Analysis of the Impact of Environmental Factors and Competitive Advantage - Microsoft Nigeria

Analysis of the Impact of Environmental factors and Competitive advantage

Microsoft Nigeria

By Abba Chimaraoke O.

Organization: Microsoft Corporation

Microsoft is a worldwide leader in software, services, and solutions.

Microsoft develops, manufactures, licenses, and supports a wide range of products and services predominantly related to Information Technology. This is a fiercely competitive industry where innovation is one of the driving forces for success. Notable players in this space range from Google, Apple, IBM, HP, Amazon, RIM etc.

This analysis shall focus on the Public Sector in Microsoft Nigeria as a business unit. The Public Sector vertical in Microsoft is responsible for helping Governments more effectively manage their resources and serve their citizens by providing tools to help connect agencies, policy makers, government workers, and those they serve with services and information-all in the interest of achieving higher levels of service, efficiency, and accountability.

Below are some of the major trends in Public sector most of which fall under some of the components on the Pestle framework:

Government and Public Sector organizations continue to face:

* Cost pressures and competition for funding priorities

* Citizens and stakeholders continue to increase expectations for citizen-centric services

* Inflexible legacy systems using old technology

* Aging workforce

Government and Public Sector organizations continue to demand:

* Better access to services

* Consolidated views of accounting/funding information with comparisons to budget

* Streamlining the flow of information

* Ability to meet rising regulatory and compliance requirements

* Ability to collaborate with other agencies

Pestle framework shall be used in carrying out an analysis of the Microsoft's external environment on the Public sector vertical.

PESTEL Analysis

Many factors in the macro-environment effect the decisions of organizations. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change. In the case of Nigeria the unstable political environment and leadership changes, local content requirements, impact of recession on the price of oil and Foreign Direct Investments, income distribution, unemployment, inflation and devaluation of the Naira, rule of law etc. impact the decisions of Microsoft. To help analyze these factors organizations can categorize them using the PESTEL model as below:

Political factors

These refer to political stability, trade regulations, and policies such as the degree of intervention in the economy. What goods and services does a government want to provide? To what extent does it believe in subsidizing firms? For instance petrol or gas is heavily subsidized in Nigeria but in recent times the new Government is seeking to remove this subsidy. Other factors may be Political decisions like the delay in Policies around eHealth and eEducation which impacts Microsoft's potential for revenue in these areas.

Economic factors

These include interest rates, taxation changes, economic growth, inflation and exchange rates. The Central Bank of Nigeria recently devalued the Naira and revised a lot of the monetary policy in the nation affecting interbank lending rates and rates to consumers. Higher interest rates may deter investment because it costs more to borrow - the Small and Medium Enterprise offerings from Microsoft that would typically cater to the local governments are negatively impacted. Also the level of inflation in Nigeria provokes higher wage demands from employees and raises costs in the face of poor revenue generation.

Social factors

Changes in social trends impact on the demand for Microsoft products. The ageing workforce in Nigeria and the decline in the quality of education or literacy levels affect the consumption or adoption of technology being sold by Microsoft in the Public Sector Vertical. The proliferation of Blackberry internet Service as a status symbol in Nigeria has also affected the need to use the Microsoft Internet Explorer thereby eroding revenue and competitive advantage.

Technological factors

New technologies create new products and new processes. Government spending on Information Technology and the rate of obsolescence of technology has worked in favour of Microsoft - virtualization, cloud computing, computer games, and the mobile computer operating platforms are all new markets created by technological advances which has added to revenues for Microsoft Nigeria in the Public Sector.

Environmental factors

Environmental factors include the weather, climate changes, energy consumptions laws, waste disposal etc. The growing desire to protect the environment is driving technological innovation in the direction of production of energy friendly systems which in turn puts a demand on new software and technologies as well as renders legacy systems obsolete.

Legal factors

These are related to the legal environment in which firms operate. In recent years Nigerian Government in partnership with Microsoft is clamping down on software piracy and intellectual property rights. This ensures that we are able to monetize more of our products and plug leakages from piracy. However the respect for and adherence to the rule of law is still a challenge being grappled with by the Government in Nigeria. Also a law prescribing minimum wage as recently passed in Nigeria also has a potential impact on all the players in the industry

Microsoft for more than a decade had dominated the public sector space in Nigeria. Six years ago it went into a strategic partnership agreement with the Federal Government worth $19.2 Million. In the past 3 years Africa and Nigeria in particular having been identified as one of the major growth frontiers have stimulated a lot of new entrants into the