Microsoft Analysis
Introduction and Summary of Company History and Background Information
Microsoft over the past 27 years has positioned itself as the arterial system of almost all computers rolled into use across the world. Albeit with no competition worth the name to challenge its existence leave alone on technology advancements, the company has still managed to keep pace with both felt and perceived needs of its customers and its niche remains robust thus far. Nevertheless disturbing winds have begun to blow. Its corporate governance is under the microscope and the world is watching as to how Microsoft is bracing itself for the challenges posed both by competition (however innocuous it may be at present) and technology proliferation.
Let us look at Microsoft¡¦s expansion plans and initiatives to integrate them to its existing competencies
- Microsoft¡¦s role according to Mr. Gates himself is to provide a software platform
that allows everyone who is building applications to build far more powerful
applications.
- MOM (Microsoft Operations Manager) 2005, which is a key management software and Virtual Server product as part of simplification of the IT lifecycle
have been launched recently
- In hardware domain the company has had the benefit of exponential improvement
in recent decades. During the first half of next year, the company is expected to
have a very smooth transition from 32-bit to 64-bit systems, with total binary
compatibility. This will provide the ability to mix 32-bit and 64-bit; a simple
recompilation for any application using the full 64-bit address base. That is a
wonderful milestone no longer requiring people to buy expensive systems simply
to achieve the best possible performance.
- New graphics chips for better visualization; larger screens, moving up to 17-inch, 19-inch or multi PAL type LCD displays; and RFID for tagging information and having them available to track is on the agenda too.
- Software developments in photography, web searches and music, and advances in gaming applications are on the anvil
- Web-service protocols for connecting applications ¡V Exchange and XML data are already in the pipeline.
All this of course does not guarantee sound sleep to Mr. Bill Gates for too long. Guarantee of success happens in no business, not even in a long-term monopoly. Competition, technology compatibility and integration needs, pricing, delivery and service parameters can precipitate substantial threat to Microsoft and afford opportunities for other players. It is not that Microsoft is not aware of this. It is focusing on R&D and business strategies to sustain market shares in its own way. But is it enough and is it taking the right direction is the big question.
Others have started to seriously innovate and compete. For example changing technologies like Wireless Communications and Networking (WAN) etc do not complement Microsoft¡¦s existing competencies. Over the next five years, in all developed countries, the majority of people will be connecting through broadband and interacting with information through many devices: PCs at work and at home, portable PCs, Tablet PCs, and pocket devices such as the phone, evolving from simply a voice device to a data device. Having all these devices work very well together and be secure and up to date are very significant challenges indeed.
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Others have started to seriously innovate and compete. For example changing technologies like Wireless Communications and Networking (WAN) etc do not complement Microsoft¡¦s existing competencies. Over the next five years, in all developed countries, the majority of people will be connecting through broadband and interacting with information through many devices: PCs at work and at home, portable PCs, Tablet PCs, and pocket devices such as the phone, evolving from simply a voice device to a data device. Having all these devices work very well together and be secure and up to date are very significant challenges indeed.
Therefore there is adequate scope and opportunity to review, audit and understand through SWOT analysis the company and its competencies and facilitate a new debate on possible corporate business models and revised action plans.
SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. It has to be a continuous rather than a need based exercise.
Strengths
A) Key Strengths
- Strong fundamentals-Microsoft has become synonymous to computers over the last two decades. It has a massive market share and has recorded impressive sustainability and growth even in the face of disasters like 9/11.Impressive research base takes care of business cycle changes and product life cycle limitations
- Strategic tie-ups and Business Process Outsourcing both to utilize technocrats all over the world and to optimize costs
- Multinational Corporation operating through regional subsidiaries giving it a truly global perspective of cultural, ethnic and linguistic differences in more than 60 countries. This certainly affords a better business perception and applications too
- Relatively rapid product development processes that allow for timely updating and release of new products
- Software products have high brand recall and recognition, generic corporate and consumer acceptance (Word, Excel, PowerPoint, Access), and numerous powerful features that are in use worldwide, thereby promoting standardization and competitive advantage through their ease of integration and cost-effectiveness
B) Other Strengths
- Applications and operations divisions complement each other well
- Recently created online service network divisions (MSN)
- Flexible workforce through contingent workers for special projects
- Very good Human Resource policies, in addition to good compensation, an opportunity for employees to do well financially through stock purchases
- Neptune, is a Window's interface and is an example of smart software
- Revenues and profits rising at 30% a year with merger/acquisition or investment in 92 companies over the past few years
- Top rating from Fortune for best company to work at and most admired company
- Windows series, and Windows NT are globally known as the PC desktop operating system with a market share of above 80%
- Participation in socially relevant philanthropic work in various countries has been a significant value addition in terms of corporate PR
Weaknesses
A) Major Weaknesses
- Hardware manufacturers need to be motivated to pre-install Microsoft's PC operating system. Although training of computer professionals and workers is by and large done on Microsoft Architecture and this in turn creates a situation of inevitability for hardware manufacturers, their default support cannot be assumed.
- Peripheral player in the Internet space and few products for Internet applications
- Failure on the part of leadership to anticipate the impending growth or popularity of the Internet
- Marginal or insignificant presence in the wireless market, WAN and Windows CE
- Leadership is monolithic and a pool of thinkers is invisible if not absent. Mere compensation/ stock option packages don¡¦t produce leaders
B) Other weaknesses
- Software Architecture remains its primary strength but has not yet developed a substantially new line of products
- Continuous product launches and deadlines contributes substantially to monotony and employee fatigue
- Employee turnover has increased from 6% for a ten year period to 7.4%
- Falling sales in the operating systems and server software sectors
- Elaborate 5-layers of management leading to red tape and dilution of two way communication within
- Frequent reorganization, reorientation and autocratic shades do dampen employee creativity leading to a loss of key personnel and chilling of communication and dilution of innovation
- Perceived by many as an unethical competitor that dominates competition and stifles its innovation leading to feeble availability of competing products
- Products have a single application focus in terms of costs and compatibility
- Reputation has suffered because of entanglement in litigation on casual workers¡¦ compensation package
Opportunities
A) Prime Opportunities
- The demand for personal computers in American and global markets remains strong despite the growth and increasing popularity of wireless handheld devices. In fact in developing and under developed countries the demand is in the take off stage
- Local language adaptations are bound to favorably sustain growth. In India for example most of the population uses Hindi language and applications software in Hindi is a certain bet for success given the population and economic growth process in the offing
- Cheaper Internet connectivity and global telecommunication costs open new markets and opportunities. Broadband access and affordable wireless communication tools does present a plethora of opportunities for making gainful strides in these key areas
- Strategic alliances with Mobile phone applications and exploitation of personal digital assistants provide Microsoft with opportunity in a market where it currently has little or no significant presence
B) Other opportunities
- Popularity among people for Internet access, information, business and applications and PC is still the widely used tool for it
- Piracy control measures in various countries shall mean additional revenues
- Internet security tools and reinforcement of LAN applications are going to be useful value additions to Microsoft¡¦s product mix
Threats
A) Palpable Threats
- IBM, Sun Microsystems, Oracle and others have collaborated on new platform technologies for their hardware that replicate much of the value of Windows
- Apple and Linux threaten Microsoft's huge market share of the desktop operating market
- Sun Microsystems, Netscape, Oracle, IBM, AOL, and other companies moved into the Internet space almost a decade ago and defined it while Microsoft failed to anticipate its growth, value or popularity
- Demand for application/operation software and hardware is a function of fluctuating exchange rates of currencies can negatively impact revenues in the global marketplace
- Software piracy of commercial and consumer applications software on a large scale threatens revenues especially in the face of free products like Linux
B) Other Threats.
- Hardware manufacturers (Sun Microsystems, Oracle, IBM, AOL, and Apple) are issuing their own pre-bundled programs on their own hardware
- Linux influence is growing steadily
- Unix dominates high-end mission-critical applications and its customers do not believe Windows can handle these operations
- Personal computers, mobile-phones, personal digit assistants, entertainment-oriented hand-held computers, and similar wireless products for Internet access do not require Window operating system products
- Rapid development of mobile devices that will displace/replace personal computers
- Recession or economic slowdown in the world impacts personal computer equipment sales and their need for an operating systems
- Technology life cycle is akin to product life cycle and needs to sustain cash cow stage with updates and alterations/value additions and any laidback approach to this crucial need shall have a debilitating effect on future prospects
Conclusion
SWOT is an important marketing management tool. . It can be used in conjunction with other tools for audit and analysis, such as PEST analysis and Porter's Five-Forces analysis to enable prospective R&D in marketing
In the light of what has been discussed about Microsoft, it is obvious that present times are crying for deliberation and brainstorming to ensure continued success of the company. Market forces are dynamic as is technology and innovation.
The corner stone or benchmark in business is market share. There are four ways to look at it.
"" Improving market share by encashing opportunities of new markets and market segments
"" Retaining market share in the face of threats and challenges
"" Improving market share by utilizing value addition/new application opportunities of existing customer base
"" Product diversification and innovation leading to altogether new role and share in the market. This has a telescopic effect on gross market share rather than on limited niche share
In the context of Microsoft all the above possible strategies have been discussed. No doubt the company still enjoys pre-eminent position in its niche market. In the foreseeable future no major threat is perceived to this position. But the fact is its niche market of today is threatening to lapse into dilution and redundancy due to rapid overshadowing by Internet and Wireless devices and applications. This is not of course going to make the company obsolete by any stretch of imagination. However there are perceptible warning signals, which the company will do well to recognize, invest in right research and innovation and sustain its leading edge in spite of the market dynamics and increasing competition. The focus areas have to be in tune with evolving technologies and applications. As marketing by definition is to identify customer needs and to satisfy them, the company cannot always hope to thrust its products and applications on the customers.
Microsoft has the resources to do it. It should be willing to just do it
