Organizational Level Of Analysis Essays Examples
Bill Gates is used to be the richest man in the world. He is the man behind the tech giant Microsoft Corporation. Like his title, the company is also experiencing decline. There are many branches pointing to its falling leadership position, which would be further discussed in the SWOT Analysis section. Yet, the root is said to be organizational. According to VenRao (2012) via Forbes, there are four organizational elements that are essentially affecting the company’s performance.
First is the contrast between personal determinism and environmental determinism. Gates retired passing the CEO position Steve Ballmer. He is perceived as a sales person rather than a technologist. With this, there is a dislike reflex against him. This goes the same for Gates. As CEO, their personalities are taken as the cultural structure of the company. This meant that the company is becoming primarily a sales expert. This is interpreted as being unable to respond with technological demands of the market, whichbrings us to the succeeding element.
Second is cultural shift from horizontal to vertical integration and enterprise to consumer-driven trend. Microsoft does horizontal integration. Certainly, such strategy would be appropriate at the time the company was founded. In the 80s, computers were used as business computers and nothing else.This meant that users would follow similar function based on the enterprise instead of the uniqueness and variety involved in personal use. Through the horizontal integration, Microsoft was able to make it big at the time servicing the sameness of the market. Arriving in the 21st century, devices are used personally. The problem for the companyis that its structure is like DNA where its foundation is the same no matter when. The structure is making it difficult for the company to adapt with the times.
Similar from the previous point, Rao pertained to the third element as “shifting winds and stopped clocks”. Gates was compared to a stopped clock while the trends as the shifting winds. It makes sense to act according to ones identity. However, more than the leader, it would have been better if the direction of the company were given priority. It seemed the direction of the company was not set that the company was not able to take advantage of the trends.
The last element is new environment. The times are changing and new trends are rising. Microsoft may be pressured to change yet by the time it shifts, the environment would demand something else. The environment have mobile and cloud as its new darling. Unfortunately, Microsoft is weak in these two. The winning player is Google that is ironically utilizing horizontal integration. For the company to surpass these and get to the right track once again, the company would need to reassess the strengths of its identity and strategize accordingly.
Microsoft Corporation is a global provider of hardware and software products. Its solid R&D undertakings and varied product portfolio are the major strengths of the company. Lawsuits and growing debt concern, on the other hand,continueas problem areas. Meanwhile, strong competition, risk in foreign exchange, piracy and shifting technology may shake the company’s business functions. Nonetheless, strategic acquisitions, partnerships, as well as positive view for cloud computing is seen to bid new developmentopportunities for the company.
The strengths of the company are furtherdivided into four points. First is the comprehensive product portfolio. The company offers an extensive range of hardware, software, and even services to broad customer classes. The revenues come from manufacturing, developing, authorizing, and supporting software in computing devices. These services spread to system developments, server and information productivity applications, development tools, online advertising, and video games. The company also provides consulting through trained and certified system developers and integrators.These enable Microsoft to attain market leadership (GlobalData, 2014).
Second is focused research and development. The company prioritizes innovation and optimization. This is achieved through solid research and development enabling the company to gain competitive advantage in establishing brand equity. The main fields of research include theory and algorithms, hardware development, and human and computer interaction.Moreover, it is known for research developments in multimedia and graphics systems, mobility, security, architecture, networking, cryptography, smart devices, cloud computing, and machine learning, adaptation, and intelligence. The company invests 13% of income for the year in order to monitor breakthroughs and emerging trends across tools, platforms, and industries (GlobalData, 2014).
Third is having solid intellectual property. This is important in building and maintaining brands. When intellectual property is secured, the company would be able to take full control in the direction of the brand. Consequently, the company also gains competitive edge. The company secures its intellectual property rights in various ways. One of them is to keep anextensive local and global portfolio of intellectual property.Currently, the company has over 55,000 issued patents and over 40,000 pending patents. Furthermore, Microsoft participates in inbound and outbound licensing of associated patented technologies. These are incorporated into the company’s products. Purchasing or licensing technology is also done so that the company could incorporate them into products or services (GlobalData, 2014).
Fourth and last point in the company’s strength is the solid distribution, sales, and marketing network. The company utilizes three main distribution channels. They are the original equipment manufacturers or OEM, dealers and sellers, and through online. OEMs have the most crucial distribution since Windows OS software ispre-installed and integrated into devices from personal computers to smartphones prior to directly selling them to end users.OEMs include Dell, Acer, ASUS, Lenovo, HP, Sony, Nokia, HTC, Samsung, and many others. Other than OEMs, the company also relies on large account sellers or LARs. These engage the company’s products and services to big organizations in the likes of distributors. They then sell to value-added resellers or VARs. VARs, on the other hand, are the ones who sell to smaller organizations.The company has also expanded into selling online through Microsoft store site.Organizations sign enterprise license agreements. Through this network, the financial and operational performances are enhanced (GlobalData, 2014; Brodkin, 2011).
On weakness, the company has three points. First are the pending legal proceedings. There are many unresolved cases that Microsoft is litigated against. The cases are related to performance liability, product design, and contracts including employment issues and intellectual property. The consequences would mean additional expenses plus penalties for the company especially if proven guilty. This would affect profitability. In one of its cases, the Alcatel-Lucent, Microsoft had to settle US$500 million for patent infringement. As of 2014, Microsoft is defending around 65 similar cases. Other than these, it is also defending unfair competition and antitrust cases that may question the company’s reputation. This in turn may upset business in the future (GlobalData, 2014).
The second point is growing debt. The company’s total debt as of June 2014 amounts to US$22.6 million. More than this, there was 45.2% increase from 2013.Its debt to equity ratio is 25.2% in 2014 jumping by 20% from the previous year. The growing debt makes it more difficult for the company to raise capital in advantageous terms. More than this, debts may reach due date. The company is likely to pay more urgently than scheduled. This would have an adverse effect on cash flow. Consequently, the company would have limited strategic financial selections. Furthermore, the company would become more vulnerable in the face of industrial economic conditions (GlobalData, 2014).
The last point is business limitations. Microsoft may be a market leader in providing technology yet it is substantially decreasing. With many other players coming in such as Google, the company’s 90% browser application market share is reduced to 25.5%. Google’s Chrome browser application leads with 42.8% of the market share. This has been attributed to Microsoft’s Internet Explorer limited compatibility. In fact, only the Windows OS could run the Internet Explorer. Meanwhile apart from Windows, Chrome could function on Mac as well as Linux. The consumers with different operating system are immediately excluded in their service coverage further weakening the company’s market dominance (GlobalData, 2014; Brodkin, 2011).
On opportunity, Microsoft may look forward to four points. First is the increasing cloud computing market. Industry analysts project cloud computing market to amount at around US$210 billion by the year 2014. The cloud computing services, on the other hand, would attain US$555 billion high on 2020. This is attributed to fast adjustment into infrastructures as service, software as service, platform as service, business process as service, and cloud advertisement management and security services. That of cloud advertisement as well as business process would have the highest share with 47% and 28% respectively. North America would lead the trend while the Asia Pacific is evolving (GlobalData, 2014).
The second opportunity point is on strategic partnerships. Microsoft partnered with SAP AG to develop products for workforce mobility and employee productivity. Through this partnership, both companies would be able to assert cloud computing on SAP applications that are critical to business. This includes the interoperability of information of SAP and MS Office on mobile productivity. For its video game line Xbox One, the company partnered with the Shanghai Media Group subsidiary, the BesTV Media. In addition, Microsoft has found Windows Phone hardware partners in the likes of LG, Lenovo, and ZTE Corporation (GlobalData, 2014; Brodkin, 2011).
Third are the inorganic growth initiatives. Meaning, companies would have growth opportunity in strategic acquisitions while pushing through new markets and diversify portfolio. With acquiring Nokia devices and services particularly the mapping service, for example, Microsoft would be able to include Nokia mobile phone, Lumia tablets and smartphones, Xbox hardware, Perceptive Pixel Products, Surface, and other accessories. This would enable Microsoft to target low priced devices market amounting around US$50 billion (GlobalData, 2014; Brodkin, 2011).
The last point of opportunity is the demand for smartphones. Smartphone global sales are projected to amount US$2 billion in 2018. Meanwhile, the smartphone market is projected to amount up to US$367 billion in 2018. This is attributed to decreasing productions costs, optimized design and function, further development of email and browsing capabilities, rising 3G and 4G technology, and upgrading operating systems have been becoming standardized.Moreover, there would be significant demands from the Asia-Pacific. Emerging economies such as Brazil, China, and India are projected to have usage increase other than UK and US (GlobalData, 2014; Brodkin, 2011).
Despite the opportunities, the company would also be facing four threats. First is intense competition. Its competitors include Apple, Google, and Yahoo for the Windows Live product. As discussed, its Internet Explorer is having difficulty against Google Chrome alone. The others such as Apple Safari, Mozilla, and Opera are quickly catching up.The MS Office that the company is known for has its market share cut with Adobe, Apple iWork, IBM, Google, and Oracle. Even in the video games line, it is facing long existing companies Nintendo and Sony. Microsoft is intensely competing in all other lines as the other major tech companies can also offer the same products. With this, Microsoft would be vulnerable to pressures from the market. This may lead to loss of market share and revenue decline (GlobalData, 2014; Brodkin, 2011).
The second threat is the risk in foreign exchange rate. The company is operating in more than 100 offices around the world. Most of its revenue comes from global sales. This would mean that the various currencies would be able to influence asset values. With high volatility of the foreign exchange, the company would be exposed to currency risks through purchases from various markets. This may impact consolidated outcomes and in turn, the entire profitability (GlobalData, 2014).
The third threat is the fast technological changes. This is second nature in the technological industry in order to stay competitive. The change is brought about by evolving standards, market conditions, and frequent introductions and updates. With this, existing products and even the ones in an ongoing development process are easily made obsolete. It is important to note that the R&D take significant expenses. Billion dollars would be wasted just because the product would be obsolete and unmarketable on its release. It would be necessary for Microsoft to adapt quickly (GlobalData, 2014).
The last threat is piracy. Any company would be robbed off its revenue through piracy. The company is losing billions equivalent to 30% piracy rate globally especially in countries with lax intellectual property laws. China, for example, has pirated Windows 8 circulating across the country. This would mean that the potential in China market, also addressed as the biggest market in the world, would not be realized. Losing in a big market is equivalent to big money losses. More than this, we have only stated China. There are many other emerging and developing markets that are likely having the same piracy problem (GlobalData, 2014; Wagstaff, 2014).
Strategy and Recommendation
There are fourtypes of problems with ideal strategic organizational responses. First is the docile isolated problem. This is the simplest since the problem is contained in a systematic environment. The second type is docile problem. It is more complex since the problem is clustered rather than isolated. The third type is dynamic interactive problem. One problem in an area gives rise to another.The last type is aggressive interactive problem. More than being interactive, a problem appears to achieve aggressive drive and momentum (Emery & Trist, 1965).
Based on the issues, the company is facing third and fourth type of problem. With these types, it would be best for an organization to review its goals in relation to its capacity to arrive on a solution. Better yet, it may be necessary for an organization to make reformations. In addition, the SWOT analysis points to Microsoft losing competitive advantage. In order to address this, the company must play through its four strengths while resolving weaknesses through the aid of comprehensive planning. Opportunities, on the other hand, must be owned to the fullest. Handling them would prepare and support the company for the upcoming environment structure. Anticipating the threats would ward off hindrances to the position that the company would take. For a giant company, Microsoft must consider corporate and global strategies(Schermerhorn, 2009).
We particularly suggest that the Microsoft do what it does best, which is horizontal integration and fast following. Apple may be taking over Microsoft with the use of vertical integration but that does not mean that the company must change its DNA. It is important to note that the environment is changing. In fact, it is shifting back to horizontal integration. Microsoft only has to be prepared and strong enough to play on the new battleground.Besides, the winning player Google is also utilizing horizontal integration. In essence, Google is merely doing its strategy excellently. Thus, Microsoft only has to remind itself of what it is and stick to it.
As discussed, one of the many problem of the company going through this changing environment is its weakness in the mobile and cloud trend. We would not entirely state that it is unwise to follow the trend. Besides, we are also suggesting the company to become fast followers but only if the company has assessed its capability to move.The suggestion we would want to assert is that the company must play on its strength on research and development.With this, the company would be able to anticipate the next trend and act accordingly. We are asking Microsoft to take exactly one step further. This is to enable the company to take significant share and position while fighting off the threat of becoming obsolete.
Furthermore, the company must innovate and integrate its intellectual property rights and licensing. It must find a compelling way for the users to purchase original copies. Certainly, another comprehensive plan would be necessary, one that is investigating the users behavior. More than the problem of lax copyright laws in the international markets, it may be possible that the local conditions such as deficient finances are nurturing piracy. Given the circumstance, perhaps the company could come up with a comprehensive financial plan as well as an appropriate platform that would enable budgeted purchases.
So far, the strategies and recommendations discussed lean towards the external environment of the company. Thus for the internally, we would encourage the company to continue certain approaches. We found out in one case that Microsoft implements the framework of Balanced Scorecard.It is a dynamic method of integrating the knowledge workers’ expertise for business functions such as the Information Technology. This approach identifies and communicates strategies. Performance measures are also determined that would propel an exceptional organizational strategy(Bloimfield, 2002). This would go well with research and development strength of the company and further gainupper hand against the problems.
Bloomfield, C. (2002). Bringing the balanced scorecard to life: The Microsoft balance scorecard framework. Retrieved from http://www.microsoft.com/business/bi/
Brodkin, J. (2011). The five biggest problems facing Microsoft.Computerworld UK. Retrieved from http://www.computerworlduk.com/in-depth/it-business/3300652/the-five-biggest- problems-facing-microsoft/
Emery, F. E., & Trist, E. L. (1965).Type of problems and organizational strategy.International Associations, 18(1965), pp. 21-32.
GlobalData. (2014). Microsoft corporation: Financial and strategic analysis review. Retrieved from http://callisto.ggsrv.com/imgsrv/FastFetch/UBER1/68489_GDTC22599FSA
Rao, V. (2012).The real reason for Microsoft’s woes.Forbes. Retrieved from http://www.forbes.com/sites/venkateshrao/2012/07/25/the-real-reason-for-microsofts- woes/
Schermerhorn, J. R. (2009). Exploring management. (2nd ed.).New Jersey: John Wiley & Sons.
Wagstaff, J. (2014). Microsoft’s current issues in China hide a deeper problem in emerging markets. Business Insider. Retrieved from http://www.businessinsider.com/r-naked-pcs- lay-bare-microsofts-emerging-markets-problem-2014-10