Microsoft SWOT 2024 | SWOT Analysis of Microsoft

Company: Microsoft 
CEO: Satya Nadella
Year founded: 1975
Headquarter: Redmond, Washington, USA
Number of Employees (2022): 221,000
Public or Private: Public
Ticker Symbol: MSFT
Market Cap (Oct 2023): $2.46 Trillion
Annual Revenue (2022): $198.27 Billion
Profit | Net income (2022): $72.74 Billion

Products & Services: Bing | Bing Video | Cortana | docs.com | LinkedIn | Microsoft Azure | Microsoft Dynamics | Office | Microsoft Money | Microsoft Office Online | Microsoft Office 365 | Microsoft Windows | Apps for iOS | Apps for Android | Surface Pro | Microsoft Teams | Video games | Power BI
Competitors: Apple | Google | Oracle | HP | SAS | Salesforce | Sony | SAP | Oracle Netsuite | Meta | IBM | Zoom | Cisco Systems | Nintendo

Fun Fact:

Did you know that the first ever mention of Microsoft was in a letter addressed to co-founder Paul Allen from Bill Gates?

An Overview of Microsoft

The ship’s captain, Bill Gates, and his business partner Paul Allen founded Microsoft in 1975. It has been dominating the software market since then, offering software and hardware products, operating systems, apps and devices, Cloud computing, and office software suites.

Satya Nadella is currently in charge of Microsoft Corporation. The company has its headquarters in Redmond, Washington, USA.

Microsoft is inevitably the world’s most renowned American multinational technology company. It’s been at the forefront of technological advancement for over 40 years and has significantly contributed to the technology industry.

The world would have been different without Microsoft!

Let’s take a look at this technological giant’s operations and examine them through a Microsoft SWOT analysis.

SWOT Analysis of Microsoft

Following is the SWOT analysis of Microsoft:

Microsoft Strengths – Internal Strategic Factors

1. Leading Software Company

Microsoft is the undisputed global market leader in software technology, specifically in cloud computing. It’s the world’s largest developer of Windows OS and the leading cloud player. It offers commercial cloud services through Azure, Office 365, and Dynamics 365. In 2022, daily users of its remote work solution, Microsoft Teams, doubled from 145 million users in 2021 to 270 million in 2022. [1]

2. World’s largest company

Microsoft ranks 2nd largest company globally, with a market value of $2.46 trillion as of Oct 2023. 

3. Vast market reach

Microsoft operates in more than 190 countries worldwide. After launching the promoted version of Windows 10, it reached one billion monthly active users before being succeeded by Windows 11 in 2021.

4. Constant growth

The latest earning results of Microsoft demonstrate its strong growth in the cloud business. The company reported year-over-year revenue growth of 17.96% to $198.3 billion in fiscal year 2022 and a 19.26% year-over-year growth in operating income to $83.4 billion in the same period. [2]

5. Addition of newer SKUs (Stock Keeping Units)

Microsoft has recently added newer SKUs to its brand portfolio. This includes Microsoft 365, combining Office 365 and Windows 10. Its M365 is a multi-billion dollar business.

6. Reputed Brand with superior customer loyalty

Microsoft had 1.2 billion Office users and 345 million Office 365 commercial customers in 2022. It undoubtedly has the most extraordinary loyal customer base. Customers trust the brand and remain loyal to it.

7. Huge Market Capitalization

With $2.46 trillion of market capitalization, Microsoft is one of the biggest hi-tech companies on the planet. Microsoft was ranked the 2nd largest company in 2023 based on market value and was the 4th most valuable brand in the world in 2023. [3]

8. Effective Adverting platform

With its strong and effective marketing strategies, Microsoft has influenced people worldwide. Its emotive advertisement aired in July 2015 with the title ‘The future starts now’ touched many worldwide.

9. Brand Reputation

Microsoft was ranked 2nd by Interbrand as the world’s most valuable brand in 2022, with a brand value of $278 billion. And, In 2022, Forbes Global 2000 Ranking, Microsoft was ranked 12th in the world based on its financial metrics. [4]

10. Easy-to-use software

Microsoft is known for its hi-tech and quality product offerings. Windows OS and Office software products are quite user-friendly with the highest quality standards.

11. Diversified Portfolio

Microsoft divided its businesses into three segments:

• Productivity and Business Processes – The segment represents about 32% of total revenue. This segment consists of products and services related to communication and information. It is mainly comprised of Office 365 Commercial and Consumer, LinkedIn, and Dynamics 365. Revenue is generated through subscription fees or one-time license-using fees.
• Intelligent Cloud – represents about 36% of total revenue. This segment provides cloud services for enterprises and consumers. Signature products include Azure, SQL Server, Windows Server, Visual Studio, and Microsoft Consulting Services.
• More Personal Computing – represents about 32% of total revenue. This segment sells personal computing devices and services such as the Windows operating system, Surface and PC accessories, and Xbox hardware and Xbox content and services.

Segment	Revenue ($Billion) (2022)	% Revenue Share
Productivity and Business Processes	63.4	32%
Intelligent Cloud	75.3	38%
More Personal Computing	59.7	30%
Total	198.2	100%

Source: Microsoft Annual Report 2022

Microsoft Weaknesses – Internal Strategic Factors

1. Overexposure to the PC market

PC shipments are often subjected to frequent falls due to vendors’ rising prices and currency fluctuations. It has landed Microsoft in a vulnerable position.

2. Cybercrime theft

The increasing cybercrime cases have left Microsoft in a vulnerable state. Hackers have reportedly attacked the cybersecurity of the Windows Operating System several times.

3. Lacking innovation

Microsoft needs to grow its hardware product sales, such as surface pro computers and phones. It needs to catch up in innovation and advanced technology, whereas Apple, Google, and Amazon are quickly blazing trails.

4. Lacking market leadership in the Internet browser segment

While Google, and Safari have been gaining market share in the Internet browser segment, Microsoft is losing the market in Microsoft IE & Edge, based on the 2023’s most popular web browsers report.

5. Unsuccessful acquisitions

Microsoft’s fewer acquisitions like WebTV, LinkExchange, Massive, and Danger resulted in failures and divestitures. Such unprofitable investments are the biggest weaknesses of Microsoft.

6. Unfair business practices

In Europe, Slack Technologies filed a complaint against Microsoft on the grounds of anti-competitive practices. In the US, a federal appeals court is hearing an appeal by Improved Search LLC, which can revive a lawsuit against Microsoft for infringing on a search engine technology patent. [5]

7. Microsoft Launches Emergency VPN Bug Fixes for Windows Server

In the latest patch, Microsoft launched important OOB (out-of-band) patch fixes for its servers. The patch was launched as a result of the complications that surfaced due to the latest Windows updates earlier this month.

According to Microsoft, the emergency update will help eliminate many of the bugs, optimize VPN connectivity, fixes for Windows Server Domain Controllers, and much more. Users can download the latest out-of-band patch from Microsoft’s update catalog, and some of the updates can also be automatically downloaded via optional Windows updates.

Microsoft Opportunities – External Strategic Factors

1. Cloud infrastructure business growth

Its cloud-based services have gained immense growth and success in recent years. Thus, there’s an opportunity for Microsoft to expand its cloud business. Microsoft launched Microsoft Cloud for Healthcare to cater to the needs of healthcare organizations post pandemic and helped organizations reimagine healthcare. It also reported a 2% market share growth from 21% to 23% from Q3 2022 to Q4 2022 in the cloud infrastructure market. On the contrary, the market share of Amazon went down from 34% to 33%, while that of Google remained constant at 11%.[6]

2. Innovation and Artificial Intelligence

Microsoft has a massive opportunity in many innovative areas, like AI and game technology. Investing in these areas can give an upper hand to Microsoft.

3. Partnerships and Acquisitions

Microsoft can focus on entering into new strategic alliances and partnerships. It will enable the company to gain a high market share. Acquiring major hi-tech firms will also be a profitable opportunity for Microsoft. Microsoft won a five-year deal in April 2020 to supply Coca-Cola’s business software. [7]

4. Smartphone industry

The fast-growing market of smartphones and tablets offers an excellent opportunity for Microsoft. It can capitalize on the rising demand for these products.

5. Cost leadership strategy

Microsoft can gain the opportunity of increasing its sales and revenue by offering its products at low prices. It may also prevent hackers from using its software illegally.

6. Remote work solutions

Recent events have increased the demand for solutions that enable people to work from home or remotely from anywhere across the world. Microsoft’s remote work solution, known as Microsoft Teams, is already a leader in the sector and has 280 million daily active users. Currently, Teams is available in 181 countries in 48 languages and can be exploited further for long-term growth. [8]

7. Newly Designed Windows 11 Task Manager

Microsoft announced that it’s working on developing a new Windows 11 task manager – specifically for its inbox applications. The new interface will help make the inbox apps appear more aesthetically and functionally optimal for the Windows 11 operating system.

8.Video Games Industry

Microsoft’s Xbox gaming division has been preparing to compete with Sony and its Playstation platform. Recently, Microsoft acquired “Activision Blizzard” for a whopping $69 billion, despite facing opposition from antitrust regulators and rivals. This acquisition marks the largest deal in the gaming industry. Activision Blizzard is well-known for its popular games such as Call of Duty, World of Warcraft, Candy Crush, and more.
Previously, Microsoft had acquired Bethesda Softworks, the maker of Fallout, Doom, and other games for $7.5 billion. With these acquisitions, Microsoft has significantly improved its strategic position in the gaming industry.

It is Microsoft’s largest acquisition in history, buying the gaming company at $95 per share. According to a spokesperson from Microsoft, the acquisition is going to help propel the company’s gaming platforms across multiple devices, such as gaming consoles, PC, and smartphones. Moreover, the company will be able to form a powerful foothold in the metaverse.[9]

 

Microsoft Threats – External Strategic Factors

1. Workforce’s related criticisms

Microsoft’s 2022 workforce diversity statistics showed an imbalance in its recruited workforce. The number of women and minorities working was quite low, fuelling severe criticism and arguments against the company’s HR policy.

2. Gay reference controversy

Microsoft has faced many criticisms for its Xbox Live game service. Reference to homosexuality and gays can’t be used in the Gamertag and user’s profile, as the company considers this matter ‘unsuitable’ and ‘offensive’ for other users.

3. Aggressive competition

Microsoft has intense competition with Google and Apple. These companies’ established positions can be a threat to Microsoft’s market position. In June 2020, Google enhanced its competition for remote work by adding video-call features, editing tools, and other remote work tools in Gmail to lure clients from Microsoft. [10]

4. Changing preferences of consumers

People are highly attracted to the market of smartphones, notepads, and laptops. Microsoft has modest shares in these markets.

5. Open-source projects

Like Linux OS and Open-Source Office, many new open-source projects have successfully entered the market, offering similar services for free. It can threaten Microsoft, which offers these products at an expensive rate.

6. Cybercrime and piracy

Rising cybercrime thefts and software piracy issues have dramatically affected Microsoft’s security network system.

7. Politicized contracts

Favoritism by the government undermines confidence. Recently, Microsoft was awarded a $10 billion Pentagon contract over Amazon. Critics and several officials alleged that Amazon was more qualified, but Trump’s administration influenced the decision to award Microsoft due to the president’s feud with Amazon owner Jeff Bezos.  [11]

8. Anti-encryption drive

Governments and child welfare groups have been pressuring Microsoft and other tech companies to abolish customer encryption technologies that allow child exploiters to operate online with impunity. Microsoft and other giants pledged to standardize disclosure of the culprits, but several governments and child welfare groups want more. [12]

Recommendations

To remain the leading software provider, Microsoft needs to work on its weak aspects and embrace opportunities. A few recommendations are given below in this regard:

1. Upgrade its software and bring innovation. Microsoft must take radical steps to embrace the future of innovation
2. Continue enhancing its brand reputation through effective marketing tools.
3. Update its internet browser market and take initiatives to increase the market share in this segment.
4. Build more competitive advantages to compete with technology rivals like Google and Apple.
5. Increase partnerships, strategic alliances, and acquisitions to strengthen its market standing.
6. Resolve cybersecurity issues and address global cyber thefts by advancing its security network systems.
7. Decrease the prices to reduce the illegal use of its software systems.
8. Diversify its business to enhance potential growth and market share.

 References & more information

1. Curry, David (2023, January 9) Microsoft Teams revenue and Usage Statistics, BusinessofApps.
2. Microsoft Annual Report 2022
3. Statista Most Valuable Brands Worldwide in 2023.
4. Murphy, A. and Contreras, Isabel (2022, May 12). Forbes Global 2000: The World’s Largest Companies. Forbes
5. Wolfe, J. (2020, July 6). Fed Circuit to consider reviving case v. Microsoft over a 20-year-old search-engine patent. Reuters
6. Nellis, S. (2020, May 19). Microsoft to adopt its cloud software for the healthcare industry. Reuters
7. Nellis, S. (2020, April 27). Microsoft wins a five-year deal with Coca-Cola to supply business software. Reuters
8. David, Ch (2023, January 17) Microsoft Teams Revenue and Growth Statistics 2023
9. Taylor, Mollie (2022, January 19) Microsoft to acquire Activision Blizzard for $68.7 billion. PC Gamer
10. Dave, P. (2020, July 1). Google ties more work tools into Gmail, aiming to get ahead of Microsoft. Reuters
11. Macias, A. (2020, February 10). Amazon wants to question Trump after losing a $10 billion Pentagon cloud contract. CNBC
12. Paul, K. (2020, June 11). Battling anti-encryption drive, tech companies pledge new child abuse disclosures. Reuters

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