1. Introduction
This article presents the SWOT analysis of Microsoft. SWOT analysis is a tool to scan the companies’ internal environment. SWOT analysis of Microsoft is done by analyzing the Microsoft strengths and weaknesses. Article also discusses the external opportunities and threats that reside in company’s external environment.
The article first provides a brief company overview, and shares some latest statistics before presenting the Microsoft SWOT analysis
2. Company overview
Microsoft is one of the most resilient and enduing big tech super star. Future-focused Microsoft strategy is enabling the tech giant to expand into new product and market areas. However, it would be untrue to say that tech giant never made any mistake.
In fact, throughout its history, Microsoft has invited so much criticism for making some wrong marketing and product development decisions. It is an evidence that even the tech super stars are not without weaknesses. But, by leveraging the strengths and exploiting available opportunities, company not only survived its mistakes, but became one of the most successful tech giant.
| Microsoft products/services MS Office |Windows |Apps for iOS/android |Surface Pro |Teams |Azure |LinkedIn |Dynamics |Cortana |Bing | What countries does Microsoft operate? Microsoft operates in more than 100 countries, and has more than 180,000 employees. |
| Microsoft competitors- 2022 Google, IBM, Apple, Oracle, Amazon, Facebook, Salesforce, SAP SE and Cisco. | Microsoft core values Microsoft core values include- innovation, diversity, inclusion, trustworthy computing, racial equity and corporate social responsibility. |
3. Recent statistics
Today, Microsoft is among a few trillion dollar companies. As per Wall Street Journal, Microsoft tops the world’s best managed companies 2022. Click here (once Microsoft marketing strategy article will be published, a hyperlink will be generated here) to get some basic company information.
Here are some interesting Microsoft statistics (2022):
– More than 70% organizations use Microsoft Azure
– More than 95% Fortune 100 companies trust Azure
– 4 out of 5 fortune 500 companies use Office 365
– Microsoft team users increased by 894% from March to June 2020
– In 2022, Teams has 270 million active users, and has become world’s most popular business communication platform
– Microsoft windows program runs on 1.6 billion active devices in 2022
– Office 365 captures 50% of productivity software market (worldwide)
– Despite challenging environment, Microsoft recorded 17% increase in revenue from 2020 to 2021
– Microsoft recorded $461.3 billion net income in 2021
Source: Investing.com
Now, let’s take a look over Microsoft strategy to success, and analyze it through Microsoft SWOT analysis
4. Microsoft SWOT analysis
Here is the SWOT analysis of Microsoft:
4.1. Microsoft Strengths
In 2021, Microsoft took over Google, and in 2022, Microsoft surpassed Amazon as world’s second most valuable brand. Its market share is quickly increasing in the cloud services, as Amazon is currently unable to challenge Microsoft’s leadership position in cloud market.
4.1.2. Consistent growth
Microsoft is currently expecting double digit growth forecast in cloud services, as its share in cloud market is constantly growing. Reuters report that in 2022, Azure market share jumped by 4% compared to the last year.
4.13. Strong financial position
Microsoft holds strong financial positioning in the market. According to New-York Times, Microsoft’s strong financial health is one of the core reasons that tech giant survived many of its epic mistakes throughout the history.
4.1.4. Market reach
Microsoft has a wide market reach. Windows 10 is currently running on more than 1.4 billion active devices, and there is an increase of 100 million upon introducing windows 11. According to Stat-counter, Microsoft’s windows has highest market reach with 75.11% share, followed by 15.6% Apple’s MacOs, and 15% other devices.
4.1.5. Strong distribution network
Microsoft’s strong distribution network is almost unbeatable. The company has partnered with almost all major computer hardware producers like Samsung, Dell, Lenovo and Toshiba, and tech retailers to ensure that the PCs are sold with pre-installed windows software.
4.1.6. Well-diversified portfolio
Microsoft has a well-diversified and well-managed portfolio. The company keeps on adding new business segments in existing portfolio, which allows the company to exercise risk hedging option. In 2022, Microsoft added SQL server 2022, visual studio 2022 and exchange subscription edition in existing portfolio.
4.1.7. Effective marketing strategy
With a creative blend of emotional and rational advertising appeal, Microsoft inspires and influences millions of people. Three recent examples of Microsoft’s effective marketing strategy (internal link to Microsoft marketing strategy) are advertising campaigns- ‘Be the one’, ‘the power of teams’ and ‘Future starts now’. All three campaigns proved to be highly successful in raising awareness and strengthening ties with customers.
4.1.8. Brand loyalty
Although, Apple is known for its loyal customer base, but a study by IT World Canada revealed Microsoft beats Apple in terms of brand loyalty. Comparably ranks Microsoft on 15th number as top brands for generation Z, with 83% brand loyalty, and 41 net promoter score. Decoding net promoter score, around 60% of Microsoft customers promote brand, 21% are passive and 19% are detractors.
4.1.9. Market capitalization
As of 20 December 2022, Microsoft has market capitalization of $1792.92 billion. Following graph shows steep rise in Microsoft market capitalization from 2009 to 2022:
4.1.10. Brand reputation
As per Rep-Track, Microsoft is among the top tech giants with strong corporate reputation. The 2022 ranking report placed Microsoft on 17th position based on its corporate reputation, beating its top competitors- Google (42nd) and Apple (64th).
4.1.11. User friendly software
Customers usually consider Microsoft office suites and operating system to be professional level, reliable and user friendly.
4.1.12. Research and development capabilities
Microsoft has developed robust research and development capabilities, which enable company to launch highly successful products that meet customers’ existing and potential needs. Following graph shows a consistent increase in the Microsoft’s spending on research and development from 2002 to 2022:
4.1.13. Environmentally responsible image
Microsoft has positioned itself as a socially and environmentally responsible organization. Since 2012, Microsoft has operated at 100% carbon neutrality level. Have a look on Microsoft sustainability report 2021 to know how company is planning to become water positive and carbon negative company by 2030.
After having a look over key Microsoft strengths, now let’s analyze Microsoft weaknesses:
4.2. Microsoft Weaknesses
4.2.1. High prices
Microsoft’s windows program is considered considerably more expensive than the alternatives like Linux, which makes it out of reach of many users.
4.2.2. Customer dissatisfaction for mobile products
Microsoft failed to introduce successful mobile products, and from 2022, company will no longer support the windows phone and related devices. Windows phone is among the unsuccessful product category that ruined the Microsoft’s reputation.
4.2.3. Slow user response for windows 11
Compared to windows 10, the windows 11 is having slow response rate. Currently, only 15.4% people installed windows 11, and many users are complaining that windows 10 has more user friendly interface than windows 10.
4.2.4. Excessive reliance on PC market
Microsoft does not manufacture hardware, and excessively relies on the hardware PC manufacturers, which increases its vulnerability to the PC market slowdown.
4.2.5. Weak security system
Microsoft has invited criticism due to security flaws. MS Office is still vulnerable to the cyberattacks. As reported by cyber-security researchers, hackers are benefiting from the security flaws, and delivering SmokeLoader malware into windows.
4.2.6. Weak positioning in the browsing market
Compared to Google, Microsoft has small market share in the browsing segment, and its product ‘Bing’ is performing poorly. Compared to Google that retains 84% share, Bing only holds 8.8% market share. Following graph shows the Microsoft’s stagnant growth in the browsing market:
4.2.7. Reputation damaging lawsuits
Unfortunately, Microsoft frequently faces lawsuits that damage company’s reputation. On December 21, 2022, Gamers sued Microsoft over Activision takeover.
4.2.8. Unprofitable investments
Microsoft made some unprofitable acquisitions, which proved to be wrong decisions and ultimately led towards divestiture. Some examples are- Nokia, Skype and Hotmail- all these acquisitions proved to be a failure for the tech-giant.
4.2.9. Lacks innovation
Microsoft lags in innovation compared to its competitors Apple and Google. According to Forbes, Microsoft scores 86th position in world’s most innovative companies, compared to Apple and Google that scored 5th and 7th positions respectively.
After analyzing the Microsoft strengths and weaknesses, now let’s analyze the external environment that shapes Microsoft strategy to success.
4.3. Microsoft Opportunities
4.3.1. Growing demand for cloud services
Microsoft already holds strong presence in the cloud services industry. As per Grandview research, the global cloud services market may grow with 15.7% CAGR from 2022 to 2030. So, Microsoft can consider it an exciting opportunity to become leader in the cloud service industry.
4.3.2. Growth in gaming industry
Fortune business insights report that global gaming console market may grow with CAGR of 5.3% from 2019 to 2027. Microsoft’s Xbox has been a huge success, and this huge growth potential presents opportunity to launch more gaming products.
4.3.3. Growing smartphone segment
Global newswire reports that global smartphone market is expected to grow with 7.3% CAGR rate from 2022 to 2029. It presents a viable opportunity to Microsoft, who can launch its smartphone products to capture share from growing market.
4.3.4. Business partnerships
As Microsoft has strong financial health, it can use the huge cash reservoir to acquire new tech start-ups that can bring fresh talent, knowledge and technology to the company. In 2022, Microsoft completed the acquisition of Nuance for $19.7 billion, and can take further initiatives in future to expand presence in different business areas. Another highly successful partnership is deal between Microsoft and Coca-Cola, which involves providing business software for next five years.
4.3.5. Cybersecurity sector
Microsoft can strengthen its market presence in the cyber security market by developing the products that mitigate the growing risks of cyber-attacks in various industries. In 2020, Microsoft acquired CyberX for $165 million, and can take further such initiatives in security market that has high growth potential.
4.3.6. Growing remote work trends
Microsoft’s Teams program has proven to be a huge success during pandemic. Analysts predict the growth in the remote work trends. Microsoft can launch more products that may support businesses in implementing the remote/hybrid work arrangements.
4.3.7. Hardware potential
Microsoft can enhance the supply chain control by expanding the production of its own hardware. It can enhance the company’s logistical capabilities.
4.4. Microsoft Threats
4.4.1. PC Market slump
PC market slowdown is threatening the Microsoft’s revenue forecast. As per Reuters, Microsoft might remain unable to maintain its annual outlook and achieve revenue growth objectives over next five years in face of PC market slowdown.
4.4.2. Free/cost effective alternatives
As customers are becoming more price conscious, they may move to free/cost effective alternatives (like Linux). Growing popularity of open source projects is threatening the Microsoft’s leadership position.
4.4.3. Changing consumer preferences
Generation Z is having higher preferences for the mobile technology than older generations, but Microsoft has modest share in mobile market. As per Stat-Counter, Microsoft Windows only hold 0.02% share in mobile operating system, compared to Android (71.96%) and iOS (27.48%).
4.4.4. Antitrust lawsuits
Microsoft’s $69 billion deal to acquire Activision is under threat, as federal trade commission may block the deal by filing anti-trust law-suit.
4.4.5. Criticism over discrimination
Microsoft invited criticism for its unclear anti-harassment and discrimination policies. Its inability to adopt a clear anti-discrimination policy can hurt the corporate reputation, and can increase threat of expensive lawsuits.
4.4.6. Economic slowdown
BBC news report that economic slowdown is hitting both- Google and Microsoft, and sales of both tech giants may even fall further in face of economic crisis.
4.4.7. Piracy issues
Microsoft may continue struggling with the growing piracy and cyber-crime issues, which affect the company’s security system.
5. Microsoft SWOT Analysis Summary
Following table summarizes the SWOT analysis for Microsoft:
SWOT Analysis Microsoft
| Microsoft Strengths • Brand value and share • Consistent growth • Strong financial positioning • Market reach • Strong distribution network • Well-diversified portfolio • Effective marketing strategy • Brand loyalty • Market capitalization • Brand reputation • User-friendly software • Research and development capabilities • Environmentally responsible image | Microsoft Weaknesses • High prices • Customer dissatisfaction for mobile products • Slow user response for windows 11 • Excessive reliance on PC market • Weak security system • Weak positioning in the browsing market • Reputation damaging lawsuits • Unprofitable investments • Lacks innovation |
| Microsoft Opportunities • Growing demand for cloud services • Growth in gaming industry • Growing smartphone segment Business partnerships • Cybersecurity sector Growing remote work trends • Hardware potential | Microsoft Threats • PC market slump Free/cost effective alternatives • Changing consumer preferences • Anti-trust law suits • Criticism over discrimination • Economic slowdown • Piracy issues |
The overall analysis of Microsoft strengths and weaknesses, and opportunities and threats provides basis for following recommendations:
6. Recommendations
• Consider consumers’ price sensitivity and lower prices of its software to handle competition
• Strengthen the security system by resolving the cyber-security issues
• Reduce reliance on the PC market, and strengthen presence in cloud services industry
• Improve browsing experience to increase presence in the browsing industry
• Find strategic partners to encourage the inflow of technology and innovation
• Accelerate innovation by making successful acquisitions
• Launch more products in gaming, smartphone and cybersecurity industry
7. Concluding remarks
SWOT analysis of Microsoft reveals the company has various strengths that it can leverage to exploit available opportunities and handle threats. Company has some key weaknesses as well, which challenge its positioning against key competitors.
This article takes an inward look. If you want to know more about how external environmental forces are influencing Microsoft, take a look over Microsoft PESTLE analysis (link to next article).
Are you interested in exploring the marketing strategies of other tech giants as well? We have conducted a detailed SWOT, PESTLE and marketing strategy analysis of Microsoft’s key competitor Apple. Take a look over these articles by clicking over the highlighted text.
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