Microsoft PESTEL Analysis: Benefiting from Social Factors
PESTEL is a strategic analytical tool and the acronym stands for political, economic, social, technological, environmental and legal factors. Microsoft PESTEL analysis examines effects of these factors on the bottom line of the multinational technology company.
Political Factors in Microsoft PESTEL Analysis
There are many political factors within the scope of Microsoft PESTEL analysis at governmental, regional and international levels. Apart from the impact of a regular set of political factors such as political stability in the market, impact of activities of lobby groups and the government attitude towards the organization and the industry, Microsoft activities during the past years have brought upon the company other set of political issues.
Most notably, Microsoft has attracted the attention of governments and political parties due to antitrust-related issues. A recent probe by China’s State Administration for Industry and Commerce into the ways Microsoft distributes its Internet Explorer browser and Windows Media Player and sells its Office and Windows software in China[1] can be mentioned as a relevant example of impact of a political factor.
Similar to major international corporations, Microsoft engages in political lobbying in order to contribute to the formation of political environment favourable to its business. As illustrated in figure below, the amount of annual political lobbying by Microsoft has ranged between USD 3,92 million and USD 7,25 million during the last 10 years.
Annual lobbying by Microsoft Corporation[2]
Economic Factors in Microsoft PESTEL Analysis
There is a range of economic factors that affect Microsoft revenues directly or indirectly. These include economic growth or recession in the market, changes in interest rates and currency exchange rates, changes in taxation rates and policies, inflation rates, changes of labour costs and costs of other resources and others. Particularly, the global economic and financial crisis of 2007 – 2009 had proved to have highly detrimental impact on Microsoft, leading to layoffs of more than 5,000 employees in 2009[3] and this illustrates the potential impact of economic factors on business performance.
Furthermore, monetary and fiscal policies of the United States and other countries where Microsoft operates can have direct or indirect impact on the performance of the multinational technology company.
Changes in exchange rates between USD and other currencies is another significant factor affecting Microsoft profit reports due to the fact that the company generates substantial part of its revenues from international markets. Strengthening of USD relative to certain foreign currencies throughout fiscal year 2017 negatively impacted reported revenue and reduced reported expenses from Microsoft international operations. This trend reversed in fiscal year 2018. Strengthening of foreign currencies relative to the U.S. dollar positively impacted reported revenue and increased reported expenses from company’s international operations.
Cost of labour can be mentioned as another economic factor with potential effects on the bottom line for the technology company. Microsoft employs approximately 131,000 people on a full-time basis including 78,000 people in North America.[4] Accordingly, increases in the cost of labour decrease the total net profit for the company.
Microsoft Corporation Report contains a full version of Microsoft PESTEL analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Microsoft. Moreover, the report contains analyses of Microsoft business strategy, leadership, organizational structure and organizational culture. The report also comprises discussions of Microsoft marketing strategy, ecosystem and addresses issues of corporate social responsibility.
[2] Open Secrets (2018) Available at: https://www.opensecrets.org/lobby/clientsum.php?id=D000000115
[3] Goldman, D. (2014) CNN Money, Available at: http://money.cnn.com/2014/07/17/technology/enterprise/microsoft-job-cuts/
[4] Annual Report (2018) Microsoft Corporation