Microsoft Corporation is a juggernaut among American companies in general, and the dominant company in microcomputer software. The company built its market share on the strength of its operating system (the software which provides the interface between the user and the computer), but has since entered the application market (spreadsheets and word processing programs, for example) and is considering entry into the multimedia market. This research examines the strengths, weaknesses, opportunities and threats now facing the company as it--and the industry--move into a new era.
Microsoft's overwhelming strength is its financial position in the market. During fiscal 1994 (ending in June of that year), the company's revenues increased 24 percent to more than $4.6 billion; Microsoft posted a net profit of more than $1.1 billion (an increase of 20 percent over the previous year) during the same period. Revenues and profits for the company have increased at an average rate of more than 40 percent annually ("Ahead," p. 8). As a result, the company is a favorite among investors, and it has little problem generating the necessary funds for internal research and development, or to provide the necessary marketing support required to promote its diverse products.
The company's ability to generate such impressive numbers comes from the nature of the industry in which it operates. Microsoft's primary products, which produce most of its revenue and profits, cost little to manufacture in comparison to their selling prices. As a result, the company was able to post a gross profit margin of more than 80 percent during fiscal 1994 ("Ahead," p. 8). But it is more than the ability of the company to generate strong revenue that accounts for its financial strength.
Microsoft has a high level of internal operating efficiency that is unusual even in the high-technology industry in which it operates. With net profit margins of 25 percent in fiscal...