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SWOT Analysis: Microsoft Corporation 

By Arthur W. Hafner , Ph.D., M.B.A. and
Erica L. Hibbert
May 31, 2001

Strengths

  • Applications and operations divisions along with recently created online service network divisions (MSN)

  • Flexible workforce through contingent workers for seasonal/cyclical projects

  • Loyal, hardworking, and diverse workforce (20% minority, 26% women) who, in addition to good compensation, have an opportunity to do well financially through stock purchases

  • Multinational corporation operating through regional subsidiaries to minimize cultural differences in more than 60 countries

  • New product, Neptune , is a Window's interface and is an example of smart software

  • Relatively rapid product development processes that allow for timely updating and release of new products

  • Revenues and profits rising at 30% a year with merger/acquisition or investment in 92 companies over past five years

  • Software products have high name recognition, broad-based corporate and consumer acceptance (Word, Excel, PowerPoint, Access), and numerous powerful features that are in use worldwide, thereby promoting standardization and competitive advantage through their ease of integration and cost-effectiveness

  • Top rating from Fortune for best company to work at and most admired company

  • Windows 95, 98, 2000 series, and Windows NT are globally known as the PC desktop operating system with a market share of about 88%

  • World's largest software company with global name recognition and strong reputation for innovative products

Weaknesses

  • Between 1990-1995, Microsoft leadership failed to correctly anticipate the growth or popularity of the Internet

  • Bill Gates has become Microsoft's chief software architect but has not yet developed a substantially new line of products

  • Dependency on hardware manufacturers to pre-install Microsoft's PC operating system

  • Downside of product launches and deadlines contributes substantially to employee burnout

  • Employee turnover has increased from 6% for a ten year period to 7.4%

  • Falling sales in the operating systems and server software sectors

  • Frequent reorganization, red tape, and autocratic atmosphere dampen employee creativity leading to a loss of key personnel and chilling of communication and innovation; 5-layers of management

  • IRS audits in 1989 and 1990 revealed employment status of contingent workers for whom Microsoft did not withhold taxes nor allow to participate in Microsoft's Savings Plus Plan or Employee Stock Purchase Plan, leading to a finding of tax liability for Microsoft in the "permatemps" Vizcaino litigation

  • Little or no significant presence in the wireless market and Windows CE has been disappointing

  • Not a key player in the Internet space and few products for Internet applications

  • Perceived by many as a cut-throat competitor that uses its dominant market position to marginalize competition by stealing/destroying the competition's products, stifling product innovation, and decreasing the availability of competitor products

  • Products have a single application focus and do not work well with or on-top of other products

  • Reputation has suffered because of entanglement in antitrust and "permatemps" Vizcaino litigation

Opportunities

  • Cheaper global telecommunication costs open new markets as people connect to the Internet

  • Federal trial Judge Thomas P. Jackson's breach of judicial discretion and conduct in the Microsoft antitrust case clouded the proceedings in Microsoft's favor

  • Mobile phone applications and exploitation of personal digital assistants represent a growth industry so that strategic alliances could provide Microsoft with opportunity in a market where it currently has little or no significant presence

  • Popularity among people for Internet access

  • The demand for personal computers in American and global markets remains strong despite the growth and increasing popularity of personal handheld devices

Threats

  • Apple and Linux threaten Microsoft's 88% market share of the desktop operating market

  • Between 1993-95, Sun Microsystems, Netscape, Oracle, IBM, AOL, and other companies moved into the Internet space and defined it while Microsoft failed to anticipate its growth or popularity

  • Currency exchange rates affect demand for application/operation software and hardware, and fluctuating currencies can negatively impact revenues in the global marketplace

  • Department of Justice antitrust litigation and current appeal creates uncertainty among employees since its outcome is not known

  • Hardware manufacturers (Sun Microsystems, Oracle, IBM) have collaborated on new platform technologies that replicate much of the value of Windows

  • Hardware manufacturers (Sun Microsystems, Oracle, IBM, AOL, and Apple) are issuing their own pre-bundled programs on their own hardware

  • Linux influence growing from 7% in 1998 to 17% in 1999

  • Personal computers, mobile-phones, personal digit assistants, entertainment-oriented hand-held computers, and similar wireless products for Internet access do not require Window operating system products

  • Rapid development of mobile devices that will displace/replace personal computers

  • Recession or economic slowdown in the U.S. or global market impacts personal computer equipment sales and their need for an operating systems

  • Software piracy of commercial and consumer applications software on a global scale threatens revenue streams

  • Technology life cycle is shorter and shorter

  • Unix dominates high-end mission-critical applications and its customers do not believe Windows can handle these operations

This SWOT Analysis was prepared by 
Arthur W. Hafner and Erica L. Hibbert

May 31, 2001

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