Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.
Microsoft has a product-type divisional organizational structure, with each division focusing on a specific line of goods and services. Furthermore, each has a separate research and development arm and dedicated sales and customer support staff.
Since current CEO Satya Nadella was appointed in 2015, the company has undergone several structural changes. Presently, Microsoft has two core engineering (product development) divisions:
Cloud and Artificial Intelligence Platforms.
Experiences and Devices.
Functional structure
Microsoft has a further seven functional divisions:
Business Development and Evangelism.
Finance.
Human Resources.
Legal and Corporate Affairs.
Engineering (operating systems, devices, studios, applications, services, and cloud and enterprise units).
Dynamics.
Advanced Strategy and Research.
Despite each division having some autonomy, divisional heads must still report directly to Nadella.
Geographic divisions
Microsoft also contains two geographic divisions: United States and International.
Other characteristics of Microsoft organizational structure
Span of control
Microsoft has a wide span of control (SOC). This means the company has a comparatively higher number of subordinates under a single manager.
Centralization
Unlike Apple – where decision-making is made by all levels of management – Microsoft remains predominantly centralized with decisions made by those with authority.
Instituted by Bill Gates, centralized decision-making standardizes work output and removes the potential for personal biases. This creates a unified company with universal standards of performance and progression.
Advantages and disadvantages of Microsoft’s corporate structure
Advantages
Streamlined innovation. With a product-based divisional structure, employees work on projects that suit their skills and expertise. Supportive leadership with access to the CEO gives product specialists the freedom and resources to innovate. This ties in nicely with Microsoft’s core strategy of creating a family of integrated devices and services.
Minimization of internal conflict. With little overlap in the scope of each division’s activities, there is little chance for conflict over resources or skills.
Flexibility and responsiveness. Each division operates as a pseudo-entity, equipped with the functions and resources necessary to accomplish its mission. As a whole, this makes the divisional structure of Microsoft more adaptative. Divisions can be added, removed, or merged as required and do not impact other units.
Disadvantages
Incompatibility. The divisional structure has led to a scenario where Microsoft’s own products were incompatible with each other. This occurred when the business software division was unable to integrate Microsoft SharePoint with Windows Live.
Minimal consideration for international markets. Microsoft has a sole geographic division for the rest of the world sans the United States. It could be argued that a single geographic division fails to capture the nuanced differences of regional markets.
Key takeaways:
Microsoft has a product-based divisional organizational structure. The company has sought to streamline product development over the years, with current CEO Satya Nadella creating just two product divisions. These are Cloud and Artificial Intelligence Platforms and Experiences and Devices.
Microsoft has a further seven functional divisions, with each divisional head reporting directly to Nadella.
Microsoft’s divisional structure helps it streamline innovation and support a core strategy of integrated products and services. Divisions also help the company operate as a collection of flexible and adaptive entities with separate missions and access to resources.
Major shareholders comprise co-founder Bill Gates, who stepped down from the company’s board in 2020, which is why these shares are no longer publicly reported. In 2019, Gates still owned a stake of 103 million stocks, which accounted for 1.34% of the company’s ownership (worth over $23 billion in January 2023). Other individual shareholders comprise Satya Nadella, the company’s CEO, Brad Smith (former president), Jean-Philippe Courtois (EVP), and Amy Hood (former CFO).
In 2022, on over $198 billion in revenue, Microsoft generated over $72.7 billion. The company had over $104 billion in liquid assets (which can be easily converted into cash).
Microsoft is among the largest companies on earth, with a diversified portfolio. Owned by billionaire Bill Gates, Microsoft acquired other companies like LinkedIn, GitHub, Skype, and more over the years. Today, Microsoft is a tech empire that spans software, social media, gaming, and more.
Microsoft’s first acquisition in 1987, Forethought, was the developer of a presentation program that would later become PowerPoint. Since then, the company has made an average of six purchases every year, with fourteen of those exceeding the $1 billion mark. Today’s Microsoft business model spans various segments thanks to an acquisition strategy, which saw Microsoft involved in multiple acquisitions.
Microsoft’s mission is to empower every person and every organization on the planet to achieve more. With over $110 billion in revenues in 2018, Office Products and Windows are still the main products. Yet the company also operates in Gaming (Xbox), Search Advertising (Bing), Hardware, LinkedIn, Cloud, and more.
Microsoft has a diversified businessmodel, spanning from Office to gaming (with Xbox), LinkedIn, search (with Bing), and enterprise services (with GitHub). In 2021, Microsoft made over $168 billion in revenues, of which over $52 billion came from Server products and cloud services, and $39.8 billion came from Office products and cloud services. Windows generated over $23 billion, Gaming generated over $15 billion, LinkedIn over $10 billion, and search advertising (through Bing) over $8.5 billion.
Founded in 1975 by Bill Gates and Paul Allen, Microsoft is a revolutionary company in the world of personal computing. The company designs and manufactures software, hardware, operating systems, apps, and devices. Indeed, Windows and Microsoft Office are staples in billions of homes worldwide.
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time, it also became more hierarchical while maintaining its hybrid approach between functions, engineering groups, and management.
OpenAI is an artificial intelligence research laboratory that transitioned into a for-profit organization in 2019. The corporate structure is organized around two entities: OpenAI, Inc., which is a single-member Delaware LLC controlled by OpenAI non-profit, And OpenAI LP, which is a capped, for-profit organization. The OpenAI LP is governed by the board of OpenAI, Inc (the foundation), which acts as a General Partner. At the same time, Limited Partners comprise employees of the LP, some of the board members, and other investors like Reid Hoffman’s charitable foundation, Khosla Ventures, and Microsoft, the leading investor in the LP.
OpenAI has built the foundational layer of the AI industry. With large generative models like GPT-3 and DALL-E, OpenAI offers API access to businesses that want to develop applications on top of its foundational models while being able to plug these models into their products and customize these models with proprietary data and additional AI features. On the other hand, OpenAI also released ChatGPT, developing around a freemium model. Microsoft also commercializes opener products through its commercial partnership.
OpenAI and Microsoft partnered up from a commercial standpoint. The history of the partnership started in 2016 and consolidated in 2019, with Microsoft investing a billion dollars into the partnership. It’s now taking a leap forward, with Microsoft in talks to put $10 billion into this partnership. Microsoft, through OpenAI, is developing its Azure AI Supercomputer while enhancing its Azure Enterprise Platform and integrating OpenAI’s models into its business and consumer products (GitHub, Office, Bing).
Stability AI is the entity behind Stable Diffusion. Stability makes money from our AI products and from providing AI consulting services to businesses. Stability AI monetizes Stable Diffusion via DreamStudio’s APIs. While it also releases it open-source for anyone to download and use. Stability AI also makes money via enterprise services, where its core development team offers the chance to enterprise customers to service, scale, and customize Stable Diffusion or other large generative models to their needs.
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, product management, investor relations, and so on).
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
