External Environment Analysis of Microsoft - Case Study Example

? Microsoft Case Analysis External Environment Analysis of Microsoft Microsoft Corporation is a company that faces both opportunities and threats in the digital market. Microsoft has various opportunities in the global, digital market. For instance, the company has the potential of developing an integrated, Personal Computer-Phone –television gadget. This is because the company is endowed with sufficient technology and reliable teams to do it. Secondly, Microsoft the company has an opportunity in developing a superior smart phone to compete with other companies in the mobile industry market. Currently, the company has a competitive Smartphone. There are further opportunities for the company because Microsoft has sought enterprise customers who can sign large deals to long-term commitments and provide a stable cash flow. For example, the Microsoft Azure Cloud offers consulting services to enterprises (Hoffmann, 2013). These opportunities, if utilized appropriately can benefit the company by providing a competitive edge. On the other hand, Microsoft faces some external threats. For instance, many of the users of Microsoft’s products have not shifted to start using the upgraded, newer products. By mid last year, half of the users and companies were still using Windows XP, and a large percentage of the market did not seem likely to buy upgrades (Cox, 2012). Therefore, the company has a lot of work to do in giving a reason to clients to purchase its new products. Secondly, the emergency of mobile devices and the increase in reliance on the Internet poses a threat to Microsoft. Customers and businesses have realized that personal computing can be done without using any of Microsoft’s products (Brodkin, 2013). The introduction of newer and efficient browsers such as Mozilla Firefox and Google chrome has posed stiff competition to Microsoft’s Internet explorer. Other competing products include Android and iOS. Many users have opted to use them because Microsoft’s platform lacks user reach-motivator for developers to invest in it. Therefore, the company has failed to increase mindshare, whereby developers can work with its own platform or technology. The company faces further competition, and struggles to convert developer interest in the platform into adoption. The company’s lack of commercial has led to its inability to convert windows phone into adoption. Finally, the market is currently dominated by-products from Apple and Google. These are iPhone and iPad, and Google’s Android platform that many manufacturers such as Samsung and LG use to power their devices (BBC, 2013). Google became a threat to Microsoft because it used its revenue from search to fund software-development projects, such as business productivity applications, while Apple focused on the consumer more than Microsoft did (Hoffmann, 2013). These threats are not favorable for the company because Microsoft’s market share has been hurt significantly. External Environment and Financial Performance Analysis of Microsoft Microsoft’s internal strengths lie in its corporate culture. It allows any employee to submit an idea, which is then voted by other employees. Ideas that are not adopted are normally archived for future reference. The company has two yearly Think weeks during which employees can suggest innovative ideas (Koulopoulos, 2009). The company’s integration with Skype to enhance its existing business provides further strength. This is because the company can add voice and videoconferencing services to its enterprise offerings. The company has already created a huge reach to customers with its most successful products, and can access both Internet and mobile platforms (Lunden, 2011). The company has invested in innovation opportunities, and this provides it with an opportunity to improve market share. Further the company’s rigorous recruitment process, which ensures that only the best and the brightest are given the opportunities, enables the company to have an excellent work force. For instance, the company hires from top colleges. Microsoft is seeking to hire new researchers and engineers (Weisman, 2009). The company promotes internally, giving employees who have a clear understanding of the company’s vision and values an opportunity to sustain its growth. The company is capable of operating across cultures. Finally, the company has streamlined its production process and offers after sale service, through its customer service support centers, located in many parts of the world. The company’s financial performance is quite strong, compared to the industry. For instance, revenues for the company increased to about $78, compared to the previous year’s $74. The company’s current ratio was 2.7, compared to 2.6 of the previous year. The quick ratio was 2.53, compared to the previous year’s 2.41, while the cash ratio was 2.06, compared to 1.93, recorded in the previous year. Microsoft’s gross profit margin for this year was 74%, compared to the previous year’s 76% while the operating profit margin was 34.38%, compared to the previous year’s 29.53% (Microsoft Corp, 2013). The net profit margin recorded was 28.08%, compared to the previous year’s 23.03%. Return on Equity was 27.69%, against the previous year’s 25.58% while the Return on Assets was 15.35%, compared to the previous year’s 14%. The company’s EBIT was $27,481, compared to the previous year’s $22,647 (Microsoft Corp, 2013). Generally, the company’s financial performance is higher, compared to the industry. It is important to note that Microsoft has a major weakness in convincing its customers to purchase its products. For instance, the company does not make any efforts to provide a reason why clients should seek products from Microsoft. Secondly, the company lacks customer focus, and does not provide cohesive message that may convince customers to make a purchase (Hoffmann, 2013). Third, the company is weak in new-product development. For instance, it took so long, for Microsoft to develop a Smartphone to compete in the market. Among these factors, continued investment in Research and Development to promote innovation and new-product development, creating mergers with developers and improvement of the company’s platform, and strong marketing efforts are the most critical in addressing the company’s current situation. Key Strategic Challenges confronting Microsoft and Recommendations for Consideration The Key strategic challenges confronting Microsoft includes competition from other market players such as Apple and Google. Furthermore, the company faces challenges pertaining to the method of marketing that it adopts. Its competitors are quick in innovating and introducing new products into the market, as well as, taking consumer focus into consideration. Microsoft should consider investing more in Research and Development, employing extensive marketing efforts and seeking to increase sales of windows phones devices. The company should also create partnerships with developers and improve its platform to motivate users. References BBC. (2013, September 20). Microsoft too Slow on Phones, admits Boss Steve Ballmer. Retirved from: http://www.bbc.co.uk/news/technology-24178512 Brodkin, J. (2013, September 11). The Five Biggest Problems Facing Microsoft. Retrived from: http://www.computerworlduk.com/in-depth/it-business/3300652/the-five-biggest-problems-facing-microsoft/ Cox, K. (2012, August 8). Windows Is Its Own Biggest Threat to the Future of PC Gaming. Retrived from: http://kotaku.com/5932879/windows-is-its-own-biggest-threat-to-the-future-of-pc-gaming Hoffmann, H. H. (2013, January 30). Microsoft – Threats and Opportunities. Retirved from: http://hansh51.com/2013/01/30/microsoft-threats-and-opportunities/ Koulopoulos, T. M. (2009). The Innovation Zone: How Great Companies Re-Innovate for Amazing Success. California : Davies-Black Publishers . Lunden, I. (2011, May 10). Updated: The Challenges And Opportunities For Microsoft And Skype. Retived from: http://paidcontent.org/2011/05/10/419-the-challenges-and-opportunities-for-microsoft-and-skype/ Microsoft Corp. (2013). Microsoft Corp. Retived from: http://www.stock-analysis-on.net/NASDAQ/Company/Microsoft-Corp#Ratios Weisman, R. (2009, February 26). Microsoft sees 'Fantastic' Opportunities. Retrived from: http://www.boston.com/business/technology/articles/2009/02/26/microsoft_sees_fantastic_opportunities/ Read More