PORTFOLIO LINKS MBA Résumé : English CV : en français Teaching experience Study abroad Research projects Literary analyses Contact information	SWOT Analysis: Microsoft Corporation Prepared under the direction of: Dr. Mary Tucker in Management 691. Authors: Jonathan Leal, Sonya Faust, Kiesha Gasparac, Kumi Takimoto Date submitted: August 1, 2000
Company strengths	Microsoft possesses numerous features that enable the company to dominate in the software market. Its operating systems (Windows 95, 98, 2000 series and business applications such as Windows NT) are the most familiar operating system in the world. Also, each application such as Microsoft Excel, Word, PowerPoint, and Outlook represents the leader in the each area ("Computers: Software," 2000). These strengths such as the top revenue level and market share enhance Microsoft's reputation and its brand image, which affect marketing strategies to catch and expand new customers. The current dominant position of Microsoft in the software enables it to gain a broader range of customers, generate more revenue, and make the top share position more stable. An obvious advantage for the company is the high number of large corporations that have adopted Microsoft's software as the basic operation and application system. Royal Dutch/Shell, Xerox Corp., Reed Elsevier, and Motorola Inc., have been the important and profitable customers for Microsoft, and they have committed to adopt the latest operation system, Windows 2000 (Microsoft, 2000). In addition to these large organization customers, Microsoft attracts numerous leading PC manufacturers such as IBM Corp, Compaq Computer Corp., Dell Computer Corp., Hewlett-Packard Co., and Toshiba Corp. These manufacturers produce personal computers, which have agreed to pre-install the Windows series as the basic operation and application system. These major customers have been retained chiefly by Microsoft's marketing strategy, which focuses on building relationships rather than strictly profits. By establishing firm relationships with large customers, Microsoft acquires not only profit but also reputation as the favorable brand and product image. Moreover, Microsoft possesses an advantage in terms of its product lineup and product development process. Historically, Microsoft has chiefly concentrated on producing and developing software products. Part of its secret to success is its ability to generate new and updated products quickly, thanks to its highly-organized research lab. During the fiscal years 1997, 1998, 1999, the company spent $1.86 billion, $2.46 billion, and $2.81 billion, respectively, on product research and development activities (Microsoft, 2000). As a multinational corporation, Microsoft is operating in more than 60 countries worldwide, overcoming cultural differences by using regional subsidiaries (Directory of American Firms Operating in Foreign Countries, 1999). Its broad international coverage significantly enhances its profit as it does not need to spend more in order to sell its product; software is used universally. In addition to the operation and application system software market, Microsoft generates significant revenue from its online service network division, MSN (Microsoft, 1999). The company has also recently announced Office Online, through which customers can access Microsoft Office applications over the Internet ("Computers: Software," 2000). Finally, Microsoft operates its corporate organization effectively and efficiently. The company bunches up its operation division into three main areas: the business division, the sales and support group, and the operations group. These sections work cooperative, yet independently (Microsoft, 2000). It's clear that the company is successful: ranked at No. 84 on the Fortune 500 list, it is also the second-most admired company in the world (Fortune, 2000).
Company weaknesses	Perhaps one of Microsoft's chief weaknesses is its reputation. While consistently ranking at the top of the "Most Admired" list, it is also perceived as a cutthroat competitor that has been vilified by the press, competitors, and computer-savvy users alike, all of whom see its dominant position in the industry as a stranglehold that forestalls competition, stifles innovation, and leads to inferior products (Kepos, 1999). This monopoly attitude only serves to antagonize, and already the competition has begun issuing their own hardware with pre-installed versions of their own software. Because Microsoft is not a hardware company, it must rely on manufacturers to pre-install its hardware, and in fact, the company has been aggressively investing billions of dollars in telecommunications, cable, and other infrastructure companies to increase the likelihood that their software (Windows CE and Mobile Explorer browser, for example) will be used in devices served by those firms ("Computers: Software," 2000). But with the emergence of more and more companies building their own hardware and pre-installing their own software, Microsoft's long-term future could be shaky.
Company opportunities	In this technology-based, computer-driven era, opportunities for Microsoft - and, naturally, the software and hardware industry in general - are seemingly endless. Growth in these particular areas has been astonishing to say the very least, and predictions suggest further expansion and growth as not simply a trend, but rather the norm ("Special article: Microsoft," 1999). As 1999 came to a close, half of the American public had access to the Internet, up from 40 percent a year ago and 23 percent three years ago (Kohut, 2000). The demographics are changing as well. It is expected that by the end of 2000 women will comprise 50 percent of all web usage (Olenick, 2000). In addition, increasing numbers of people without college training and those with modest incomes are going online (Kohut, 2000). These changes are not limited to the United States, however. Japanese netizens may finally be able to afford the Internet as a result of a switch to flat-rate service that is currently being tested in parts of Tokyo and Osaka. Due to exorbitant phone rates, approximately two dollars an hour for local calls, the Japanese have been restricted in their web usage (Kunii, 1999). If these rates come down, a large new market could open up. Personal computer demand is strong today as well. A resurgent Asian economy and consumer demand for the Internet boosted growth in worldwide sales by 15 percent last quarter, and a 17 percent increase is forecasted for this quarter (Mathew, 2000). Personal computer ownership is predicted to increase 60 percent this year, due in large part to interest in the Internet. Nonetheless, the personal computer has been challenged in recent years by less complex, more affordable alternatives. To date, the personal computer has managed to meet these challenges by becoming simpler, sleeker, more stylish, faster and less trouble-prone (Olenick, 2000). New technological devices cannot be discounted despite predicted short-term growth in personal computers (Meyer & Stone, 1998). The goal of getting individuals onto the Internet does not require a personal computer. Several new devices which allow easy Internet access are being developed and introduced to the market. In May 2000, Gateway and America Online debuted their $500 portable device, which accesses the Internet without relying on an Intel processor or Windows. Microsoft's rival, Netscape, contributed the Internet browser, known as Gecko (Bickers, 2000). The mobile-phone manufacturers and the makers of personal digit assistants are also launching an attack on personal computer domination, transforming their simple products into powerful tools, which can accomplish difficult tasks and also access e-mail and the World Wide Web. Sony is licensing an operating system from a software company formed by an alliance of mobile-phone companies, a system that it will use for new mobile-phone products. In September 2000, Sony will release an entertainment-oriented, hand-held computer (Bickers, 2000). The incredible interest in Internet access has produced a shift toward game consoles, mobile phones and television sets (Bickers, 2000). Presently, Microsoft excels in none of these areas. However, Microsoft is working diligently to change this. In early 1999, Microsoft had secured more than 100 licensing agreements with manufacturers for "intelligent appliances" - hand-held devices, point-of-sale terminals and pocket terminals (Directory of Company Histories, 1999). In December 1999, Microsoft created a partnership with Swedish wireless phone giant Telefonak-tiabolaget, LM Ericsson, to develop software to enhance a wireless Internet (Standard and Poor's Industry Analysis, 1999). Microsoft also announced the purchase of design and diagramming software company, Visio Corporation, to add to its stable of business product offerings (Standard and Poor's, 1999). Moreover, Microsoft had allocated $2.81 billion in funds for R&D in 1999 (Directory of Company Histories, 1999). Clearly, great opportunities exist for industries with a desire to penetrate the ever-growing technology-seeking market. Opportunities to gain shares of this market are extremely competitive and only those companies that are willing to evolve with consumer tastes and trends, along with technology, will have any chance for survival. Naturally, this will work to a disadvantage for some companies, but it is a far greater asset in the respect that it will help to prevent domination by any one company and will allow a huge number of companies the opportunities to share their innovations and a piece of the market ("Special article: Microsoft," 1999).
Company threats	Microsoft's rise to the top has not come without enemies. The competitive nature of the software business and rapid technological change has kept the company on its toes, but is that enough? Strong competitors (AOL, IBM, Sun Microsystems, Oracle) are ganging up on Microsoft. Instead of using Microsoft's programs, they have been issuing their own pre-bundled programs on their own hardware. This threatens Microsoft's reliance on hardware manufacturers' agreements to pre-install their software. These competitors have also collaborated on new platform technologies replicating much of the value of Windows ("Information Superhighway," 2000). It has been predicted that there could be a major shift away from the historical business model that Microsoft has always followed ("Computers: Software," 2000). The move is server/web-based applications from proprietary software to open-source, and from PC to Internet-based devices. In addition to this prediction, an on-line competition is growing, from the likes of AOL and AT&T ("Information Superhighway," 2000). Competition from the PC world is not the only threat for Microsoft. There is major competition between companies for new "wireless" Internet devices. Already hand-held devices are running other programs besides Microsoft's. Intel Corporation (a long time partner) announced in early 2000 its plans to create and sell its own Web devices as well as to develop related software using a form of the operating system Linux rather than Windows CE, says Standard & Poor's, which also predicts: In a Java-dominated environment, software developers would likely concentrate on making smaller, specific program applets and then selling them to consumers, corporations, and other users accessing Web sites. If this comes to pass, demand for large application programs-those memory-hungry behemoths stuffed with features that most users rarely need-would eventually wither. Software developers would no longer design programs primarily for Microsoft's operating systems, because applets can be executed by all operating systems. This change, in turn, could make the software industry less dependent on Microsoft for the development of viable operating systems. ("Computers: Software," 2000) In the past few years the U.S. Department of Justice and 20 state Attorney Generals have brought antitrust lawsuits on Microsoft. It has been branded a monopoly, and the company has been ordered by the government to split into two parts. Company #1 would build operating systems, and Company #2 would do all the rest (Hoover's, 2000). Often threats are out a company's control. The earthquake in Taiwan created component shortage and negative effect on PC unit shipments (Kepos, 1999). Economic slowdowns in foreign economies could hurt software sales. Foreign currency risk exists as overseas sales are translated from local currencies into dollars (Acuff, 2000). Neither these threats have not stopped Microsoft, nor other fears such as piracy (the illegal copying of software programs). This problem continues to plague the software industry, which in 1998 alone lost approximately $11 billion of revenues worldwide to piracy ("Computers: Software," 2000).