Home ยป Microsoft SWOT Analysis Matrix (2021)

Microsoft SWOT Analysis Matrix (2021)

Founded in 1975 in New Mexico, the mission of Microsoft’s founder, Bill Gates, was to put a computer in every home by making technology cost-effective and user-friendly. These exploits turned Microsoft into one of the world’s biggest corporations and elevated Bill Gates to the wealthiest individual on the planet.

We dive into the internal strengths and weaknesses of the technology giant, as well as the external opportunities and threats that impact the company.

Strengths

1. Microsoft is the biggest technology company in the world.
The first company to reach a market capitalization of $500 billion in 1999, Microsoft has held a position in the top ten biggest corporations in the world throughout its lifetime. Its market reach has ensured that the Windows Operation System was a household feature during the technology boom of the 1980s and 1990s. Due to its size, Microsoft often dictates the direction of the industry, therefore reaffirming its position going forward.

Microsoft maintains 76.56% of the global operating system market. (Statista)

2. Microsoft has one of the largest market-reach out of any technology company.
As the Windows Operation System is the go-to platform for over 70% of the operating system market, Microsoft already has access to an incredible customer base. This penetration offers Microsoft the ability to sell its products and services to its existing client base. Furthermore, its existing client base knows that these products can be fully integrated into its current setup.

More than 1 billion devices run on Microsoft’s flagship software, Windows 10. (Microsoft)

3. Microsoft’s environmental policies are world-leading.
Microsoft has installed responsible environmental practices in its operations for several years, sewing eco-friendly policies into its fabric for years to come. As consumers become increasingly conscious about their environmental impact, Microsoft offers a responsible choice for the market’s technological needs. Furthermore, government policies and regulations are placing increasing pressure on the private sector to curtail its impact on the environment. In this regard, Microsoft is ahead of the game.

Microsoft has operated at a carbon neutrality level of 100% since 2012. (Microsoft)

4. Microsoft has one of the largest market capitalization rates.
Microsoft has a market capitalization of approximately $2 trillion, making it the second most valuable company after Apple. Its recent growth is due to a change in consumer behavior to a more tech-focused livelihood with decentralized workspaces.

These days, consumers can work from anywhere in the world thanks to an online existence supported by online technological infrastructure. As companies have facilitated decentralized workspaces, Microsoft developed products to service that demand.

Microsoft has a market capitalization of $1.359 trillion. (Statista)

5. Microsoft diversified its suite of products across a broad range of market segments.
With the prevalence of the Windows operating system, Microsoft has a large section of the technological marketplace easily available to it. The company has leveraged this position in its wide range of products. Microsoft is present in most segments of the technological world, being one of the largest players in the gaming sector, cybersecurity, productivity software, as well as cloud computing, among others. This is reinforced by its flagship software, the Windows Operating System.

Microsoft has 16.9% of the Infrastructure As A Service (IAAS) business market share. (Seeking Alpha)

6. Microsoft has an incredible brand value, helped by its historic first-mover advantage in many sectors that are now well established.
The shift that occurred to decentralized workspaces increased the brand value of Microsoft and helped it to surpass its competitors. Microsoft’s productivity software, as well as collaborative conferencing software, Teams, gave Microsoft an edge over its closest rival, Google, which derives most of its income in advertising spend.

The brand value of Microsoft had a year-on-year growth of 30%, reaching $326.5 billion. (Statista)

Weaknesses

1. Cybersecurity continues to impact Microsoft’s operations.
Resilience in the modern age of an online existence means that cybersecurity is essential to maintain trust in technology. Threats from cybersecurity are becoming more and more advanced, with actors developing beyond private individuals and ill-intentioned groups, to governments deploying secret tactics in their bids to influence the sovereignty of other nations. Microsoft has experienced several cyberattacks on its software, leading to the perception that its security features are not as strong as its competitors.

Every day, Microsoft processes over 6.5 trillion signals in order to detect occurrences of breaches in cybersecurity. (Microsoft)

2. Microsoft has a large reliance on the personal computer market.
As its flagship software is primarily used on personal computers (PCs) developed by third-party manufactures, the market for PCs has a large impact on the sales revenues of Microsoft. The diversification of Microsoft’s products and services occurs once its flagship software has been adopted by the consumer. The resulting effect is that Microsoft is largely impacted by the forces that impact the PC market. Microsoft can strengthen its position by further diversifying beyond its flagship software.

The PC market grew by 11%. (Blue Box Media Private Limited)

3. The continued struggle of Internet Explorer impacts the Microsoft brand.
Microsoft’s Internet Explorer has been dubbed “the best browser to download better browsers, like Google’s Chrome, or Mozilla’s Firefox.” Microsoft’s Internet Explorer has had a long, drawn-out decline from its inception in 1995 when it took over as the leading internet platform. The tangible result of a lack of innovation, Microsoft ended support for the application in 2021, finishing off a 26-year lifespan of its primary internet browser.

Microsoft’s Internet Explorer once held a 90% market share, but declined to the point that Microsoft ended support for the platform in 2021. (Mind Matters)

4. Many large acquisitions of companies with little residual value have harmed Microsoft’s balance sheet.
Microsoft has an unfortunate history of acquiring market-leading companies in up-and-coming industries, and subsequently not doing anything with them. A notable case of this is Microsoft’s purchase of Nokia, which, after a series of managerial issues and blunders, resulted in Microsoft writing off nearly all of the $7.2 billion it paid for the mobile handset manufacturer. This situation has replicated itself in several of Microsoft’s mergers and acquisitions, with the major contributor to failure identified as cultural mismanagement.

Microsoft purchased Skype for $8.5 billion in 2011, and Nokia for $7.2 billion in 2014. (Hustle Con Media, Inc.)

5. Microsoft’s core markets are over-saturated.
With 70% of the Operating System and a large portion of the productivity software market under its belt, Microsoft’s options for growth are increasingly hard to identify and achieve. Coupled with its slow uptake in innovation and a reliance on its existing marketplace, Microsoft’s market position has some weaknesses. To strengthen its position, further development and innovation of Microsoft’s products and services will go far.

Microsoft’s share of the productivity software market is 41.6%. (Statista)

6. Microsoft does not produce its hardware.
By not controlling the supply chain of Microsoft’s main hardware and devices, it exposes itself to supply chain shocks and constraints, as well as market forces in these industries. Furthermore, Microsoft produces operating software for hardware that is produced by third parties. Microsoft is well-positioned to design hardware that marries its software perfectly, creating a more harmonious ecosystem for the rest of its products and services. This has been implemented well by its competitors, such as Apple.

PC shipments fell 10% due to supply chain constraints. (CNBC)

Opportunities

1. Consumers who run legacy software will update to newer software.
Through the development of competitive upgrades to its existing software suites, Microsoft has access to an incredibly large market of loyal customers who need to periodically upgrade their software to ensure cross-compliance with other applications, as well as replace outdated hardware or software to ensure continued usefulness. These market dynamics bode well for Microsoft’s sales.

In 2020, 8.5% of Microsoft’s users were still using Windows 7. (SlashGear)

2. Microsoft could intensify its research and development efforts.
As mentioned above, research and development of innovative technologies increase the chance of consumers choosing a technology offering over that of a competitor, as well as initiates an upgrade of existing software. Although expensive technology that becomes outdated quickly because of technological advancements is not good for the reputation of a company, a company will still need to ensure that legacy software is somewhat compatible with replacement software as and when it becomes available.

Microsoft spent $19.3 billion on research and development. (Statista)

3. Strategic collaborations and acquisitions can offer Microsoft gains in diversified sectors.
As the rate of change in the consumer technology and software industries increase, it becomes increasingly difficult for large corporations to keep on top of development and innovation. A strategic approach could be to collaborate, merge or acquire companies that show strong market potential in infant industries that show positive growth possibilities. Microsoft has gained a lot of experience in this strategic approach and has certainly learned how it can go wrong, with mergers such as Nokia.

Microsoft purchased Nuance for $19.7 billion and LinkedIn for $26 billion. (VentureBeat)

4. The wearables and smartphone industries are both set for great growth.
Although Microsoft’s entrance into the wearables market with the Microsoft Band (a wrist-based fitness device) ended when it announced that it would no longer support the platform, the patents that Microsoft is issuing are pointing toward a comeback. The market has incredible potential, especially considering the medical and insurance applications that these devices are now offering. As the world becomes interconnected and consumers require technology that has more seamless integration, wearables offer incredible opportunities.

The global wearables market size is expected to grow by 15.51% year-on-year between 2020 and 2027. (GlobeNewswire)

5. Microsoft can produce its hardware.
Microsoft can take control of the supply of its hardware, as well as produce the hardware that operates its software. In pursuit of this, it can significantly shorten its supply chain, as well as increase the resilience of its logistical capabilities. Furthermore, it can offer innovative technological offerings that better merge the hardware and software interface of its flagship platforms. This will bring Microsoft in line with the strategy of its major competitors.

Microsoft’s main chip supplier, Intel, posted revenues of $9.85 billion from its activities related to selling PC chips. (CNBC)

6. The cybersecurity sector is growing at a rapid rate.
The global threat of cyber-attacks on individuals, corporations and the government is a lot more real these days than it was a decade ago. Private players are using cybercrime to undermine foreign governments, and governments themselves are using cybercrime as a tactic to undermine the sovereignty of rival nations. Microsoft is favorably positioned to leverage its existing market presence to develop products to mitigate the increasing risk of cyber-attacks on the various industries/sectors that are being targeted.

Microsoft purchased CyberX for $165 million. (The Motley Fool)

Threats

1. Competitive forces will continue to threaten Microsoft’s market position.
Microsoft was once the go-to company for most things software-related. Many of its market-leading offerings have lost market share due to competition and a lack of innovation. One major instance of this is Microsoft’s Internet Explorer, once having 90% of the internet browser market, which is now dominated by Google’s Chrome.

Other areas of Microsoft’s business are increasingly impacted by that of its competitors, such as Google’s Sheets, Docs, and Slides taking market share from Microsoft’s Excel, Word, and PowerPoint, respectively.

The office software market volume is $26.5 billion. (Statista)

2. Piracy undermines Microsoft’s profitability.
Microsoft’s software is generally priced at a premium compared to its competitors. Furthermore, most computers require an operating system to operate. Microsoft’s operational mechanism of native hardware installed on a device, instead of cloud-based infrastructure, means that Microsoft’s software will have a higher likelihood of being illegally operated, especially in emerging economies. This represents a significant portion of the global market for operating systems.

The overall rate of piracy in Microsoft products in the Middle East and Africa is 56%. (ITWeb Limited)

3. Privacy and security issues over Microsoft’s flagship software packages raise concern for its consumers.
Targeted Advertising, Diagnostic Feedback, Location Tracking, use of the Camera and Microphone, and Activity History are all features of Windows 10 that have come under scrutiny in recent years for the violation of the privacy and security of Microsoft’s consumers. Furthermore, Microsoft allowed the National Security Agency to intentionally circumvent security features that come standard with Microsoft’s products.

250 million customer records were exposed in a data breach of Microsoft. (Forbes)

4. Discrimination in Microsoft’s employment makeup and corporate environment impact its workforce.
Microsoft’s employees are mostly white men, which has led to allegations that Microsoft discriminates in its hiring processes. Furthermore, allegations have surfaced of a significant wage gap present in the remuneration of males compared to their female counterparts. Finally, Microsoft is accused of sexual prejudice toward its existing staff members.

Microsoft’s workforce is 60% white and 75% male. (Vox Media, LLC)

5. Large antitrust lawsuits have had an impact on Microsoft since the 1980s.
Allegations of monopolistic tendencies are a staple in Microsoft’s legal battles, with a major case in the 1980s, the United States vs. Microsoft Corporation, where Microsoft placed restrictions on the ability of PC manufacturers to install software other than Microsoft’s offerings on the machines that it produced. These allegations have continued to surface, involving Microsoft using its position as a market leader in non-competitive ways.

A $375 million antitrust lawsuit has been bought against Microsoft. (Incisive Business Media (IP) Limited)

6. Disruption in the technology industry severely impacts firms that do not innovate.
While companies that employ strong innovation tactics in their operations suffer less from the impact of a changing market landscape, those that do not innovate and change with the times can be swiftly and severely impacted by a change in consumer behavior and consumption patterns. Changes in the way companies operate and individuals interact in their professional lives have represented a major disruption in many industries. Corporations need to ensure a nimble approach to innovation to mitigate the impact of this risk.

73% of employees want flexible, remote work. (Microsoft)

Having such a large market share in a fickle, dynamic market as consumer technology, Microsoft’s position allows it to carve the path of the industry. Whether or not Microsoft leverages its position to innovate and dictate the industry path or not is yet to be seen. Many large firms that had previously been seen as “too big to fail” have disappeared due to the lack of their ability to change with the times.

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