This report is aimed to find some useful business strategies and adjust some useless business strategies of Microsoft. Environmental Audit using PESTEL model has been conducted along with SWOT analysis. Competition level in the industry and position of Microsoft has been discussed using Five Forces model for competition. BCG Matrix has supported to find out the objective of positioning company’s products at different level in the industry. Innovation has been considered as one of the major strategies of the company with respect to gain maximum from the increasing demand of technological products in the market. It has been focused in this report how innovation and product differentiation business strategies have helped Microsoft to become market leader in the product segment of operating systems and MS-office tools.