SWOT and PESTEL Evaluation of Microsoft - Case Study Example

Executive Summary: Innovation refers to a new manner in which an object could be developed or a task could be performed. The main motive behind innovation is to improve the quality of service that could be rendered with the product, or to increase the efficiency in terms of the reduction of the cost associated with the manufacturing of the product. Innovation is therefore the platform for increasing the wealth of a company and thereby improving the economy as a whole. For developing a new business, the deliverables must provide a service better than the existing products in the market which demands for innovation. Even for maintaining a healthy growth, the deliverables must be much above the expectations of the client keeping the operational costs down and within the specified time frame. If the increasing demand for the product thus created have to met, then innovation becomes the need of the hour and an essence for any successful business to survive. I have taken Microsoft as the organization for analysis of business environment and have performed SWOT and PESTEL evaluation of its business. Microsoft being one of the most renowned companies in the world and frequent amongst the Fortune toppers offers a lot to learn from the innovative processes it has followed for more than a decade. Introduction: Microsoft Corporation Ltd. Founded by Bill Gates and Paul Allen on April 4, 1975 in Albuquerque(US) it is today a Multinational corporation which deals in computer software, computer hardware, research and development, gaming; a corporation that manufactures, outsources, licenses and supports a wide range of software products like Microsoft Windows, Microsoft Office, Microsoft Servers, Developer Tools, Microsoft Expression, Business Solutions, Games & Xbox 360, Windows Live, Windows Mobile. Structure of Microsoft: Board of Directors consists of ten people, made up of mostly company outsiders. Current members of the board of directors are: Steve Ballmer, James Cash, Jr., Dina Dublon, Bill Gates, Raymond Gilmartin, Reed Hastings, David Marquardt, Charles Noski, Helmut Panke, and Jon Shirley. There is an Executive Team which includes the Chairman and Chief Software Architect, the CEO, the General Counsel and Secretary, the Chief Financial Officer, senior and group vice presidents from the business units, the CEO of the Europe, the Middle East and Africa regions; the heads of Worldwide Sales, Marketing and Services; Human Resources; and Corporate Marketing. Business Environment of Microsoft (SWOT Analysis): Strengths: 1) Microsoft is one of the leading brands and one of the top companies featured in Fortune 500 list of companies. The operating system Windows, provided by Microsoft, is one of the most favorite operating systems of most of the people across the world. Apart from this, the office suit supplied by Microsoft which includes MS Word, MS excel etc. can be found on almost all the computers across the globe. Not only does it provide software for home and office computers, laptops and mobile devices but it also is one of the leaders in the Market of servers, gaming products and hardware devices. 2) Creating a Brand Name is one of the toughest jobs for a company. Microsoft has been very successful in creating a Brand Name for itself and is therefore increasing the names in the list of its customers every single hour. 3) Microsoft has a wide web of offices and has its presence in every continent of the world except Antarctica. It has its offices situated in more than three dozen countries of the civilized world. Weaknesses: 1) The on-line support provided by Microsoft is not up to the highest standard. Even the support available on phone is not available 24*7. It should be not that after delivery support for the softwares is an important criteria for the customers making any purchase and the lack of best quality support can definitely has a negative influence in the mind of the customer. 2) It is generally seen that the software products offered by Microsoft have compatibility problems when installed on operating systems other than Windows. Moreover, even Windows does not support many softwares provided by other Vendors. This comes as a hindrance to a consumer intending to buy products from different vendors. 3) Microsoft does not disclose the source code for its product which causes a lot of pain to the end user if he/she desires to do some minor modifications to the product obtained by him in case of any bugs found or some extra features needed to him. 4) Microsoft having its presence across the globe has to be very cautious of its legalities, patents, trademarks, codes, products etc and has to keep a close watch on any development in the legal policies for any country throughout the world. Opportunities: 1) Microsoft has started to capture opportunities in attracting the tech savvy youths in developing countries by introducing softwares in their native language rather than English. Microsoft has also given discretionary authority to the respective government to ensure tight vigilance on malpractices such as eavesdropping and phishing emails. 2) Microsoft has made a smart move by venturing into entertainment segment which is the need of the 21st century youngsters by production of game consoles such as XBOX. Threats: 1) As Microsoft has a wide market share in developing and developed nations, one of the major threats that Microsoft is facing recently is the wider problem of ‘Credit crunch’ in the global market. Microsoft is generally catering to the affluent section of society therefore the problem of credit crunch is more applicable to this company. Because of this liquidity problem, the customers are delaying their purchase of computer, laptops and entertainment devices. Microsoft is thriving mainly upon the softwares to the computers, laptops and the sale of entertainment devices; therefore any delay in the purchase of these items is directly increasing the inventory or the stock level for the company and is therefore increasing the inventory cost. Moreover with its fixed cost already in place the credit crunch will be definitely a threat and a concern for Microsoft. 2) The customer, paying a hefty bill for Windows Operating system and other softwares from Microsoft, these days, has an option available in the market in terms of free Operating System like Linux and also Web Browsers and other softwares available without any cost to him/her and thus posing a serious threat to Microsoft. 3) Microsoft, in its urge to expand the product lines, has to face a stiff competition with those already existing in those product lines and may have to even lose while competing with those already set up players in the segment. 4) With the number of hackers increasing every day, threats to Microsoft in terms of its products getting hacked and security threats in using passwords onto its Web Browser is constantly soaring thus making its customer to think twice before going for any purchase in the related products. PESTEL Analysis: Political: Microsoft is a huge organization which has not only its operations in one country, but in many countries of the world. The Political factor is something that affects the Multinational giants like Microsoft on a huge scale. Primarily it is affected by the Political changes in USA, because it is being headquartered at Microsoft and listed at NASDAQ as well. Any political instability in US will lead to a crisis and the major stocks, including Microsoft, will have to bear the brunt for it. Secondly, it has its operations spread across the world. It exports not only software, but also hardware and gaming products. Any increase in the import duty on any of these products by any government is going to be counterproductive for a global player like Microsoft. Moreover US is also looking to cut down on its outsourcing as apparent from the Stand of recently elected President, Obama which is also a blow to Microsoft attributed to political reasons. Economical Economics is an important factor to consider when doing macro environmental scanning because this variable affects business operation and direction more closely. Foreign exchange will be important for Microsoft because it is not only involved in catering to US clients but it caters to customers across the world. Not only this, it imports some of its services from low cost destinations as well. However, looking at the overall picture of the trade, it is safe to assume that Microsoft is a net exporter from US and therefore a cheaper dollar is most of the times going to increase profitability of the company. Social Social is a worthwhile criterion for the company. For Microsoft, an educated and tech savvy nation like US or UK will be more productive to its business rather than a financially weak nation like Liberia. So, primarily the company has its target consumers as educated and tech savvy people. Technological Technology is the backbone for the development of company like Microsoft. For any emerging technology, appearing in the market, Microsoft has to keep itself abreast of any changes. It has to take care that the Windows operating systems are compatible with the latest technology gizmos, processors, hand held devices, PDA etc in the market. Environmental "Addressing global warming is a responsibility we take very seriously at Microsoft." -Steve Ballmer, Microsoft CEO Microsoft is into research to reduce the carbon footprint of the computing industry through software innovation. Microsoft follows strict policies to ensure that the company remains in full compliance with international environmental regulations and the specific environmental requirements of each country/region wherever they do business. Microsoft works to protect natural resources by doing the following: Conserving, reusing, and recycling. Reducing and disposing of waste. Developing safe and sustainable products. Making environmental stewardship a part of business relationships. Legal Being a giant or the leader in IT industry, Microsoft has several threats from its competitors or the market followers and so MS has to be very cautious of its legalities, patents, trademarks, codes and products. The entire products make must follow strict on the law and standard requirement to ensure the product is safe for consumers to consume. The Microsoft Legal and Corporate Affairs Group (LCA) works on the cutting edge of business and regulatory issues around the world. A diverse and multidisciplinary team of legal, business, and corporate affairs professionals operates from 57 locations in 40 countries/regions worldwide. Innovative Process of Microsoft: 1. Creation of new markets:- Microsoft has constantly innovated new products for the developing needs of the customer. After providing operating systems, it has made a foray into the software gaming and even hardware and gaming products. 2. Improved Quality: - MS has constantly tried to improve the quality and a higher versions of software products from Microsoft including the operating systems, are generally much more efficient than the previous versions and support for supplementary features on the top of existing ones. 3. Extension of the product range: - Microsoft has got an ever increasing range of products from operating systems to software games and even to gaming products like XBOX these days. 4. Reduced labor cost: - MS has set up its offices in developing countries in order to reduce the cost of labor. 5. Reduced environmental damage:- Microsoft is into research to reduce the carbon footprint of the computing industry through software innovation. 6. Replacement of products/services:- Most of the products offered from MS have guarantee that they could be replaced within a specific time frame if they are not working properly. 7. Reduced energy consumption: - MS is trying to reduce its energy usage by recycling, reusing and different other methods of energy conservation. 8. Conformance to regulations: - Microsoft follows strict policies to ensure that the company remains in full compliance with international regulations and the specific legal requirements of each country/region wherever they do business. Conclusion:- Microsoft indeed displays an exemplary work by innovating itself regularly and offers inspiration to the industries in the varied businesses to follow its path of success or carve a new path for themselves through this invincible route of innovation. Work Cited: Arthur W. Hafner and Erica L. Hibbert. “SWOT Analysis: Microsoft Corporation.”31 May, 2001. Ball State University. 10 April 2009 < http://www.bsu.edu/libraries/ahafner/awh-th-swot-ms.html> "Innovation." Wikipedia, The Free Encyclopedia. 10 Apr 2009, 14:26 UTC. 13 Apr 2009 . “Legal and Corporate Affairs.” Microsoft. 12 April 2009 . "Microsoft." Wikipedia, The Free Encyclopedia. 6 Jan 2009, 06:53 UTC. 10 April 2009 . Wentz C, Rolf. “The Organizational structure of Innovation.” 2008. The innovation Machine. 11 April 2009 . Read More