantly demand for
2      
evolving Technology
Enhance Cybercrime
3      
Security
Cloud Technology Markets
4      
growing
South Korea is the fastest
5 growing technological        
country
      ST WT
Increase R&D in to diversification away Address over exposure in PC market
from PCs (S2,T1) (W5,T1)
T Threats - External 1 1

Consumer preference Further diversify manufacturing to avoid Increase funding towards Cyber
1 2 2
changing away from PCs regional threats (S4,T2) security (W4,T4)
Global threats & Economic
2      
Crisis
Increasing competition -
3      
Google, Apple,
Increasing software piracy
4        
and Cybercrime
5 Opinions & past controversy

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8 possible alternative strategies
1. Focus growth on cloud computing as demand for cloud computing grows
- More and more large organisation moving their databased and CRM
platforms to cloud computing which offers competitive hosting prices. It’s
a no brainer that focusing on cloud computing is part of our strategy mix.

2. Focus marketing in South Korea as a Tech growing market

- Although South Koreans are loyal to Samsung and the Android Phone
platform, they both lack provisions in the PC Operating Systems platforms
leaving a wide market for Microsoft to conquer.

3. Increase R&D into mobile devise like phones, tablets

- The convenience offered by mobile devices is unmatched by PCs and in a
world where convenience is of highest priority there is no doubt Microsoft
require higher attention in their mobile hardware sector.

4. Increase funding towards Cyber security

- Other than the Apple IOS most other operating systems in the market
have come under threat from hackers with malicious threats. To stay
appealing to large organisations cyber security is a major segment we
should be looking to invest in.

5. Increase R&D into diversification away from PCs

- Moving away from PCs and towards Cloud Computing and mobile devices
can not be stressed enough in the way moving forward. With more
applications and services offered via mobile phones and tablets fewer
households own PCs these days.

6. Further diversify manufacturing to avoid regional threats

- With operations already in India and China there is opportunity to
diversify into South Korea as well. Diversifying operations limits risk of
geographical and economic crisis in one region as operations can continue
from the next region.

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7. Address over exposure in PC market
- Fund R&D in Cloud computing and mobile device production and
marketing.

8. Increase funding towards Cyber security

- Security in general is at the fore front of any organisation to investing in
strong Cyber security is essential for assuring potential customers and
gaining market share.

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 7. BCG Matrix
Used to differentiate between the organisation focus segments, Productivity &
Business Processes, Intelligent Cloud and More personal Computing, all of which are
classified as stars according to the BCG in relation to their competitors. This is because
although Microsoft haven’t done as well as expected in the mobile arena, they are and
have been the undoubted market leaders in PC operating systems and cloud
computing technology, globally with a profit of over $125 billion in 2019.

Relative Market Share Position

High 1.0 Stars Low 0.0

Question Marks
High 0.20 Productivity and
Business Pro- Intelligent Cloud
cesses
Industry Sales Growth Rate

More Personal
Computing

Low -0.20
Cash Cows Dogs

Top Firm in
Your Firm's Industry Relative
Industry
Division Division Sales Growth Market Share
Division
Revenues Rate Position
Revenues
   
Productivity and Business Processes $4,116 $6,581 0.16 0.63
Intelligent Cloud $3,898 $5,487 0.20 0.71
More Personal Computing $4,569 $6,734 0.11 0.68
Other $0 $0 0.00 NA
Other $0 $0 0.00 NA

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8. IE Matrix

THE IFE TOTAL WEIGHTED SCORES

Strong Weak

4.0 1.0

High
4.0 Productivity and
Business Pro-
THE EFE WEIGHTED SCORES

Intelligent Cloud cesses

More Personal
Computing

Low
1.0

Percent of
Firm's Estimated Estimated
Division
Division EFE Score IFE Score
Revenues
   
Productivity and Business Processes $4,116 2.0 3.0
Intelligent Cloud $3,898 2.5 3.4
More Personal Computing $4,569 1.9 2.5
0 $0 0.0 0.0
0 $0 0.0 0.0

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9. The Quantitative Strategic
Planning Matrix (QSPM)

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 10. 3 Recommended alternative
strategies
From the 8 strategies mentioned earlier we recommend the 3 strategies below. These
are our top pick after going through a rigorous process and various matrices.

1. Invest 30% of sales in growth of cloud computing capabilities over the next 24
months – TAS 5.40
As Microsoft is already a supplier of cloud computing services, we’re
recommending a forward Integration strategy estimated to cost approximately
$10.9 Million per year - this allows the company to expand its control over direct
distributorship. Through forward integration Microsoft will be able to increase
its market power and increase ownership of sales. Azure reported revenue
growth of 36% year-on-year growth at the end of 2019. By the end of 2021 we
are aiming for a growth of at least 50% year-on-year to $16.5 Billion.

Product development – investing two-thirds ($7m per year) of the funds

allocated for the growth of cloud computing we want to further develop the
current platform on which Microsoft cloud provider Azure operates with newer
applications for it’s users with better on- call customer service. As customer
service is a dying art these days, improving on this definitely has many
advantages.

2. Address over exposure in PC market and increase mobile device revenue by

40% compared to 23% in fiscal year 2019 – TAS 4.05

Focus on product development – Microsoft has addressed some of the initial

concerns and turned around its underwhelming response to Microsoft’s surface
pro tablet hybrid has hurt the company’s reputation as a mobile PC provider
when launched. In fiscal year 2019 the surface fetched revenues of $1.1 billion
which we are aiming to increase to $1.7 billion or 40% year-on-year. Microsoft
can only achieve this by developing their hardware in a way it will seamlessly
communicate and react with the windows phone OS. The new Microsoft Surface
Pro 7 launching in 2020 with the new USB-C capability promises to be a leading
competitor for the hybrid pc/tablet market.
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3. Gain market share in Productivity and Business sector – TAS 3.35
Backward integration – Become the supplier of software to organisations.
Microsoft provides a wide range of services and users of these services have
been constant but in implementing newer technology with services will help gain
more share in the market through innovation, strong customer relationships and
obtaining more competitors. A higher market share will put the company at
competitive advantage and will be able to receive better prices from suppliers as
the order volume will increase and cutting off cost of production.

Market development- till now Microsoft has 70% market share and 77% globally
but to expand it, in Seoul, South Korea specifically will enhance the progress as it
is one the fastest growing technological country.

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 11. Financial Statement
Projected Income Statement - $millions
2020 2021 2022
Sales $136,326 $155,115 169,203 Increase 24%
Cost of goods $47,413 $51,814 $55,553 Increase 17%
sold
Gross margin $$92,643 $102,456 $112,571 Increase 21%
Selling expense $90,464 $98,216 $105,816 Increase 16%
Administrative $19,026 $20,715 $22,645 Increase 19%
Expense
(EBIT) $50,860 $56,893 $63,223 Increase 24%
Earnings Before
Interest and Taxes
Net Income $61,909 $83,909 $$105,909 Increase 71%

Projected Balance Sheet - $millions

2020 2021 2022
Retained $32,715 42,078 49,977 Increase 52%
Earnings
Shareholder $102,129 $107,122 $120,742 Increase 18%
equity
Long term $111,970 $115,270 $104,950 Decrease 6%
liabilities
Current $79,152 $85,884 $88,627 Increase 12%
liabilities
Total $193,576 $202,899 $216,355 Increase 12%
liabilities
Total assets $308,868 $327,492 $336,118 Increase 9%
Current $181,442 $188,135 $194,025 Increase 7%
assets

A major driver of Microsoft's energy has been its cloud computing business. For the
quarter finished Sept. 30, 2019, its cloud business produced $11.6 billion in income,
denoting a 36% year-over-year increment. Azure drove the unit, with 59% income
development. Microsoft contends against Amazon Web Services and, whilst much

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smaller, a quicker clip is gaining. Azure reported revenue growth of 59 % in the third
quarter compared to 35 % in the cloud sector of Amazon.

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References
HUB 2019, SWOT Analysis, viewed on 8 March 2020,
<https://bstrategyhub.com/swot-analysis-of-microsoft/>

Panmore 2019, Google’s Mission statement and Vision statement (An Analysis),
viewed on 11 March 2020,
<https://panmore.com/google-vision-statement-mission-statement/>

Microsoft 2020, About Microsoft, viewed on 11 March 2020,

<https://www.microsoft.com/en-au/>

Microsoft 2020, Microsoft Investor Relations – Goals, viewed on 11 March 2020,

<https://www.microsoft.com/en-us/Investor/corporate-governance/goals.aspx>

Nguyen 2015, Microsoft CEO lays out new mission: it’s all about empowerment,
viewed on 11 March 2020,
< https://www.techradar.com/news/world-of-tech/management/microsoft-
chief-rallies-employees-around-mission-of-empowerment-1297769 >

Insights 2020, Microsoft Strategy Teardown: Cloud, Al, & Subscriptions and the
Next. Trillion-Dollar Company, viewed on 11 March 2020,
< https://www.cbinsights.com/research/report/microsoft-strategy-teardown/ >

Storage 2019, Microsoft Launches the Latest Cloud and Developer Tool for
Creators, viewed on 11 March 2020,
< https://fastcloudstorage.com/microsoft-launches-the-latest-cloud-and-
developer-tool-for-creators >

Hawthorne 2019, the Purpose of. Mission and Vision Statements in Strategic
Planning, viewed on 11 March 2020,
< https://smallbusiness.chron.com/purpose-mission-vision-statements-strategic-
planning-13161.html >
Vault 2019, Microsoft Corporation, viewed on 11 March 2020,

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< https://www.vault.com/company-profiles/computer-software/microsoft-
corporation >

Kramer 2019, What Strategies Do Companies Employ to Increase Market Share,

viewed on 11 March 2020,
< https://www.investopedia.com/ask/answers/031815/what-strategies-do-
companies-employ-increase-market-share.asp >

Kenton 2019, Forward Integration, viewed on 11 March 2020,

< https://www.investopedia.com/terms/f/forwardintegration.asp >

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