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
Microsoft is at its core a software company. Despite the current move toward hardware, it most
lucrative aspect is software. Which are inherently dependent on PC sales. As negative sales
increase, its flagship products, office and windows, are negatively affected. To parry against the
trend, the firm has been developing and moving toward cloud based and subscription based
computing to ensure a steady stream of income from its software ventures (Microsoft, 2016).
Thus at the moment it’s a race against the speed at which pc sales are dwindling.
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.
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.
Microsoft’s Azure, is a cloud based platform that helps firm manage their data; either through
private cloud systems or public. The establishment of Azure; the development of Office 365, a
cloud based version of Microsoft Office, and the bolstering of one drive has helped Microsoft
have a footing in the cloud industry and maintain a competitive edge. As the role of IT increases,
it is becoming imperative to innovate both the tools and the capability to effectively utilize the
information.
Mobile Advertising
Mobile advertising is set to grow significantly in the next few years. Microsoft still has the capability of
penetrating the market; this can be done by challenging google. In 2014, Bing, Microsoft’s search engine,
increased its market share from 18.6% to 20.1%. (Reed, 2015). Meanwhile, Google’s share dropped from
67.5% to 64.4% within the same time frame (Reed, 2015). At the same time, Bing has been powering
yahoo’s searches and Siri.

Acquisitions
Microsoft is in the business of acquisitions. Using its huge cash reserves, the firm is making
acquisitions that enable the company to reach into other spheres of interest. The CEO, Nadella
Satya, is using acquisitions to grow the company. Skype one of Microsoft’s best acquisition, was
purchased in 2011 for 8.5 billion (Statt, 2013). After the acquisition, within the same time frame,
Skype’s users grew from 27 million to 50 million; income also increased, in 2013, before
integration to other Microsoft products, earnings were projected to grow to $2B up from $.8B
(Statt, 2013).
Other acquisitions such as Bungie in 2000 helped establish its gaming console Xbox and reap
more 4 billion in sales (Bass, 2015). There is also PowerPoint which Microsoft acquired in 1987
at 14 million; which is part of the office suite, drawing in more than 20 billion annually for the
firm.
Currently, the trend is using acquisitions to bolster current systems and products. through
acquisition and integration, Microsoft has been able to enhance its products, improving its
overall competitive strategy.

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. Due to this proliferation of talent and
creativity, Microsoft is poised to use its cash assets to acquire and integrate the most productive.
However, Microsoft’s greatest rival is google. Google, unlike Microsoft, is a software company
with ad-generated income. Google’s slow and steady growth in the lower markets has forced
Microsoft to lower its overall prices. Competition from Chrome OS and Linux has forced
Microsoft to perform drastic strategic decisions, such as cutting OEM pricing for the operating
system and doling out free one year trials for Office 365 and OneDrive.
Microsoft’s challenge is to diversify to counter, Microsoft has been diversifying income with
hardware, advertising, online infrastructure.

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.
.
Summation
Based on the SWOT analysis, it is possible to perceive that Microsoft is at an incredibly good
position based on the monopolistic nature of its hold on the OS market. The SWOT analysis, can
over emphasize internal strengths while limiting external threats (Pearce & Robinson, 2014). For
example, although Microsoft is dominating OS sales in personal computers, it is important to
note that PC sales are dwindling, more specifically more people are opting for mobile solutions
over traditional computers. This change, which is rapidly decreasing microsoft’s income, cannot
be perceived as an emergency; due to the seemingly slow rate of change. The SWOT analysis
deemphasizes the importance and instead places emphasis on mobile.

Bibliography
Bass, D. (2015, July 8 ). Microsoft's Four Most Costly Blunders Besides Nokia . Retrieved from
BloombergBusiness: http://www.bloomberg.com/news/articles/2015-07-08/microsoft-s-four-
most-costly-blunders-besides-nokia

Cisco. (2015). Cisco Global Cloud Index. Retrieved from

http://www.cisco.com/c/en/us/solutions/collateral/service-provider/global-cloud-index-gci/
Cloud_Index_White_Paper.pdf

Colombus, L. (2015, January 24). Roundup Of Cloud Computing Forecasts And Market Estimates, 2015.
Retrieved from Forbes: http://www.forbes.com/sites/louiscolumbus/2015/01/24/roundup-of-
cloud-computing-forecasts-and-market-estimates-2015/#516f7351740c

Gralla, P. (2014, May 21). Microsoft's Brand Value Surges, is now No. 4 worldwide . Retrieved from
COMPUTERWORLD : http://www.computerworld.com/article/2476317/vertical-it/microsoft-s-
brand-value-surges--is-now-no--4-worldwide.html

Kedmey, D. (2015, February 20). This Is Microsoft’s New Plan to Invade Your Smartphone. Time, pp. -.
Retrieved March 3, 2016, from http://time.com/3716303/microsoft-acquisitions/

Lomas, N. (2014, January 21). Mobile Ad Market Spending To Hit $18BN In 2014, Rising To ~$42BN By
2017, Says Gartner. Retrieved from Techcrunch: http://techcrunch.com/2014/01/21/mobile-ad-
market-forecast-to-2017/

Microsoft. (2016, January-March ). Microsoft SEC Filings . Retrieved from Investor Relations :
http://www.microsoft.com/investor/SEC/default.aspx

Pearce, J. A., & Robinson, R. B. (2014). Strategic Management (Vol. 14). Villanova, Pennsylvania:
McGraw Hill.

Reed, B. (2015, April 16). The Impossible Happened: Bing has Become Relevant . Retrieved from BGR:
http://bgr.com/2015/04/16/bing-vs-google-vs-yahoo-market-share/

Statt, N. (2013, September 3 ). Microsoft Acquisitions:Its Biggest Hits and Misses. Retrieved from c|net:
http://www.cnet.com/news/microsoft-acquisitions-its-biggest-hits-and-misses/

Sun, L. (2015, June 28). SWOT Analysis of Microsoft Corporation . Retrieved from The Motley Fool :
http://www.fool.com/investing/general/2015/06/28/swot-analysis-of-microsoft-
corporation.aspx

Trefis. (2015, November 2). Microsoft. Retrieved from Trefis :

http://www.trefis.com/stock/msft/model/trefis?
easyAccessToken=PROVIDER_4f3bafbafd3829ea10eeb9593465b445f02c1004