PESTLE Analysis of Microsoft. Microsoft (MS) is an American tech multinational corporation. The head of the brand is in Redmond, Washington, USA. The portfolio of Microsoft comprises of diverse products and services like computers, operating systems, licenses, IT devices, servers, smartphones, etc.
Bill Gates and Paul Allen laid the foundation of Microsoft on April 04, 1975. They started it as a development and sale of Altair 8800 and Basic Interpreters. MS-Dos in the 80s and MS Windows in the 90s created a pathway of market domination in the software industry. In 2019, Microsoft achieved the status of becoming a 3rd US trillionaire company after Apple and Amazon.
According to an estimate, the annual revenue of Microsoft is 143 billion US dollars by the end of 2020. Out of which the net profit of the company after cutting down all the expenses is 44.3 billion dollars. Microsoft has hired approximately 163000 people to perform various operations of the company across the world by the end of 2020. The market worth of Microsoft’s total asset is 301.3 billion US dollars.
Today we’ll discuss pestle analysis of Microsoft and analyze various macro-environmental factors that are impacting the company. We’ll study all of those factors one by one details and they’re as follows;
Issues with Chinese Governments
Microsoft is operating its business all over the world. As a result, the company comes across small political issues with different countries now and then. They’re nothing more than a mosquito bite for a multinational corporation. But the company shouldn’t take anti-trust issues lightly.
For instance, China doesn’t like the distribution and supplying system of Microsoft. Some of the production and manufacturing plants of companies like Microsoft are based in China. However, the political tension between the US and the Chinese government disturbs many operations of the company.
Issues with the European Union (EU)
Not only the Chinese government and Trump administration, but Microsoft also had issues with the EU over the years and it cost the company hundreds of millions of dollars. For instance, the European Union issued a penalty of 730 million US dollars on Microsoft in 2013.
They claimed that the company is responsible for violating the trust regulations of the EU. It’s not only Microsoft, but there are also other US companies like Apple, Google, and Amazon had to pay the fines for the same regulations issues. The way the EU is introducing new trust and privacy legislation; it’s becoming difficult for big corporations like Microsoft to operate its business globally.
Changing Political Environment
The political environment of the different countries keeps on changing and politicians introduce new laws every year. Sometimes those laws are in accordance with the policies of the company and they benefit the brands like Microsoft. The other time, some countries impose a ban on the usage of certain tech products/services like OS, Windows, Mobile Applications, etc. Such restrictions and bans can badly impact the growth of the company.
After realizing the power of political influence on big companies, that’s why Microsoft hires lobbyists to present a better image of the company in the government circles of different countries. According to an estimate, Microsoft spends 10s of millions of dollars annually on lobbyists to establish and maintain a better image of the company in different political circles.
Labeled as a Monopolist
Microsoft has attracted the attention of the EU and other governments for hiring lobbyists. Critics and some government officials said that the brand is creating an environment of monopoly by hiring lobbyists to create a favorable environment for the company. On the other hand, small software developing companies don’t have the budget to manipulate the system.
Economic issues like labor laws, trade tariffs, taxations, import regulations, poor relationships with government officials and other companies, and other affairs can badly impact the growth and profit of global companies like Microsoft.
Economic recession and financial crisis were at its peak when Microsoft had to fire 5000 of its most skilled employees during the period of 2008. It’s been more than 12 years, but the loss was so great that the brand has just recently recovered from it.
The currency exchange rate can have a fast impact on multinational companies. If the US dollar is stronger than foreign currencies, then people and business would decrease their spending. If the US dollar is lower than foreign currencies, then it would increase the expenses and less earnings of the company. Microsoft is not above the law; therefore, the company should also keep in mind the exchange rate factor as well.
Overhaul H-1B Visa Program
Trump administration has recently announced that they’ll overhaul the H-1B visa program that forces US employers to pay higher wages to skillful foreign employees. As a result, the visa length of foreign employees would be short under the new law. Critics say that new law would make it difficult for foreign employees to get a visa.
It may be not good for foreign employees working in the US, but it would benefit companies like Microsoft to increase its profit and growth.
Ever since President Donald Trump came into office. His administration has been following the protectionist policies. It means that discouraging foreign imports and inputs by increasing the taxes on the imports and promoting the local producers and manufacturers to strengthen the economy.
It may seem good for the local small companies. But global companies like Microsoft operating its business empire worldwide. The company also some of its manufacturing plants in China and employees have to visit both countries back and forth. Such nationalist and protectionist policies aren’t good for multinational corporations.
Check out this article: Pestel analysis of Microsoft
Changing Culture & New Trends
Government regulations and policies aren’t only unpredictable factors, changing trends and customer preferences are also equally unpredictable. Therefore, it’s very important for multinational brands like Microsoft to keep track of all the changing trends and customer preferences in different countries across the world.
IKEA is one of those multinational companies that are changing their products according to the requirements of customer preferences. Microsoft is very weak in this area of keeping up according to the market trends and customers’ preferences.
Growing Smartphone Market
The smartphone market is growing and users of mobile devices are increasing every year. More and more people are browsing and conducting transactions over their smartphones. The products and services of Microsoft are for PCs and laptops. They aren’t for smartphone devices. It means that the company is losing a great chunk of market share in the smartphone industry.
Therefore, Microsoft should also develop applications for smartphones as well. If the company doesn’t, perhaps the same thing would happen to Microsoft what had happened to Nokia in 2006.
Shortage of STEM Professionals
According to a study conducted by Emerson in 2018 and it said that there’s a shortage of STEM (science, technology, engineering, and mathematics) professionals in the US. Every two out of five Americans would accept the fact that the country needs more STEM professionals.
According to the economic projection conducted by the President’s council of advisors on science and technology that there’ll be approximately 1 million more STEM professionals outside of the US in the next decade.
The tech market and software development are very competitive. There’re many as many competitors as many tech professionals and software developers. All you need is one new big idea that no one has ever thought of it before. After launching it successfully into the market, everyone would soon forget how great the previous software was.
Google and Apple are the main competitors of Microsoft. If the brand doesn’t keep up with the pace of competitors, it would result in the form of decreasing market share and revenue. Even though Microsoft has also acquired Nokia, but it didn’t give the expected results.
Investment in R & D
In 2019, Microsoft became the third trillionaire American multinational company. The net profit of the company in 2020 is 44.3 billion US dollars. It means that the company has a plethora of resources at its disposal. Now the brand should invest in research and development to come up with something unique.
Growth in AI
Artificial intelligence (AI) is one such area that top competitor companies like Google and Amazon are investing their resources in. Microsoft also has an opportunity to introduce something new in the field of AI and win the market share.
As we know that Microsoft is operating its business in different countries across the globe. Different countries have a different attitude toward technology and they make laws accordingly. Therefore, Microsoft has got more chances of being sued than an ordinary local brand. Microsoft has paid approximately more than 10 billion US dollars under different lawsuits.
Gender Discrimination Issues
According to an estimate that roundabout, more than 9000 current/former employees of Microsoft complained and filed a lawsuit against the brand for gender discrimination. According to another study that every 1 out 120 gender discrimination lawsuit is directed to Microsoft. Complainants say that the brand discriminates against people systematically.
In 2018, a customer of Microsoft filed a lawsuit against the brand that the upgrade on his laptop from windows 7 to windows destroyed his computer. Such lawsuits of customers are nothing a bug, but it encourages other customers to do the same.
Microsoft has launched many green projects over the years toward saving nature and decreasing global. According to the ranking conducted by Just Capital in 2019, Microsoft ranked at the top position of the world’s most eco-friendly tech company worldwide. The brand provides brands and funding of 500,000 dollars to the universities to find out the unique ways of cleaning the environment.
Microsoft is the world’s tech company that is 100% carbon. In fact, the brand imposes a carbon on its business to clean the environment. The company has planned to spend over 50 billion US dollars in the next five years to clean the environment by using Microsoft AI.
On October 09, 2020, Microsoft has confirmed its plan of removing the carbon from its environment that the company emitted into the air since its establishment in 1975.
After the careful study of the pestle analysis of Microsoft, we have concluded that the brand has a top position in the software industry across the world. But macro-environmental factors are out of the control of any business. It doesn’t matter however large the brand may be.
Therefore, the company should maintain a less gender discriminate environment inside the organization. If Microsoft doesn’t change its course of action, then anti-trust and other lawsuits would send a negative image of the company.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.