Microsoft (MSFT) SWOT Analysis / TOWS Matrix / MBA Resources
Software & Programming
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Microsoft (United States)
Based on various researches at Oak Spring University , Microsoft is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic ,
increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Microsoft can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Microsoft, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Microsoft operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Microsoft can be done for the following purposes –
1. Strategic planning of Microsoft
2. Improving business portfolio management of Microsoft
3. Assessing feasibility of the new initiative in United States
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Microsoft
Strengths of Microsoft | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Microsoft are -
Ability to recruit top talent
– Microsoft is one of the leading players in the Software & Programming industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Software & Programming industry
– Microsoft has clearly differentiated products in the market place. This has enabled Microsoft to fetch slight price premium compare to the competitors in the Software & Programming industry. The sustainable margins have also helped Microsoft to invest into research and development (R&D) and innovation.
Ability to lead change in Software & Programming
– Microsoft is one of the leading players in the Software & Programming industry in United States. Over the years it has not only transformed the business landscape in the Software & Programming industry in United States but also across the existing markets. The ability to lead change has enabled Microsoft in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Microsoft in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Microsoft has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Microsoft to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Software & Programming industry
– Microsoft is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Microsoft in the Technology sector have low bargaining power. Microsoft has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Microsoft to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Microsoft is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Software & Programming industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Effective Research and Development (R&D)
– Microsoft has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Microsoft staying ahead in the Software & Programming industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Microsoft has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Software & Programming industry. Secondly the value chain collaborators of Microsoft have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of Microsoft comprises – understanding the underlying the factors in the Software & Programming industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Learning organization
- Microsoft is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Microsoft is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Microsoft emphasize – knowledge, initiative, and innovation.
Weaknesses of Microsoft | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Microsoft are -
Skills based hiring in Software & Programming industry
– The stress on hiring functional specialists at Microsoft has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Lack of clear differentiation of Microsoft products
– To increase the profitability and margins on the products, Microsoft needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Microsoft has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High cash cycle compare to competitors
Microsoft has a high cash cycle compare to other players in the Software & Programming industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Microsoft is slow explore the new channels of communication. These new channels of communication can help Microsoft to provide better information regarding Software & Programming products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Microsoft is one of the leading players in the Software & Programming industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Software & Programming industry in last five years.
High bargaining power of channel partners in Software & Programming industry
– because of the regulatory requirements in United States, Microsoft is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Software & Programming industry.
Interest costs
– Compare to the competition, Microsoft has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on Microsoft ‘s star products
– The top 2 products and services of Microsoft still accounts for major business revenue. This dependence on star products in Software & Programming industry has resulted into insufficient focus on developing new products, even though Microsoft has relatively successful track record of launching new products.
Aligning sales with marketing
– From the outside it seems that Microsoft needs to have more collaboration between its sales team and marketing team. Sales professionals in the Software & Programming industry have deep experience in developing customer relationships. Marketing department at Microsoft can leverage the sales team experience to cultivate customer relationships as Microsoft is planning to shift buying processes online.
Products dominated business model
– Even though Microsoft has some of the most successful models in the Software & Programming industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Microsoft should strive to include more intangible value offerings along with its core products and services.
Microsoft Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Microsoft are -
Using analytics as competitive advantage
– Microsoft has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Software & Programming sector. This continuous investment in analytics has enabled Microsoft to build a competitive advantage using analytics. The analytics driven competitive advantage can help Microsoft to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Microsoft can use these opportunities to build new business models that can help the communities that Microsoft operates in. Secondly it can use opportunities from government spending in Software & Programming sector.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Software & Programming industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Microsoft can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Microsoft can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Building a culture of innovation
– managers at Microsoft can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Software & Programming industry.
Better consumer reach
– The expansion of the 5G network will help Microsoft to increase its market reach. Microsoft will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Microsoft in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Software & Programming industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Microsoft has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help Microsoft to build a more holistic ecosystem for Microsoft products in the Software & Programming industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Microsoft to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Microsoft to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Microsoft to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Microsoft can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Microsoft to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Microsoft can develop new processes and procedures in Software & Programming industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Microsoft can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Software & Programming industry, but it has also influenced the consumer preferences. Microsoft can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Microsoft External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Microsoft are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Microsoft can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Microsoft prominent markets.
Regulatory challenges
– Microsoft needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Software & Programming industry regulations.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Microsoft will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Microsoft in Software & Programming industry. The Software & Programming industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Microsoft needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.
Consumer confidence and its impact on Microsoft demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Software & Programming industry and other sectors.
Stagnating economy with rate increase
– Microsoft can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Software & Programming industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Software & Programming industry are lowering. It can presents Microsoft with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Software & Programming sector.
Environmental challenges
– Microsoft needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Microsoft can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Microsoft may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Software & Programming sector.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Microsoft.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Microsoft business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Microsoft
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Microsoft.
Weighted SWOT Analysis of Microsoft Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Microsoft needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Microsoft is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Microsoft is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Microsoft to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Microsoft needs to make to build a sustainable competitive advantage.