PEST Analysis of Microsoft in 2021

Microsoft Corporation is an American multinational technology corporation which produces computer software, consumer electronics, personal computers, and related services. Microsoft was founded by Bill Gates and Paul Allen on April 4, 1975, to develop and sell BASIC interpreters for the Altair 8800. It rose to dominate the personal computer operating system market with MS-DOS in the mid-1980s, followed by Microsoft Windows.

Earlier dethroned by Apple in 2010, in 2018 Microsoft reclaimed its position as the most valuable publicly traded company in the world. In April 2019, Microsoft reached the trillion-dollar market cap, becoming the third U.S. public company to be valued at over $1 trillion after Apple and Amazon respectively. As of 2020, Microsoft has the third-highest global brand valuation.

Actually, if you’re not running an Apple device, chances are you’re using a Windows Operating system. Unfortunately, the laptop and PC industry isn’t as strong as it once was. Future success in this realm is still possible. But it’s much more strenuous than ever before. There’s also trouble brewing with data breaches. Some companies aren’t happy with how Microsoft distributes their software. And the company isn’t doing well in the mobile niche. This PEST analysis explains these troubles in more details. As well as Microsoft’s successes within the last few years.

Political: Software selling issues and expensive political lobbying.

Within the last couple of years, Microsoft has run into several political issues. Many were nothing more than an annoying mosquito biting at their heels. But the anti-trust issues aren’t so easily squashed.

Countries, most notably China, have taken issue with how Microsoft distributes and sells their software. The United States of America and China have had a (mostly) amicable relationship in the past. Even now, the U.S relies heavily on China. Any type of disturbance can be a cause of alarm, even for Microsoft.

It’s not just China either. In 2013, the European Union (EU) hit Microsoft with a $730 million fine for violating their trust regulations. Microsoft isn’t the only company at fault; Amazon and Google also faced legal issues on the same subjects. And with the EU changing their privacy regulations recently, lawsuits for big American corporations are likely to continue.

Watching how the laws shift in international countries will benefit Microsoft. The political environment directly affects the profitability and revenues of any active business. When operating in many countries, as Microsoft does, a nation’s (un)friendliness impacts the success in said country.

Right now, Microsoft is in a favorable position for political lobbying. Within the last two years, the company has provided more than $10 million towards the formation of political environments. Clearly, they wish to be on the good side of their government. As any business would. Microsoft isn’t the only one to throw money into politics. Amazon.com and JPMorgan Chase have also spent millions towards sales taxes, data protection regulations and privacy.

Economic: Still recovering after loss from 10 years ago.

Microsoft is affected by the current state of the economy. The company sees profits waver when taxation rates and labor laws change. Or from a poor relationship between international companies. Because a bad relationship can increase inflammation or prevent importing and exporting of materials. Microsoft is affected by all of the above.

The corporation is still recovering from changes over ten years ago. During 2007, when the financial crisis hit, Microsoft was forced to lay off over 5,000 employees. This is just one example on how the economy can cause devastating results for a company. Even one as big as Microsoft.

Then there’s the U.S dollar. It’s stronger than many foreign dollars since the recession hit. Although recovery was swift for some companies the stronger dollar has caused some friction.

In 2015, this led to reduced revenue and expenses from Microsoft’s international operations. If one country is struggling, their buying habits will shift to only products of necessity. However, if the country’s economy is flourishing, they’re likely buy more products regardless of need.

This is bound to happen at some point. Microsoft needs to act accordingly to make sure changes like these have little impact on the company as a whole.

Social: Not shifting to new trends could be disastrous.

It’s not just the economy affecting revenue and profits; social factors have a voice too. Every business needs to understand the social and cultural forces of their business.

Not keeping track of cultural changes can negatively impact a business. You never want to be the last to know about a new trend. It’s more difficult when the business is available in multiple countries. Then several customs and cultural changes must be studied. Some companies, like IKEA, have managed to shift their positioning to benefit cultures. Microsoft hasn’t put much emphasis on doing the same.

We’ve seen a massive increase in the use of mobile devices. Websites are expected to run smoothly on these devices. They should be fast, optimized for the screen size, and easy to use.

Unfortunately, Microsoft hasn’t adapted to smartphones easily. Most Microsoft products are built for computers. They’ve put little focus on mobile users. Other businesses are stepping up to the plate that Microsoft has abandoned.

If they want to see more success, Microsoft needs to shift their thinking to include smartphones as a major part of their campaigns. If not, plenty of other companies will be happy to take the lead.

Technological: Constant competition and troubles with Nokia

Microsoft is a technology company. It develops and distributes digital software. Any changes in the technology industry will affect the corporation. Once new technology is developed the old is thrown away. Forgotten. Never to be used again. That’s why keeping up on new technological breakthroughs isn’t an option for a company like Microsoft.

Two major rivals, Apple and Google, keep Microsoft on their toes. If it doesn’t, it’ll likely result in devastating profit loss. Luckily, Microsoft puts plenty of funding towards innovation, research, and investments. The company has experienced profit growth after adopting cloud-based services, for instance.

Still, they’re not quite on board with mobile technology, as mentioned earlier. That isn’t to say they didn’t try. Microsoft purchased the Nokia brand but it wasn’t profitable. They’ve created phone hardware and devices, but consistently see a revenue decrease in this area. They’re trying, but striking out consistently.

Source: PESTLE ANALYSIS

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