1. Brand loyalty. Over the years, Microsoft has been the leading OS and software provider, which resulted in more than 90% market share for PC OS. Most of us grew up using its easy to use OS, are familiar with it and will keep using it. Few other brands are capable to compete with Microsoft for this reason. Even open source OS, which are completely free and well suited to use for common user, find it hard to attract users.
2. Brand reputation. According to Interbrand; (Interbrand.com, 2013) , Microsoft's brand is the 5th most valuable brand in the world, valued at $ 57.8 billion. Forbes listed the corporate as the 7th most reputable business in the world. Brand reputation leads to higher sales and greater market share.
3. Easy to use software. Windows OS and Office software products are so popular not just because Microsoft has great monopolistic power, strong distribution channels and good brand reputation but also because its products are of great quality and really easy to use.
4. Strong distribution channels. The company works with all the major computer hardware producers such as Lenovo, Dell, Toshiba and Samsung and major computer retailers to make sure computers would be sold with already pre-installed Windows software. The company also invested in Dell and Nokia to tighten its relationships with these companies.
5. Robust financial performance. Microsoft grew its revenues by 20% from 2008 to 2012 and holds more than $63 billion of cash and cash equivalents that can be used for acquisitions and substantial investments into R&D.
6. Acquisition of Skype. With nearly 300 million users, Skype is a significant boost to Microsoft's online presence and have a lot of potential in generating income from online advertising.
1. Poor acquisitions and investments . Few of Microsoft's acquisitions were successful and brought not just revenues and products but new skills and competencies to the company. Massive, LinkExchange, WebTV, Danger are just few examples of multimillion dollar acquisitions made by Microsoft but soon shut down or divested.
2. Dependence on hardware manufacturers. Microsoft is a giant software corporation but it does not produce its own hardware and depends on computer hardware manufacturers to develop products that run Windows OS. If cheap and popular alternative OS would appear, hardware manufacturers may simple choose the alternative and Microsoft could do little to change the situation.
3. Criticism over security flaws. Windows Operating System ,which is the main Microsoft product has been heavily criticized for being so weak against various viruses' attacks. Compared to other OS, Windows is the least protected against such attacks.
4. Mature PC markets . Only recently has Microsoft entered the mobile technology sector and still heavily depends on its OS and software sales for standalone and laptop computers. The market for these products has matured and Microsoft will find it harder to grow revenues in these sectors.
5. Slow to innovate . Microsoft has huge R&D resources and great position to enter new markets with innovative products but constantly failed to do so , unknown why ?. It had an opportunity to be the first player in online advertising but missed the opportunity. It's entrance to mobile OS was also too late, while Google and Apple captured the market share.
1. Cloud based services . Microsoft could expand its range of cloud services and software as the demand for cloud-based services is expanding.
2. Mobile advertising . Mobile advertising markets are expected to grow in double digits over the next few years and Microsoft has a great opportunity to tap into these markets with its mobile OS.
3. Mobile device industry . Smartphones and tablets markets will grow steadily over the next few years and Microsoft could exploit this opportunity by introducing more of its own tablets and a new company phone. Which ultimately lead to their acquisition of Nokia . (BBC News, 2013)
4. Growth through acquisitions . With a huge reserve of cash Microsoft could start acquiring new startups that would bring new technology, skills and competences to the business.
1. Intense competition in software products . Microsoft is more than ever on the pressure to introduce successful OS both in PC and mobile markets as such competitors like Google and Apple have already established positions.
2. Changing consumer needs and habits . Customers shift from buying laptops and standalone PCs to buying smartphones and tablets, the markets, where Microsoft has only a modest market share and may never establish itself.
3. Open source projects . Many new open source projects are coming to the market and some of them became quite successful, such as new Linux Operating System and Open Source Office. Open source projects are free and so they can become an alternative to expensive Microsoft's products .
4. Potential lawsuits. Microsoft has already been sued for many times and lost quite a few large scale lawsuits. Lawsuits are expensive as they require time and money. And as Microsoft continues to operate more or less the same way, there is high probability for more expensive lawsuits to come.