Microsoft Corp Current Strategy

According to Hanson et al. (2008, p.177) corporate-level strategy is," An action taken to gain a competitive advantage through the selection and management of a mix of businesses competing in several industries or product markets". If the corporate-level strategy is managed effectively, the strategy assists in enhancing the firm's strategic competitiveness whilst contributing to the ability to earn above-average returns. Consequently, the corporate-level strategies are managed in a global business environment in which is characterised by high degrees of risk, complexity, uncertainty and ambiguity. (Hanson et al, 2008).

The literature in comparison with Microsoft's current financial statements (Microsoft Corporation, 2010) reveals that Microsoft is effectively managing their corporate-level strategy as the firm can be seen to be pursuing a dominant-business diversification strategy. (Hanson et al. 2008, p.178). Please refer to Appendix E: Microsoft Division for the breakdown of revenue per Microsoft Division. Montgomery (1994) examines the market-power view, the agency view and the resource view as reasons as to why firms diversify. The literature goes on to suggest that firms with lower levels of diversification are often more profitable than those companies with higher levels of diversification.

Firms partake in diversification for an array of reasons. Microsoft utilises a value-creating diversification in order to increase the economies of scope, obtain more market power and to increase financial economies. (Hanson et al. 2008). Additionally, such diversification allows Microsoft to move beyond the PC industry.

4.0 RECOMMENDATIONS

Through analysing the case study provided and the initial financial analysis, key problems were identified as seen in the introduction of this report. This section will provide possible recommendations as to how the firm can overcome these problems.

Olson et al. (p. 57) suggests that organisations such as Microsoft who have the ability to charge premium prices through utilising their key strategic strengths in areas such as marketing and brand management, can find themselves facing competitive rivalry. Firms may find that strong competition comes from rivals