An environmental scanning process consists of an organization gathering information about the industry in which it operates, including information about the economy, government, laws and demographic factors such as population size, distribution and other factors. The organization should focus on its competitors. The company should examine the research for trends, opportunities and threats that might impact its business. An internal scan of the organization is needed to examine the organizations strengths and weaknesses.
An organization should gather information from the community it conducts business and interview the leaders of the groups or use surveys. An external scan of the organization is the opportunities and threats that are outside the organization. When conducting an environmental scan, a variety of methods should be used to collect data, including publications, focus groups, leaders inside and outside the organization and the media. After the data is collected, the final step is to analyze the data and identify changes that can be made using a SWOT analysis, resource–based view, and the VRIO framework.
According to the reading, the VRIO framework helps organizations determine if a resource adds value or defend against threats (Pearce & Robinson, 2013). If the answer is yes, then a resource is considered valuable. Organizations need to constantly monitor the value of the resources because changes in internal or external conditions can make them less valuable or useless. Resources that can only be acquired by an organization are considered rare. Imitation can occur in two ways either through duplicating or substituting the resource. An organization that has valuable, rare and costly to imitate resources can achieve a competitive advantage.
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An organization needs to manage its systems, processes, policies, organizational structure and stakeholders to be able to fully realize the potential of its valuable, rare and costly to imitate resources and its intangible assets. Microsoft’s ability to manage their people effectively is a source of both differentiation and cost advantages. Microsoft uses data about its employees to manage them. This capability allows making correct (data based) decisions about which employees to offer employment and the best way to use his or her skills.
As a result, Microsoft is able to hire innovative employees that are also very productive. Besides being valuable, it is also a rare capability because no other company uses data based employee management this often. It is costly to imitate, at least, in the near future. Microsoft has trained HR managers that know how to use the data and manage employees. It also has the needed IT skills to collect and manage the data about its employees. According to the reading, RBV is an approach to achieving a competitive advantage(Pearce & Robinson, 2013).
In other words, organizations should look inside its departments to find the sources of competitive advantage instead of looking at the competitive environment because its easier to exploit external opportunities using existing resources in a new way rather than trying to acquire new skills for each different opportunity. An organization can achieve an edge over its competitors through external changes when its capable to respond faster than other organizations. An organization can achieve cost or differentiation advantages when it develops VRIO resources.
According to the reading, the external environment consists of political, economic, socio-cultural, barriers to entry,economies of scale, and technological factors(Pearce & Robinson, 2013). When these factors change many opportunities arise that can be exploited by an organization to achieve an edge over its competitors. An advantage can also be realized when an organization is the first one to exploit the external change. Otherwise, if an organization is slow in its capitalizing on changes it may never benefit from the opportunities. Microsoft's is the world's #1 software company and its corporate office is located in the US.
The current CEO is Steve Ballmer, there are managers for its different departments, board members, partners or stakeholders and it has 94,000 employees. In 2012, Microsoft’s revenue was 73 billion, profits close to 17 billion. Microsoft competitors are Apple, Google and many others. Other products include enterprise applications like Microsoft Dynamics, server and storage software, video game consoles (Xbox), and digital music players (Zune). It also makes software for mobile phones. Based on a SWOT analysis, resource–based view, and the VRIO framework,
Microsoft’s strengths are brand loyalty, brand reputation, easy to use software, strong distribution channels and the acquisition of Skype and other organizations. Microsoft has been the leading software provider, which resulted in more than 90% market share. Brand reputation leads to higher sales and greater market share. Microsoft products are easy to use. Microsoft works with all the major computer hardware manufacturers. For example, Lenovo, Dell, Toshiba and Samsung and major computer retailers to make sure computers would be sold with already pre-installed Windows software.
With nearly 300 million users, Skype is a significant boost to Microsoft’s strategy and online advertising. Microsoft’s weaknesses are poor acquisitions and investments, dependence on hardware manufacturers, criticism over security flaws, mature PC markets and they are slow to innovate. Microsoft’s acquisitions are not successful. Microsoft does not produce its own hardware and depends on computer hardware manufacturers to develop products that run Windows OS. If cheap and popular alternative OS would appear, hardware manufacturers may simple choose the alternative and Microsoft could do little to change the situation.
Windows OS, is criticized for being so weak against various viruses attacks. The market for these products has matured and Microsoft will find it harder to grow revenues in these sectors. Microsoft has resources to enter new markets with innovative products but constantly failed to do so. It had an opportunity to be the first player in online advertising but missed the opportunity. It’s mobile OS was also too late, while Google and Apple captured the market share. The opportunities for Microsoft are cloud services, mobile advertising and growth through acquisitions.
Microsoft could expand its range of cloud services and software as the demand for cloud-based services is expanding. Microsoft does offer Office 365 and many organizations use this platform. Mobile advertising markets are expected to grow over the next few years and Microsoft has a great opportunity to tap into these markets with its mobile OS. Smartphones and tablets markets will grow over the next few years and Microsoft could exploit this opportunity by introducing more of its own tablets. Microsoft could start acquiring new startups that would bring new technology, skills and competences to the business.
The threats facing Microsoft are Intense competition in software products, Changing consumer needs and habits, Open source projects and potential lawsuits. Microsoft is under pressure to introduce successful OS both in PC and mobile markets as such competitors like Google and Apple have already established positions. Customers shift from buying laptops and standalone PCs to buying smartphones and tablets, the markets, where Microsoft has only a modest market share and may never establish itself. Many new open source projects are coming to the market and some of them became quite successful, such as new Linux OS and Open Source Office.
Open source projects are free and so they can become an alternative to expensive Microsoft’s products and its complicated licensing agreements. Microsoft has already been sued and lawsuits are expensive as they require time and money. Recently, an article in the Seattle Times called “Microsoft sells Issaquah Highlands property” written by Keith Ervin, a staff reporter mentioned that Microsoft sold 63 acre in Issaquah , Washington because it no longer had requirements for office developments(Seattle Times. com). This is a cost saving move.
Microsoft’s strategic plan needs to include flexibility while considering the needs and outcomes for its employees, stakeholders and the communities it serves. The vision, mission and value statements should be validated by customers, employees and other stakeholders during an interview and survey process. The external and internal environmental factors should be evaluated by the SWOT analysis, resource–based view, the VRIO framework because conducting a SWOT analysis alone has limitations and the data can prove inaccurate.
The two most prominent sources of competitive advantage can be found in the business’s cost structure and its ability to differentiate the business from competitors. Businesses that create competitive advantages from one or both of these sources usually experience above-average profitability within their industry and avoid tunnel vision. Businesses that lack a cost or differentiation advantage usually experience average or below-average profitability because the strategist has tunnel vision. Implementing and monitoring these strategies will be key for Microsoft to remain a dominant player in the future.
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