Microsoft Corporation - Essay Example

Microsoft Corporation Headquartered in Redmond, Washington, Microsoft Corporation is known as a pioneering company, as far as research and development in the field of software products is concerned. With a worldwide presence the company has aspired to be a leader in software products and services. SWOT Analysis Strengths Strong Brand Image: Microsoft is a well known brand the world over. Anybody having anything to do with the field of IT, computers or technology finds the italicised brand name easily distinguishable and identifiable. Microsoft was firmly placed at third position after Google and GE in the ranking of brands being finalised by MillwardBrown for the year 2008. In fact, while many of the reputed brands have slipped down their positions, Microsft has firmly held on to its position for couple of years. With a brand value of $ million 70,887, the company saw a rise of 29% in its brand value as compared to 2007. Well Organised R&D set-up: Microsoft is known to be continuously on the lookout for an upgrade or latest product or service with focus on the innovation and customer convenience. Microsoft was one of the first software companies to make provisions for R&D activities1 way back in 1991 itself. With R&D labs at six places around the world, the company has more than 800 researchers studying more than 55 areas of research. Wide range of Product portfolio: If we talk of an operating system, Windows is the first name that crops up. In fact Windows itself became a brand identity for operating software. Now with valuable upgrades like Vista, the OS range is quite wide. Besides the OS, a number of other products like Office tools, development tools, multimedia software, client-server tools etc. provide a remarkable strength to the company. Strategic tie-ups with a number of reputed companies: Microsoft has been working in close co-ordination with a number of companies. For example computer manufacturers like Dell, HP; multimedia and audio-visual products like Sony, Phillips etc. are the strategic partners of Microsoft. Consistent operating performance: Microsoft has seen healthy operating figures consistently for many years. The results announced for the fiscal quarter ended Sept 30 2008 has shown revenues worth $15.06 billion with a 9% increase over the corresponding period last year2. The average returns of the company over the last five year period ending June 2007 indicate consistency in performance. The average return on assets, return on investments and return on equity figures during the last five years were 14.3%, 18.5% and 20.2% respectively, higher than the industry averages of 11.7%, 16.5% and 19% for the same period (Datamonitor, 2007). Weaknesses Uneven Geographic Concentration: Though Microsoft has operations in many countries around the world, but a cursory look at its financial statements indicate that company's revenues from the US contributed to 62% of the total revenues of the company in 2007 leaving just 38% for the rest of the world (Datamonitor, 2007). In fact, the revenue figures are not indicative of the existing usage of Microsoft software because of a large number of pirated versions doing the rounds in many countries around the world. But Microsoft has not been able to do much to tackle this menance. Decreasing share of search market: Microsoft's search engine MSN search is being replaced by Google all around the world at a rapid pace. Microsoft, having been a leader in software products has not been able to come out with a matching answer to Google indicates sorry state of affairs for the company. Opportunities Increasing emphasis on emerging markets: Microsoft has been strengthening its operations in countries like China and India, the major untapped, yet highly promising markets. With America under recessionary trends, company will do a world of favour to itself if it is able to set off some of the losses by being better focused towards such markets. Launch of Newer Products: The Windows Vista launched in 2007 has come out with many improved features over the previous versions of OS. This is bound to provide better leverage to the company in times to come, with more customers inclined to hook on this platform. The ongoing research activities at Microsoft are bound to provide a better working experience to users in times to come. Acquisitions and strategic tie-ups: Microsoft has acquired Medstory Inc. Tellme Networks, ScreenTonic, aQunative, AdECN Inc etc. in the recent past. Such acquisitions are bound to strengthen the company's performance in times to come as it will widen the product and marketing base of the company. Threats Increasing cases of software piracy: Microsoft has been fighting innumerable cases of piracy all over the world. On the one hand this indicates the popularity of the products, but on the other hand it is indication towards the fact that the higher prices of the products have made the illegal products more attractive. In a series of raids carried out in the southern province of China in 2007 revealed that more than $2 billion worth of counterfeit Microsoft software was being sold by the software pirates3. Recessionary trends in US: The US economy is fast slipping towards recession in the recent past. How long this trend will continue, nobody can forecast. This implies difficult days for the company in the coming months and years, as the company is heavily dependent on the US market. Intense Competition: Microsoft has been facing intense competition from companies like UNIX, Apple, Sun Microsystems etc. Though the market share of the company is still quite high, but the increasing market share of competitive companies is an indication towards the increasing threat perception. Open Source Model: Microsoft works with a business model which is based on customers agreeing to pay a fee for licensing the software from the company. This system is called open source model. In recent years, a non commercial software model has evolved which presents a challenge to such commercial software model. Porter's Five Forces Analysis of Microsoft in America Porter's Five Forces have become a yardstick for assessing industry profitability. This helps the retailer in consistent performance and planning. The five forces are; Buyers'/customers' power Suppliers' power Rivalry among competitors Threat of new entrants Threat of substitute products Threat of New Entrants Bargaining Power of Bargaining power of Suppliers Buyers Threat of Substitute product References: 1. Datamonitor (2007). Microsoft Corporation - Company Profile. Datamonitor Europe, London 2. Microsoft (2008). 'Your Potential, Our Passion'. Available online at http://www.microsoft.com/en/us/default.aspx (November 21, 2008) 3. MillwardBrown (2008). Top 100 most powerful Brands 2008. Available online at http://www.brandz.com/upload/BrandZ-2008-RankingReport.pdf (November 21, 2008) 4. Quick MBA (2008). Strategic Management, "Porter's Five Forces: A Model for Industry Analysis. Available online at http://www.quickmba.com/strategy/porter.shtml (November 21, 2008) Read More