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Microsoft is an American technology company which operates in a global scale. It offers a range of software products and services for a wide range of customers, including personal as well as commercial use. At present, Microsoft holds the leadership position in the personal computer operating system, with a market share of more than 77%. Over the years, the company has also expanded its business into multiple ventures. This diversification has enabled Microsoft to achieve increasing revenue generation over the decade. Microsoft has often been studies as a case study by business management students for its operational model and its constant innovation. In this article we have conducted a thorough analysis of the internal and external factors that influence the business venture of Microsoft using the SWOT analysis framework. The SWOT framework has covered the strength, weakness, opportunity and threat of Microsoft.

Microsoft SWOT Analysis

Strengths Weaknesses
  • Strong financial position
  • Strong brand image
  • Diversified product portfolio
  • Robust infrastructure and human capital
  • Failed to capture the smart mobile devices market
  • Poor performance in some Windows iterations
  • Unable to meet the customer’s needs in the console gaming industry
  • Dependence on third party hardware manufacturers
Opportunities Threats
  • Opportunity for expansion in themobile computing devices such as laptops and tablet computers
  • Investment into the IoT solution sector
  • Growth potential in cloud gaming
  • Competitive threat from PC hardware manufactures
  • Threat from Sony, as its biggest rival in console gaming
  • Threat from software piracy

Strengths

The key strength of Microsoft lies in its financial position. As of 2019, the company has earned USD 125.84 billion, recording a 14% increase from the previous year. Moreover, the company has also recorded a profit of USD 39.24 billion, which is a 136.8% increase from 2018. This indicates that Microsoft has been performing quite well financially. The strong financial position has can help the company to invest in new product development, diversification into new technology sectors and adopt aggressive marketing strategies to face competition. It has also helped the company build more confidence among the investors and shareholders, thereby attracting more investments.

Microsoft is one of the oldest software companies which has dominated the market ever since its inception. Over the years, the company has developed a strong brand value, which reflects its business prospects and its popularity among its stakeholders. According to Forbes, Microsoft is among the top three most valuable brands, with a brand value of USD 162.9 billion, which is a 30% increase from 2018 to 2019. The strong brand image of Microsoft can act as a competitive advantage in the market, highlighting its differentiation among the stakeholders.

The strength of Microsoft also comes from its product portfolio. The company has started its business with developing and distributing personal computer operating system called Windows. Over the decades, the company has expanded into multiple related ventures, such as software applications for Windows, cloud computing services for business clients, gaming devices (Xbox) and video games (under Microsoft Game Studios) and mobile computing devices (Surface), among others. The diversified business portfolio has allowed the company to strengthen its presence in the technology sector.

Finally, it should be highlighted that the strength of Microsoft also comes from its robust infrastructure and human capital. Microsoft is a globally operational company, with more than 163,000 fulltime employees all across the world. The company works with some of the most talented employees, who are committed to drive innovative product, service and process development, which helps the firm to retain its leadership position. Moreover, the transformational leadership of Microsoft also plays a significant role in determining its long-term success.

Weakness

Microsoft has failed to capture the growth in the smart mobile devices sector. Although the introduction of Windows Mobile operating system showed some promise in its early years, but is failed to meet the fast-paced developments in the industry. Microsoft has also failed in its mobile devices venture. Eventually, the company closed off its smartphone OS and devices division. This has led to huge financial loss and negative impact in its brand image.

Even though Microsoft is the leader in PC operating system, it faced a huge backlash for its performance issues in Windows Vista and Windows 8. Even though the company has taken the necessary steps to fix the issues, but it still faced poor response from the customers and its financial performance was affected.

Microsoft has also performed poorly in the gaming console sector. Even though Xbox is a reputed brand in the gaming industry, but it failed to keep up against its rival Sony. The company failed to recognize needs of the gamers and was not able to take the necessary actions in time. The lack of Xbox exclusive titles compared to Sony, drove sales away from Microsoft.

Finally, it should be noted that Microsoft is highly dependent on third party hardware manufacturers for manufacturing devices. The lack of vertical integration leaves very less room for the company to have control over its supply chain, which can be detrimental in the long run and exposes the company to certain operating risks.

Opportunity

Microsoft has significant opportunity in the personal computing hardware sector. Over the years, the company has started to roll out its own laptops and tablet computers that runs of Windows. Even though it has a very low market share in the PC hardware sector, it has a strong competitive advantage over other manufacturers owing to its strong brand image. Moreover, Microsoft can benefit from introducing personal computing devices for the mass market consumers, who are looking for value for money options.

The company has massive growth opportunities in the IoT sector. As highlighted by the reports of Statista, the IoT solutions market is likely to expand drastically over the next decade. Microsoft has the financial capacity and human capital to invest in this sector and reap the benefits of the market growth. The IoT is likely to bring drastic changes in the supply chain management. Microsoft can offer innovative IoT solutions to its business clients, which can further help the company to diversify its business.

Microsoft can take advantage of the rising popularity of online gaming and game streaming. Using its experience in game development, the company focus on building its own streaming platform and competitive game titles, which can boost its position in the gaming industry.

Cloud gaming has proved to be quite promising and the market can expand drastically in the near future. Microsoft can invest heavily in this sector to build its own cloud gaming infrastructure from ground up. It can leverage its own cloud computing technologies to offer cloud gaming services to compete with the likes of Google Stadia and PlayStation Now.

Threats

Microsoft faces severe threats from PC hardware manufacturers such as Dell, HP, Lenovo, etc. Each of these companies have a strong market presence and good brand awareness, which can pose a serious competition to the Surface series of laptops and mobile computing devices from Microsoft. The company is also threatened by Amazon and Google in the cloud computing services sector. Amazon’ AWS being the market leader in this industry poses a severe threat to Microsoft’s Azure. It has made it quite challenging for the company to expand its business. The threat of competition also extends to the gaming console sector, where it faces a steep competition from its biggest rival Sony, which has dominated the console market for the last half decade. While working on your college essay, you should keep in mind that even though Microsoft is the market leader in PC operating system, it still faces some degree of threat from Apple’s Mac OS. The over the years, the market share of MacOS has improved gradually and can eventually pose some threat to the company.

Microsoft faces a significant threat from software piracy. The rising trend in using free pirated applications has proven to be a menace for companies like Microsoft. It takes a significant portion of its potential revenue thereby limiting its growth.

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