Microsoft Corporation SWOT Analysis

Introduction

Microsoft Corporation is known as the leader in the development of applications and personal computer software systems. Additionally, the company makes portable media devices, computer peripherals, e-mail servers, and tablet computers. Performing a “Strength, Weaknesses, Opportunities (SWOT)” analysis of Microsoft Corporation would help in understanding their position in the industry better. According to Ommani (2011), SWOT analysis can help managers to understand their history and come up with better solutions to their potential or current problems when dealing with an existing business or when MS want to open up a new venture. Through SWOT analysis, companies can determine what the organization can and what it cannot do together with helping in understanding their threats and opportunities.

Microsoft SWOT Matrix

Strengths

Loyalty to their brand

Brand Reputation

Software that is easy to use

Well established distribution channels.

Their acquisition of Skype

Weaknesses

Poor investments and acquisitions

The heavy dependence of manufacturers of their hardware

Continuous criticism because of their security flows

Mature PC markets

The slow pace of innovation

Opportunities

Offering cloud-based services

Mobile advertising

Ever expanding mobile device industry

Growth through acquisitions

Competitive software products

Ever changing customer habits and needs

Growing wave of open source projects

Potential lawsuits

Strengths

Loyalty to their Brand

Microsoft Corporation has been able to maintain a significant portion of the market share. However, for the first time, MS dropped below 90% of the total market share (Hruska, 2016). Even with this drop, MS still maintained a significant lead over their competitors who manager just close to 12% of the total market share. Most people grew up using the Microsoft OS and fell in love with it given that it is easy to use. Over the years, the company continued using Microsoft OS because the firm was good towards it production. Despite the increasing numbers of open source operating systems, the firm still find it difficult to sway users to shift from Microsoft OS.

Brand Reputation

2017 data ranks Microsoft as the third most valuable company in the world with a value of $80 billion, and it is listed as the seventh most reputable company in the world (Picchi, 2017). With their brand reputation, Microsoft Corporation has been able to increase their sales and increase their market share. With their ever-increasing popularity, it is expected that the company will be able even to increase their market share. Over the past five years, Microsoft has seen an increase in their market share. Microsoft has steadily risen in the rankings, compared to their past position that was at number five.

Easy to Use Software

In most countries, the operating systems that people first come into contact with are Microsoft OS. The Microsoft software on the market is good, and people fall in love with them almost instantly. Due to this, the company has become very popular with most people as they have found them to be enjoyable. In fact, the software requires very little training with no additional costs. Microsoft also has unrivaled monopolistic power, good brand reputation, competitive distribution channels. These have enabled them to produce good quality products, and customers instantly fall in love with them.

Well Established Distribution Channels

According to Szopa & Pękala (2012), distribution channels are essential in ensuring that finished products can meet the needs of the customers; especially, in ensuring that the products reach the consumers at the right and in the right place. Microsoft works with some of the major producers of computer hardware such as Samsung, Toshiba, Dell, and Lenovo. Microsoft ensures that their computer comes with Windows pre-installed. Microsoft has also invested in Nokia and Dell, thus making their relationship with the companies even stronger.

Acquisition of Skype

Even before acquiring Skype, Microsoft was performing well. However, acquiring Skype gave expanded their performance and market power, bringing in 300 million additional users. This brought a significant boost to the online presence of Microsoft giving them more ability to generate income from their online activities.

Weaknesses

Poor Investments and Acquisitions

One area that Microsoft has not been successful in making acquisitions because very few of the acquisitions that it made in the past helped them to bring in revenue and acquire new skills. Microsoft places a lot of focus on developing new skills and gaining more competencies to add value to the company. In the past, Microsoft acquired such companies as Danger, Web TV, and Link Exchange but soon had to divest or shut down some of them because Microsoft was not yielding the results it required. This is one area that severely hindered the ability of Microsoft to expand their market share in the market. Making wise acquisition decisions is one area that Microsoft needs to work on thoroughly or MS risks being able to expand and increase their market share.

Heavy Dependence on the Manufacturers of their Hardware

Microsoft solely depends on dominating the software market, and MS have never taken steps to produce their hardware. Consequently, MS depend on the manufacturers of computer hardware to develop for them programs that can run on Windows operating system. The risk here for Microsoft is that whenever cheaper and matching quality alternatives would be produced, hardware manufacturers would find it easy to opt for them because MS never rely on Microsoft, Microsoft relies on them. The problem for Microsoft is that it will never be in their power to be able to change the situation.

Continuous Criticism because of their Security Flows

Increase in security concerns means that software security has become relevant to the IT security managers. Without sufficient protection, the software can offer attackers the leeway through which MS can compromise the safety of the data and information that is stored (Mehta, 2007). Even in the light of the importance of security, Microsoft products have faced endless criticism of their vulnerability to virus attacks. Other OS such us Linux and immune to the threat of virus attacks as opposed to Microsoft OS which is always vulnerable to attacks by viruses. It is hard to imagine if any individual is using Microsoft OS which has never been a victim of virus attacks. Microsoft has continuously failed to make their systems immune to these attacks, and the situation presents their customers with great worries that MS never can address. The laxity of Microsoft to address these security concerns can be attributed to the fact that MS has continued to be successful in the face of these criticisms.

Mature Personal Computers Markets

Even though Microsoft entered the mobile technology market, it still heavily rely on their software and operating systems sales as the single most significant sources of their revenues to those that sell laptops and stand-alone computers. On the other hand, the markets for the products are continuously maturing, and as time progresses, it would be difficult for Microsoft to ensure that their revenues grow in the sectors mentioned above. This poses a critical challenge to Microsoft Corporation in its quest to become the highest grossing company on the globe.

Slow Pace of Innovation

Innovation is the backbone of any business, the platform MS use to differentiate themselves from their competitors and gain competitive advantage (Ionescu & Dumitru, 2015). Even though MS has considerable research and development department, Microsoft has never been able to place themselves at a position where it can penetrate new markets. For the company, this is a major headache because with the technological changes, innovation has become inevitable and a must for any company that wants to succeed and have sustained a competitive edge. Microsoft tends towards being behind in technological developments. Microsoft entered late into the smartphone market and passed up on their chance to be the first to offer online advertising.

Opportunities

Offering Cloud-Based Services

According to Huth & Cebula (2011), cloud computing refers to using servers stored on the internet in the management and processing of data instead of relying on personal computers or the local servers Mobile advertising. Microsoft has the opportunity to expand their range of cloud services and start offering some of their software as services. If Microsoft can effectively take advantage of the cloud services, it can be able to maintain a significant lead over their closest competitors.

Mobile Advertising

The fact that Microsoft decided to venture into the mobile market should come as a great plus for them because mobile advertising is always growing. Additionally, Microsoft can tap into the mobile advertising market and take advantage of the opportunities that it offers because it is one of the companies which is specialized in the provision of mobile operating systems. The MS can ensure that it make its mobile OS the best performing and beat off biggest competitors such as Android.

Ever Expanding Mobile Device Industry

Smartphone technology brought a big buzz into the mobile industry, and people believe that there are no limits to what the mobile industry can achieve. More growth and expansion is expected in the mobile industry. The decision by Microsoft to venture into this industry will come as a major plus for them because the industry can only continue to expand. If MS can get their cards right and become among the leaders in the industry, MS will be able to improve their performance and their market share significantly.

Growth through Acquisitions

Acquisitions offer companies the ability to increase their synergies and their market share and become more stable and competitive (Jørgensen & Jørgensen, 2010). Microsoft is one of the most successful companies, and this can be supported by its vast cash reserves. Consequently, MS can acquire firms in areas that it never operates and this can help them to expand their risks. Additionally, MS can be able to purchase new technologies, competencies, and skills that would help them to generate more revenue and increase their competitive advantage. Microsoft is one of those companies that have a positive image, and there would be a buzz around any of the acquisitions that MS make. The management of Microsoft can acquire companies in other fields with relative ease, and this would enable them to diversify their risks effectively.

Threats

Competitive Software Products

The generation of software development is becoming increasingly competitive with more technology companies always striving to release more unique products. In this regards, Microsoft must ensure that they continuously release new and more innovative yet successful operating systems to enable them to beat off the competition and create a buzz around their products. Corporations such as Google and Apple are positioning themselves as leaders in software development, and Microsoft can never afford to let them surge ahead. Now more than ever, Microsoft needs to offer unique products with distinctive features that would make them stand out from their competition. Any failure to keep up with the pace will leave them vulnerable and may take them out of business. The case of Nokia showed that even if a company is so big, MS must keep up with innovation or else the company risk being overrun.

Ever Changing Customer Habits and Needs

Technology has not only made customers aware that change is possible, but it has also made MS realize that it continuously need technological changes. As a result, customer needs are continually changing, and it is imperative for companies to keep up with the changes or else the company risk losing a significant share of their market. Microsoft is now under pressure to release OS that would inspire confidence in customers that they are getting a better product that would offer them something unique yet better and more responsive to their needs and demands. In the future, it is expected that customers will have significant variations in their demands for PCs, tablets and mobile phones. Therefore, Microsoft needs to be strategically positioned to ensure that they are not let out in any of the markets.

Growing Wave of Open Source Projects

Open source software projects are open to inspection, modification, and enhancing by anyone Fogel, K. (2005). Over the last fear years, many of these products have come into the market, and several of them have achieved a reasonable degree of success. Examples are Libre Office, Open Source Office, and the new Linux Operating System. Whereas Microsoft products are paid for and can be expensive, open source products are free, and most of them offer the same functionalities. Over time, the brand loyalty and reputation of Microsoft will not be able to give them an edge over their competition.

Potential Lawsuits

N aturally, lawsuits can be expensive, and they can cause significant damage to the finances of a company. In the years gone by, Microsoft has faced several lawsuits, and they have lost a good portion of them. Even in the face of these lawsuits, they have never changed their modes of operation. This has left them in a delicate position of potentially facing further lawsuits.

Recommendation

There is intense competition in the software industry where Microsoft operates. Therefore, the focus of Microsoft should come up with new growth strategies. The windows platform and their Operating systems are their core strengths. However, with the increasing number of open source projects, the dominance of Microsoft will be threatened in the future. Consequently, they must invest in research and development to ensure that they come up with better and unique products that would make them stand out among their competitors. The mobile technology and smartphone market have the ability to generate for Microsoft better opportunities. Being a technology company, Microsoft must exploit these opportunities. Google is the biggest competitor that Microsoft faces. It is only through innovation that Microsoft can ensure that their brand grows faster than Google.

Conclusion

Microsoft continues to be one of the largest and the most profitable companies around the globe. Judging from their success, it is evident that there are a lot of things that the management is doing right and yet there is always a room for improvements. MS cannot afford to sit on their laurels in the face of changing customer needs and trends. Additionally, technology is ever-changing, and it is inherent in the company to continue investing in research and development so that MS can find ways of having sustained competitive edge through differentiation.

References

Fogel, K. (2005). Producing open source software: How to run a successful free software project. “ O’Reilly Media, Inc.”.

Hruska, J. (2016). Windows drops below 90% market share for the first time in years; Windows 7 falls below 50% - ExtremeTech. Retrieved from https://www.extremetech.com/computing/227693-windows-drops-below-90-market-share-for-the-first-time-in-years-windows-7-falls-below-50

Huth, A., & Cebula, J. (2011). The basics of cloud computing. United States Computer.

Ionescu, A., & Dumitru, N. R. (2015). The role of innovation in creating the company’s competitive advantage. Ecoforum Journal, 4(1), 14.

Jørgensen, V. B., & Jørgensen, I. B. (2010). The Importance of Mergers & Acquisitions within the Danish banking sector during a financial crisis. BUSINESS ADMINISTRATION AND INTERNATIONAL MANAGEMENT.

Mehta, D. M. (2007). Effective software security management. OWASP-Open Web Application Security Project.

Ommani, A. R. (2011). Strengths, weaknesses, opportunities and threats (SWOT) analysis for farming system businesses management: Case of wheat farmers of Shadervan District, Shoushtar Township, Iran. African journal of business management, 5(22), 9448.

Picchi, A. (2017). These are the world’s most valuable brands. Retrieved from https://www.cbsnews.com/news/brands-most-valuable-in-the-world-interbrand/

Szopa, P., & Pękała, W. (2012). Distribution channels and their roles in the enterprise. Polish Journal of Management Studies, 6, 143-150.