Microsoft Corporation’s PESTEL/PESTLE Analysis & Recommendations

Microsoft Corporation PESTEL PESTLE analysis, political economic sociocultural technological ecological legal external factors computer case study
Microsoft Ireland at The Atrium Building in Dublin. Microsoft Corporation’s PESTEL/PESTLE analysis shows the need for competitive computer technology products, based on the remote or macro-environment. (Photo: Public Domain)

Microsoft Corporation’s managers include PESTEL/PESTLE analysis in their approaches to understanding the company’s business situation. The PESTEL/PESTLE Analysis model is a tool for identifying the external factors that influence the remote or macro-environment of firms. In the case of Microsoft, these external factors reflect the performance of the computer hardware and software market. Such factors represent the issues relevant to the company’s business. Through the inclusion of these issues determined through the PESTEL/PESTLE analysis, Microsoft can develop suitable strategies that create business competitiveness and resilience.

A PESTEL/PESTLE analysis of Microsoft Corporation reveals the most significant issues based on the conditions of the company’s remote or macro-environment. Considering the situation of the computer hardware and software market, Microsoft can implement strategies that address such issues and their corresponding external factors shown in this PESTEL/PESTLE analysis.

Political Factors Affecting Microsoft’s Business

This area of the PESTEL/PESTLE analysis model deals with the effects of governments on the remote or macro-environment of the computer hardware and software business. In the case of Microsoft, the following political external factors are significant in strategic decision-making:

  1. Political stability in the majority of markets (opportunity)
  2. Increasing governmental support for automation (opportunity)
  3. Increasing international trade agreements (opportunity & threat)

The political stability of the majority of markets worldwide creates opportunities for Microsoft to increase its investments and corresponding performance. For example, the company can improve its sales and marketing investments in Europe to achieve a corresponding increase in revenues. On the other hand, the increasing governmental support for automation presents opportunities for Microsoft to increase its computer technology sales via governmental clients. This external factor is significant, considering large-scale purchases involving governmental organizations. Moreover, increasing international trade agreements develop a remote or macro-environment that supports an increase in Microsoft’s global sales. Through this external factor, the company benefits from easier business deals in overseas markets. However, increasing international trade agreements are also a threat against Microsoft. In these agreements, foreign firms can increase their competitiveness in developed countries like the United States. Based on this area of the PESTEL/PESTLE analysis of Microsoft Corporation, the political factors present major opportunities to boost the business.

Economic Factors Important to Microsoft Corporation

The business effects of the economic situation on the remote or macro-environment are considered in this area of the PESTEL/PESTLE analysis model. Microsoft must include the following economic external factors in strategies for the computer hardware and software business:

  1. Considerable economic stability of the majority of developed countries (opportunity)
  2. High growth of developing countries (opportunity)
  3. Growing middle class disposable income (opportunity)

Microsoft benefits from the considerable economic stability of the majority of developed countries. For example, the company can expect stable performance in these markets. Microsoft also has potential boosts in sales revenues in high-growth developing countries. This opportunity translates to steady growth in Microsoft’s global sales. Moreover, the economic external factor of the overall global rise of middle class disposable income creates opportunities for the company for higher revenues. This condition is so because middle-class customers are among the most significant sources of revenues for Microsoft. Thus, the company can exploit growth opportunities in its remote or macro-environment. Microsoft must strategically address such opportunities in the computer hardware and software industry environment, as highlighted in this area of the PESTEL/PESTLE analysis.

Social/Sociocultural Factors Influencing Microsoft’s Business Environment

This area of the PESTEL/PESTLE Analysis model considers how the social situation affects Microsoft’ remote or macro-environment, especially in terms of customers’ behaviors and expectations. In the computer technology market, the following sociocultural external factors influence Microsoft:

  1. Stable attitudes about leisure (opportunity)
  2. Increasing cultural diversity (opportunity & threat)
  3. Stable demand for high quality customer service (opportunity)

The stable attitudes about leisure present opportunities for Microsoft to develop products that can satisfy customers’ leisure preferences. For example, the company can increase its investment in innovating computer gaming products for this purpose. In addition, increasing cultural diversity is a potential threat against Microsoft in terms of product-customer mismatch in the remote or macro-environment. For instance, customer satisfaction could decrease as the company’s products satisfy only the biggest cultural groups. Nonetheless, Microsoft has an opportunity to improve its goods and services to address this issue. On the other hand, the stable demand for high quality customer service creates opportunities for the company to improve its customer support activities. In this area of the PESTEL/PESTLE analysis of Microsoft Corporation, sociocultural external factors emphasize opportunities for growing the computer hardware and software business.

Technological Factors in Microsoft’s Business

The effects of technologies on the remote or macro-environment of the computer technology industry are identified in this area of the PESTEL/PESTLE analysis model. Microsoft needs to integrate the following technological external factors in its strategies:

  1. Rapid adoption of mobile technology (opportunity & threat)
  2. Increasing volume of online transactions (opportunity & threat)
  3. Increasing automation in businesses (opportunity)

Microsoft Corporation can improve its performance through rapid innovation of its mobile devices. This opportunity is based on the rapid adoption of and rising demand for mobile technology. However, this technological external factor is also a threat that facilitates competition against Microsoft. More technology firms could exploit such opportunity to enter the market. On the other hand, the increasing volume of online transactions provides opportunities for Microsoft to develop more products that support secure online transaction processing. However, such increasing volume of online transactions threatens the company in terms of a corresponding increase of cybercrime attacks, which is one of the threats identified in Microsoft’s SWOT Analysis. Moreover, the company has an opportunity to grow through products that enable businesses to automate more of their processes. As shown in this area of the PESTEL/PESTLE analysis, Microsoft has significant growth opportunities, although the related threats could limit such opportunities in the remote or macro-environment.

Ecological/Environmental Factors that Define Microsoft’s Situation

In this area of the PESTEL/PESTLE Analysis model, the impacts of ecological issues on the computer hardware and software industry environment are considered. Microsoft faces the following ecological external factors in its remote or macro-environment:

  1. Increasing preference for green products (opportunity)
  2. Increasing focus on business sustainability (opportunity)
  3. Increasing availability of recyclable materials (opportunity)

Based on the increasing preference for green products, Microsoft Corporation has the opportunity to enhance its sustainability standing. For example, the company can develop more environmentally friendly products, and increase the use of green energy in its business operations. In relation, Microsoft’s efforts to improve its sustainability directly addresses the opportunity based on the increasing focus of societies on business sustainability. Also, the increasing availability of recyclable materials is an ecological external factor that the company can use as basis for increasing the use of recycled materials in its computer hardware and software products and packaging. In this area of the PESTEL/PESTLE analysis of Microsoft, the remote or macro-environment presents a number of opportunities for competitive advantage.

Legal Factors Affecting Microsoft’s Industry

The business significance of laws and regulations are determined in this area of the PESTEL/PESTLE Analysis model. In Microsoft’s remote or macro-environment, the following legal external factors affect strategic success:

  1. Increasing electronic waste disposal regulations (opportunity & threat)
  2. Improving patent laws (opportunity)
  3. Energy consumption regulations (opportunity)

Increasing electronic waste disposal regulations are an opportunity for Microsoft Corporation to implement more effective recycling and disposal programs that improve brand image. However, this legal external factor is also a threat that could impose additional challenges for the company in addressing the environmental impact of its business. On the other hand, the improving patent laws facilitate Microsoft’s global growth by gradually reducing issues, such as computer software piracy. The company also has an opportunity to enhance its products to help client organizations reduce their consumption of energy through more energy-efficient computing technologies. Based on this area of the PESTEL/PESTLE analysis, Microsoft has growth opportunities in its remote or macro-environment.

Microsoft’s PESTEL/PESTLE Analysis – Recommendations

This PESTEL/PESTLE analysis of Microsoft Corporation highlights a variety of opportunities that can boost the company’s growth and expansion in the global computer hardware and software market. The remote or macro-environment is advantageous to the business, considering the opportunities available for Microsoft in markets worldwide. However, the main threat against the company is competition based on the expansion of foreign firms, as indicated through the external factor of increasing international trade agreements. For example, Microsoft experiences rising competitive rivalry with Asian firms. To address this threat, a recommendation is for Microsoft to develop innovative products that can outcompete their rivals. It is also recommended that Microsoft must develop additional strategic alliances with other firms to increase its competitive strength in overseas markets. As identified in this external analysis through the PESTEL/PESTLE Analysis model, the opportunities in the industry environment should be adequate for Microsoft to continue as one of the major firms in the global computer technology industry.

References
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