Microsoft AG: SWOT Analysis

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Table of Contents

SWOT Analysis
Changes in External Environment and Impact on Opportunities and Threats
Conclusion
Reference List

SWOT Analysis

Strengths

Development of software products which have wide recognition among the users with user-friendly features.
Multinational presence in more than countries minimize cultural difference to sustain the growth (Fill, 2002).
Loyal and committed workforce motivated by good compensation and stock options enables the company to retain highly skilled individuals (Davenport, 1997)
Relatively rapid technologically advanced new products and software applications.
Wide global brand reputation and customer loyalty. Highly innovative nature and customer-focused (King, 2004)

Weaknesses

During the development stage, the company failed to anticipate growth opportunity in Internet and lost major share to Google.
Dependency on hardware manufacturers to pre-install Microsoft products in their personal computers and other hardware products
Perceived by many as an unethical corporation involved in destroying the competitors’ market position by unethical means
Lost reputation because of legal entanglements in anti-trust cases.

Opportunities

Development in global information and communication technology has opened new avenues for product development
Mobile phone applications and personal digital assistants represent possible growth opportunity
Increase in use and demand for personal computers in American and other global markets provide continuously enlarging market for the company.
Synergies from the core competencies of the firms acquired by the company following an aggressive acquisition strategy.
Partnerships and alliances with PC manufacturers would enhance the growth potential

Threats

Stiff competition from other market players like Apple Linux poses a real challenge to the growth.
Hardware manufacturers like Sun Microsystems, Oracle, and IBM have found new collaborators for platform technologies reducing the importance of Microsoft products and applications.
Issue of their own pre-bundled programs on their hardware by manufacturers like Oracle, IBM and Apple has affected the importance of Microsoft products significantly
Absence of strong presence on mobile phones, hand-held computers and other wireless products for internet access is a serious threat to the growth of the business.
Unauthorized or illegal trading in unlicensed products undermines the scope of expanding the business.

Changes in External Environment and Impact on Opportunities and Threats

The external factors that can have an impact on the growth potential of an industry are the changes in macroeconomic situations, technological changes, changes in legislative frameworks, socio-cultural changes and changes in the competitive position (Business Wire, 2007). The recent change in the global economic situation has in general affected the purchasing power of people. This has resulted in a decline in the market demand for the PCs and consequently has hit the sales potential of Microsoft products. Fiscal year 2009 has witnessed a 3.2% decline in sales which is caused by legal charges and severance claims from employees who have been laid off in addition to drop in overall PC and server sales (Miller, 2009). Technological changes in the area of operating system developed by Linux and Sun Microsystems has largely affected the potential of Microsoft to expand its sales in its core products (Miles, 2000). The greatest threat for the company is its dependence on Windows and a suite of desktop applications produced 14 years ago for 80% of its sales and 140% of profits despite the rapid development in the technology (Murphy, 2005). Changes in legal environment prompting European and US Justice Departments to file antitrust lawsuits have been one other threat to the company to sustain its growth. However the positive changes in the socio-cultural environment with more number of people using personal computers at homes and offices has enlarged the opportunity for the company to grow. Despite the criticisms and negative publicity the company could ensure its sales growth till fiscal 2008 and the global economic downturn caused a slight dip in sales during fiscal 2009. Stiffer competition from Linux in corporate environments has been acknowledged by Microsoft, even though Microsoft could withstand the competition from Linux in Desktop segment (Millard, 2004). IBM another serious competitor planned to invest $1 billion during 2004 to meet the competition from Microsoft (Linux online, 2004).

Conclusion

With its large volume of sales and massive employee strength, the company has developed bureaucracy at all levels. This has made the company miss several opportunities in Web-server platforms and search engine segments. While ‘Google’ and ‘Yahoo!’ get 70% of the search engine queries, Microsoft’s MSN gets only 13%. It is for Microsoft to analyze the underlying reasons for the backwardness and introduce new concepts and selling points so that the company can build up its strength in this large segment. The company has to come out of its mid-life crisis with focused research and development in Web-server software and other Internet based applications rather than concentrating on refining and developing more of desk-top applications. Corporate network is another major area where the company can enter in to new inroads. With its huge cash reserves and talented employee pool the company can involve itself in more innovative products through continuous research and developments in the identified areas to increase its competitive strength.

Reference List

BusinessWire, 2007. Research and Markets: Microsoft Corporation’s Strengths and Weaknesses Examined Using SWOT. Web.

Davenport, T.H., 1997. Knowledge Management at Microsoft. Web.

Fill, C., 2002. Marketing Communications: Contexts, Strategies and Applications (3rd Ed). UK: FT Prentice Hall.

King, D.R.K., 2004. Enhancing SWOT Analysis using TRIZ and BIPOLAR Conflict Graph: A

Case Study on the MICROSOFT Corporation. Web.

Linuxonline, 2004. IBM Will spend $ 1 Billion to challenge Microsoft.

Miles, S., 2000. Linux Closing in on Microsoft Market Share Study says.

Millard, E., 2004. Microsoft Battles Linux Threat. Web.

Miller, R., 2009. Microsoft sees First Annual Sales Decline in its history for fiscal 2009.

Murphy, V., 2005. Microsoft’s Midlife Crisis. Web.