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In this video tutorial, viewers learn how to set up business letters in Microsoft Word. The first step involves adjusting the top margin from 1 inch to 2 inches. To do this, users navigate to "Page Layout," click on "Margins," and select "Custom Margins," where they enter "2" for the top margin before clicking OK. Following this, the video will guide viewers on changing font style, size, and spacing options to ensure proper formatting before typing the letter.