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Microsoft’s Diversification Strategy Essay

3331 words - 13 pages

This essay plans to focus on the corporate strategy of Microsoft, and show how Microsoft has used diversification successfully within their corporate strategy to gain a competitive advantage.

This essay will utilise the following structure. It will commence by providing the reader with a brief history about Microsoft and then go onto explaining what corporate strategy is. Following this will be Microsoft’s diversification strategy in parallel with the reasons why they choose to diversify. Within this section the author plans to explore Microsoft’s related diversification approach, their corporate rationale, alongside why skill transferring is essential to them sustaining a competitive advantage and also how they achieved and utilized economies of scope (EOS). In the section regarding reasons why Microsoft chooses to diversify will be notions of proactive and defensive reasons, along with the idea of increasing market power and spreading risk. Then finally, a conclusion will follow summing up Microsoft’s overall ability to sustain a competitive advantage.

About Microsoft
Microsoft was originally created in 1975 by Bill Gates and Paul Allen. They first introduced their software package, Window 1.0 in 1983, the first package to consist of a mouse which helps navigate a PC. MS-DOS commands were previously used to operate computer systems, however people found these extremely hard to understand. This Windows 1.0 package was a key turning point in Microsoft emergence. As time progressed Microsoft created updated versions which consisted of advanced graphics, built-in internet support, dial-up networking and much more (Microsoft, 2011). Windows packages started from Window 1.0 to the current version which is Windows 7, with Microsoft releasing software packages almost every year with additional features to every package created. Throughout Microsoft’s lifetime they have diversified into numerous other fields besides software for computers.
Microsoft breaks down their diverse business portfolio into 5 different areas:-
Online services divisions (i.e. MSN, Bing),
Server and tools business (i.e. Windows server) ,
Microsoft business solutions (i.e. Microsoft health solutions),
Microsoft office division (i.e. SharePoint)
Interactive entertainment business (i.e. HTC, X-box, Skype)
(Microsoft, 2010)
Microsoft are situated within the top 20 largest companies functioning in the world, with turnover figures of 60-70 billion dollars a year (E-how, 2011).
From reviewing the history on Microsoft it is clear to see that Microsoft has a wide portfolio with strategic businesses units working in numerous related markets. The next section will identify what corporate strategy is and what type Microsoft are using.
What is Corporate Strategy?
Corporate Strategy has been defined by numerous authors. Grant (1995) claims corporate strategy deals with the way a corporation manages a number of different businesses. Lynch, R,...

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