STRATEGY FORMULATION & ANALYTICAL FRAMEWORK

By:

Ahsan Arshad (36532)

Bilal Ahmed(37349)

Jazba Tabassum(36964)

Farida()

Mohamid()

Adil()

Submitted to:

Sir Muntazir Mehdi

Strategic Management

Date: 21th April,19

Strategy-Formulation Analytical
Framework

Space Matrix

BCG Matrix

The Matching
stage SWOT Analysis

IE Matrix

Grand Strategy Matrix

 Space Matrix of Microsoft
Internal Strategic Position External Strategic Position

Financial Position Stability Position

(Environmental)
Return on Investment 6 Technological changes -3

Working Capital 6 Demand variability -3

Cash Flows 5 Price range of competing -2

products
Financial Position 5.6 Stability Position - 2.6

Competitive Position Industry Strength

Market Share -5 Growth Potential 6

Product Quality -4 Profit Potential 6
Customer loyalty -4 Financial Stability 5
Competitive Position -4 Industry Strength 5.6

Scores of X axis = (- 4) + (5.6) = 1.6

Scores of Y axis = (5.6) + (- 2.6) = 3

 F
+6
Conservative +5 Aggressive
+4
+3
+2
+1

CA I
-6 -5 -4 -3 -2 -1
-1
+1 +2 +3 +4 +5 +6 S
-2
-3

-4
Defensiv -5 Competitive
e -6
ES

ANALYSIS

As can be seen from the graph above that Microsoft lies in the Aggressive quadrant of the space
matrix. The company has a strong competitive position in the market with rapid growth. It
needs to use its internal strengths for development of new products and market development
strategy.
 BCG Matrix of Microsoft Company
Stars
• Stars are those segments which have
high market share and high sales
growth industry.
• Device and consumer segment of
Microsoft Corporation
• Windows Operating systems and word
processor (MS office),
• Mobile application and
• windows related software products and
services
• Skype and bing
Cash Cows
• Those segments, which operates in low
sales growth industry but have high
market share.
• Windows 7 with a market share of
49.42%
• Microsoft computing and Gaming
• Xbox one and Xbox 360 holds a big
chunk of market share in gaming
industry
• Accessories of Microsoft PC.
Question mark
• Those segments which have low relative
market share and operate in high sales
growth industry.
• Microsoft Phone hardware
• Lumia and non-Lumia phones
• When android phones were introduced
most of the customers of windows cell
phone switched to android which
almost occupied the market share of
Microsoft Lumia.
• In the current scenario Microsoft should
use product development strategy to
increase its market share and turn this
segment into star.
Dogs
• Dogs are those segments which
compete in low sales growth industry
and have low relative market share
• WINDOW VISTA
 Analysis Strategy

 Build Increase investment in windows phone. Can push up it question marks to star
and finally a cashcow.
 Hold Microsoft is not going to invest on Window7 anymore. So it will remain in
cashcow.
 Harvest Reduce investment in Windows 10to try to take out maximum cash flow from
it. It will increase overall profitability make cashcow.
 Divest Microsoft release the amount of money which was already stuck in the business.
Microsoft can sell windows Vista or stop its marketing Post analysis Strategy

SWOT Analysis

Strengths Weaknesses

1. Brand loyalty 1. Poor acquisitions and investments

2. Brand reputation
3. Easy to use software
4. Strong distribution channels
5. Robust financial performance
6. Acquisition of Skype
2. Dependence on hardware manufacturers
3. Criticism over security flaws
4. Mature PC markets
5. Slow to innovate

Strengths

1. Brand loyalty. Over the years, Microsoft has been the leading OS and software provider,
which resulted in more than 90% market share for PC OS. Most of us grew up using its easy
to use OS, are familiar with it and will keep using it. Few other brands are capable to
compete with Microsoft for this reason. Even open source OS, which are completely free
and well suited to use for common user, find it hard to attract users.
2. Brand reputation. According to Interbrand, Microsoft’s brand is the 5th most valuable brand
in the world, valued at $ 57.8 billion. Forbes listed the corporate as the 7th most reputable
business in the world. Brand reputation leads to higher sales and greater market share.
3. Easy to use software. Windows OS and Office software products are so popular not just
because Microsoft has great monopolistic power, strong distribution channels and good
brand reputation but also because its products are of great quality and really easy to use.
 4. Strong distribution channels. The company works with all the major computer hardware
producers such as Lenovo, Dell, Toshiba and Samsung and major computer retailers to make
sure computers would be sold with already pre-installed Windows software. The company
also invested in Dell and Nokia to tighten its relationships with these companies.
5. Robust financial performance. Microsoft grew its revenues by 20% from 2008 to 2012 and
holds more than $63 billion of cash and cash equivalents that can be used for acquisitions
and substantial investments into R&D.
6. Acquisition of Skype. With nearly 300 million users, Skype is a significant boost to
Microsoft’s online presence and have a lot of potential in generating income from online
advertising.

Weaknesses

1. Poor acquisitions and investments. Few of Microsoft’s acquisitions were successful and
brought not just revenues and products but new skills and competencies to the company.
Massive, LinkExchange, WebTV, Danger are just few examples of multimillion acquisitions
made by Microsoft but soon shut down or divested.
2. Dependence on hardware manufacturers. Microsoft is a giant software corporation but it
does not produce its own hardware and depends on computer hardware manufacturers to
develop products that run Windows OS. If cheap and popular alternative OS would appear,
hardware manufacturers may simple choose the alternative and Microsoft could do little to
change the situation.
3. Criticism over security flaws. Windows OS, the main Microsoft product has been heavily
criticized for being so weak against various viruses’ attacks. Compared to other OS, Windows
is the least protected against such attacks.
4. Mature PC markets. Only recently has Microsoft entered the mobile technology sector and
still heavily depends on its OS and software sales for standalone and laptop computers. The
market for these products has matured and Microsoft will find it harder to grow revenues in
these sectors.
5. Slow to innovate. Microsoft has huge R&D resources and great position to enter new
markets with innovative products but constantly failed to do so. It had an opportunity to be
the first player in online advertising but missed the opportunity. It’s entrance to mobile OS
was also too late, while Google and Apple captured the market share.

Opportunities

1. Cloud based services. Microsoft could expand its range of cloud services and software as the
demand for cloud-based services is expanding.
2. Mobile advertising. Mobile advertising markets are expected to grow in double digits over
the next few years and Microsoft has a great opportunity to tap into these markets with its
mobile OS.
3. Mobile device industry. Smartphones and tablets markets will grow steadily over the next
few years and Microsoft could exploit this opportunity by introducing more of its own
tablets and a new company phone.
4. Growth through acquisitions. With a huge reserve of cash Microsoft could start acquiring
new startups that would bring new technology, skills and competences to the business.

Threats
1. Intense competition in software products. Microsoft is more than ever on the pressure to
introduce successful OS both in PC and mobile markets as such competitors like Google and
Apple have already established positions.
2. Changing consumer needs and habits. Customers shift from buying laptops and standalone
PCs to buying smartphones and tablets, the markets, where Microsoft has only a modest
market share and may never establish itself.
3. Open source projects. Many new open source projects are coming to the market and some
of them became quite successful, such as new Linux OS and Open Source Office. Open
source projects are free and so they can become an alternative to expensive Microsoft’s
products.
4. Potential lawsuits. Microsoft has already been sued for many times and lost quite a few
large scale lawsuits. Lawsuits are expensive as they require time and money. And as
Microsoft continues to operate more or less the same way, there is high probability for more
expensive lawsuits to come.
IE Matrix
 Grand Strategy Matrix

ANALYSIS
According to Grand strategy matrix Microsoft is the first quadrant with market penetration and
market development as well as development of existing products have an appropriate strategy.
Diversifying development of products also help reduce the risk associated with narrower
product line. Microsoft also has resources to take advantage of external opportunities that
expends in the different fields. Microsoft staying quadrant 1 of the Grand Strategy matrix is
meant for this firm which are in a strong competitive and flourishing with rapid market growth.
Microsoft located in this quadrant are in excellent strategic for all existed Microsoft products
but also help to support and build up the Microsoft brand image which already been damages
due to the competition. These regions also the “gold mine” of new technologies for Microsoft
to exploit and create more competitive advantage.

The second outcome that Microsoft has is the development of differentiation of their product
line. With all the technologies they acquire during market expansion, they will have access and
foundation to create new technologies to make their product become more advance and unique
thus will increase the advantage of their products in the market in compare with other
competitors.