SWOT Analysis
Strengths
Brand Loyalty
Microsoft has been the leading software and OS provider since the firm joined forces with IBM
in 1978. Its market domination has allowed the firm to control more than 90% of PC OS market
share (Sun, 2015). Most current computer users grew up using the OS. Even more so, the
simplicity of the OS makes it incredibly difficult for even custom tailored OS’ have a difficult
time attracting users. At the moment, the most productive aspects of Microsoft are Windows and
Office (Trefis, 2015). A significant portion of sales acquired through these pillars are to
enterprise systems that, quite frankly, are locked in with Microsoft; in part, it’s because there is
feasibly no other firm capable of replacing Microsoft at least in the near future.
Brand Reputation
According to Statista, over the past 10 years, Microsoft’s brand valuation has increased by
86.2% (Trefis, 2015). The calculations done by Millard brown, are used to estimate the amount
of revenue drawn in by the brand. At the moment, given its improved customer service and shift
in overall company strategy, Microsoft is second to apple globally (Sun, 2015).
Straight Forward Software
Because of its global nature, Microsoft has developed software that is both intuitive and
customizable. This allows new users to comfortably use the software while customizing and
developing it to suite their specific need. And If there is a discrepancy, Microsoft has helped
foster and develop a social based customer service system; where users can post questions and
solutions with Microsoft’s moderation.
Distribution Channels
Microsoft has developed relationships with virtually all major hardware; ensuring that a
significant portion of computers produced are running its software. The firm has also acquired
Nokia mobility to help position its mobile and devices division (Microsoft, 2016); started
developing its own hardware, surface; and invested both time and money on its distribution
partners to ensure stronger ties.
Financials
Fiscally, Microsoft is at an advantageous position. Evaluating its current state, as a blue chip
company, Microsoft has, between 2011 and 2015, increased total dividends by 90.7%; from
5.18B to 9.88B (Microsoft, 2016) . This is important because very few firms in the industry pay
a dividend. Within the same time scale, the firm was able to increase revenue by 32% bolstering
its research and development sector (Microsoft, 2016); which is essential in maintaining an edge
in the industry.
Weaknesses
Acquisitions
Historically, Microsoft’s acquisitions are, put simply, a craps shoot. The firm has a record of
expensive wins and even more expensive blunders. It is possible to assert that due its cash laden
nature, Microsoft runs the risk of performing numerous and expensive investments. In the 90’s
early 2000s amidst the dot com bubble, the firm invested $5B in at&t and a host of other telecom
companies in Europe. Eventually, the investments cost the firm a $9.1B write off (Bass, 2015).
Others include:
AQuantive an advertising agency that was purchased in 2007, was written off at $6.2B in
2012 (Bass, 2015).
Most recently Nokia mobile. Purchased at $9.5B the company wrote off $7.6B in less
than 3 years’.
Slowing PC sales
.
Slow Innovation
Microsoft innovative trail, like its acquisitions, is filled with failed prospects. The firm blundered
the prospect of dominating both mobile markets and online advertising. The firm had the cash
and resources to effectively dominate both markets but the company failed to do so. Thus it is
not implausible to claim the firm might have an innovation problem within itself. It might be due
to its size, that reduces the firm’s capability to nimbly maneuver the ever changing market place.
Older software
At this juncture Microsoft is actually competing against its self. Because of the firm’s long
monopoly in the software industry, the company’s income was actually limited by older
iterations of its software.
Looking at the chart above, a majority, or 50% of Microsoft’s market share still run windows 7;
which is 7 years old, while another 7% are still running windows xp which is 15 years old.
Consumers, as demonstrated, are more apt to remain with software that they understand; making
it difficult to roll out new software.
Opportunities
Cloud Services
According to Forbes, spending on SaaS increased by 21% over the previous year (Colombus,
2015). Currently cloud system workloads are subdivided into 3:
PaaS (Product as a Service)
SaaS (Software as a Service
IaaS) (Infrastructure as a Service)
According to a report by Cisco, global data center traffic is set to increase 3 fold over the next 5
years. Of that increase 86% of workloads will be processed by cloud data centers where as 14%
by traditional data centers (Cisco, 2015). While data center workloads would double between
2014 2019, cloud workloads would triple within the same period.
At the same time, consumer cloud storage is set to increase from an average of .992GB to 1.5GB
per month between 2014 and 2019 (Cisco, 2015).
Currently, SaaS the fastest growing aspect of cloud computing, is forecasted to grow to $32.5B.
this partly due to the fact that 42% of IT decision makers are planning on increasing expenditure
on cloud computing (Colombus, 2015). Microsoft’s move to make, cloud first its mantra, is late
in terms of market share, but the firm’s ability to capitalize on cross- marketing in its
organization has made it a formidable competitor.
Mobile Advertising
Acquisitions
Threats
Intense Competition in Software
Over the last few years’ software design has been becoming cheaper and overnight successes are
becoming more prominent. Unlike previous years, most technological, at least divisive
innovation, are developed by small incubator startups
Conclusion
Currently, under one Microsoft, the company is aiming to reduce fragmentation by making
updates mandatory, and giving out windows 10 for free. This move is cutting significantly into
the company’s bottom line in the short term but it does prepare the company for a more
homogenous cloud experience (Trefis, 2015). Under One Windows, Microsoft is unifying the OS
experience across phone, tablet, notebook, desktop and TV. Doing so allows the company to
relinquish its dependence on PC manufacturers, consolidate production, and diversify product
line. (Trefis, 2015). Consolidation will prove to be most beneficial for both fiscal and strategic
future of the company
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