Brief History of Microsoft Operations
Microsoft Corporation is involved in licensing, developing, and supporting a variety of software services and products. The company operates in five sectors: Server and Tools, Window & Windows Live Division, Online Services Division, Entertainment and Devices Division, and Microsoft Business Division (Microsoft Corp, 2013). Microsoft’s products include operating systems for computers, phones, servers, and other intelligent devices, server applications, productivity applications, desktop and server management tools, video games, software development tools, and online advertising (Microsoft Corp, 2013). Additionally, the company specializes in designing and selling hardware, involving the Xbox 360 gaming console (Microsoft Corp, 2013). In 2013, Ericson has completed the acquisition of the company’s business and television solutions.
In 2011, Microsoft acquired Skype Global S.a.r.l. and VideoSurf Inc. In 2012, the LeGuide.com SA took over shopping sites in European countries. Cloud profits have been earned from the use of advertising and fees. The company’s cloud computing services include Windows Live Essentials suite, Microsoft Dynamics, Xbox LIVE service, Microsoft Office 365, and CRM services (Microsoft Corp, 2013). Additionally, the company provides a range of other services, including product support services, computer system integrators, and design development (Microsoft Corp, 2013). Operating in over 100 countries, Microsoft Corporation manages to sustain its position in the global market place.
Microsoft Business Division is composed of the Microsoft Office system and Microsoft Dynamics. To begin with, the Microsoft Office system is necessary for personal, team, and organization productivity; it involves a number of services, programs, and software solutions that may be supplied on the basis of cloud computing (Microsoft Corp, 2013). The Microsoft Office system is aimed at increasing company’s productivity by a variety of services and solutions and creates more than 90% of revenues (Microsoft Corp, 2013). Finally, Microsoft Dynamics services and products offer business solutions for customer relationship management, financial management, supply chain management, and analysis applications for mid-size businesses, small and large organizations. The chart presented below illustrates Microsoft’s financial performance in the 2012-2013 financial year:
Risk of Uncertainly of Operations
The company recognizes that it has a number of problems regarding the restructuring efforts. In particular, Microsoft seeks to position itself as services and devices company, as it has been decided by the CEO Steve Ballmer. He had previously declared details concerning One Microsoft plan that focuses on creation of four main engineering groups (Mackie, 2013). Financial analysts have paid close attention to the company’s operations and reporting. The event involved speech by Ballmer and other managers. The CEO announced his plans with no details provided to successors. However, the plan presented on the Financial Analyst Meeting accentuates the quality of internal operations and defines further paths in the financial development of the company.
Although Microsoft Corporation is a successful software producer, it still takes certain financial risks to gain competitive advantage over other software providers. In particular, the company’s chief financial officer has managed to deliver a 7.3 % return on the thee-year investments. The return has been increased by almost three times and allowed the company to prosper by $1 billion in sales. Microsoft has managed to perform efficiently by investing more bonds and stocks with a decreased rating. Therefore, constant investment in development of new technologies and introduction of new assets and materials is essential for sustaining the successful performance of the company. Additionally, Microsoft has to stay afloat in the market place to compete with other leading rivals in the sphere. At the same time, Bass and News (2004), “the high returns helped make up for some of the slowdown in sales that resulted from a drop in demand for computer software.” The chief financial manager expects a 6% return on the investment for the current financial year. It has also been reported that the company generated a 2.8 % return in 2003. Connors also convinced Bill Gates and Steve Ballmer of the effectiveness of the plan to increase the company’s investments after his appointment to the position. However, in 2004, the financial manager recognized that about $6 billion were held in the emerging market debt. One third of the entire fund is controlled by outside firms, including Goldman, BlackRock, Inc., and Sachs & Co.
With regard to the above-presented reforms and financial strategies, it should be stressed that Microsoft is often involved in risks because they allow them to advance their performance and compete with other leaders in the sphere of software production. What is more important is that the company strives to develop a new plan for managing financial resources and encouraging new investments.
Government Regulations and Their Influence on the Company’s Operations Domestically and Abroad
When it comes to government regulations, the primary focus should be on the compliance standards of the produced software products and services at the company. The trends in developing cloud computing systems have also led to the development of new regulations. In particular, Zink (2010) acknowledges that cloud computing creates many serious challenges for regulations. The laws of various countries can differ significantly, and, as a result, it can affect the criteria in accordance with which Microsoft can design products and services. At the same time, such aspect as data privacy is common for all legal regulations irrespective of territorial affiliation. Specifically, it is essential to have efficient information protection law to limit access to confidential data of organizations and individuals. In this respect, Zink (2010) refers to the European regulations that fail to realize the objectives pursued by the private users. Inconsistent enforcement practices in the European Union have caused incompatible differences in securing data privacy across the EU countries. The discrepancies have led to the increased compliance costs although the protection mechanisms have never been improved. Moreover, the reporter assumes that “if a cloud computer provider complies with one EU country’s data protection laws, it could well find itself in violation of the law of another” (Zink, 2010). In response to the emerged challenges, the General Counsel of the company Brad Smith highlighted a number of cloud-computing regulations. In particular, Mr. Smith described new ideas concerning how government can proceed to prevent the cost increase. The issues involved broadband availability, data transfer security and data protection against cyber-attacks, and cross-border coordination.
In order to provide a solution to regulating IT compliance with the existing standards, the company has developed a long-term plan sponsored by Microsoft Security Solutions. A group of experts has outlined the requirements of the legal frameworks to best practices and solutions which were grouped by roles and functions that Microsoft products perform. The mapping also describes business solutions relating to security issues. To mention a few, application security solutions, identity management solutions, network security solutions, and security compliance training are among the main applications that ensure security and safety of data processing and storage. To begin with, application security solutions refer to a set of development practices and security solutions, whereas data encryption solutions deal with securing information during transmission (Noblett, 2008). All these regulations have been developed on the basis of existing governmental regulations, such as Sarbanes-Oxley Act of 2002, Health Insurance Portability and Accountability Act, Gramm-Leach-Billey Act, European Union Data Protection Directive, Bank Secrecy Act, the Federal Information Security Management Act, and Payment Card Industry Data Security Standards (Noblett, 2008). All these provisions are taken into the deepest consideration by the Microsoft designers who search for better security options.
Inputs used by the Company’s Production Function and Challenges of Securing the Inputs
With regard to the products offered by the company, it is possible to distinguish between several inputs, including mouse, console, and other functions. To be more exact, mouse inputs are based on such functions as tracking and detection of objects. The mouse captures and tracks the movement until the user leaves the button. Further, the mouse has the function of capturing the retrieval and handling to the window. There are also keyboard input functions, including activation of keyboard layout, block input, getting focus, and many others. For instance, the activation keyboard layout refers to setting the input identifier for the calling threat process. The input local identifier defines a locale and physical layout of the keyboard. The analysis of these functions is essential to define the possible challenges of introducing these functions.
According to the research conducted by Goyal, O’Neil, and Rao (n. d.), the study of hash function is also essential to understand the value of correlated inputs, implying that security should be ensured in case the adversary notices hash values of related entropy inputs. The property is met by a random oracle, whose importance is demonstrated by the research. Hence, the concept of security can be differently interpreted with regard to the values, purpose, and functions performed by the available inputs. Finally, the company offers low-level input functions that deliver input records handling information about keyboard, buffer-resizing, focus, and menu events. The functions also ensure direct access to the buffer in contrast to the high-level functions that process the input data and discards all keyboard input.
Product Prices Fluctuations, Demand Elasticity, and Price Decisions
It should be stressed that Microsoft’s new pricing strategy is confined to developing new competitive costs for the clients to receive an attractive offer. In particular, it has been recognized that Ballmer focuses on a much more aggressive approach by reducing the prices on a range of fronts, from flagship Office and Windows products to new Internet offers. The point consists in accepting lower levels in certain businesses as well as increasing overall earning introducing growth opportunities. These opportunities originate from expanding the share of large organizations producing software and decreasing the cost of the company’s software for the consumers. This enables the company to enter the newly emerged markets and prompts customers to pay for licensed software rather than use pirate version. With this in mind, the CEO pays attention to gaining share in the most critical areas. Due to the fact that Microsoft plans the majority of customer to pay for the software, less powerful programs but with more functions will always be available for free on the website. In addition, the company expects to charge a fee for applications, including e-mail software Exchange. Moreover, Microsoft’s new Windows PC operating system will be on sale in various stores. Vista program, which was launched in 2007, will also be offered at a considerably lower price. According to Burrows (2009), “by lowering prices, the company hopes to increase sales of existing products while making fast headway with the one ones.” Therefore, if Microsoft manages to obtain a sufficient market share to match its considerable costs and Internet search, its expanded data centers can turn out to be profitable. Additionally, the company has many promotions and, therefore, Office as the leading software should also be represented for gaining competitive advantage. Other programs including Excel and Word have also been involved in the competition with other rivals. Due to the fact that Google is considered to be Microsoft’s leading competitor, the latter should also think over the pricing policies in various countries, including China. In particular, the analysis of Microsoft strategies should be followed by developing new policies for competing with other leading corporations in the field of software production. Certainly, the policies of cutting prices are a risky business, but they should be considered in much detail because it cannot be based on a long-term plan. At the same time, the aggressive policy is the only best option for the company to strike the balance between its profitability and the demand elasticity.
According to the analysts’ estimates, Microsoft Corporation has exceeded the expectations and increased the third-quarter profit along with demand for personal computers. The net profit for the presented period has increased by 19%. According to the projection of analysts, the revenue must have increased by 18%. Therefore, the chief executive has managed to keep expenditures and retain the company’s image as the global largest producer of software products and services. The sales of teleconferencing and collaboration programs have also increased, as it has been evidenced by the IDC research (Bass, 2013). In addition, the company states that “operating expenses for its next fiscal year, which starts July 1, will be $31.6 billion – the company’s first forecast for the coming year” (Bass, 2013). Therefore, the company possibilities to affect its performance depend on a range of factors, including price policy, internal processes, technological innovation, and analysis of consumer demand.
Competitive Environment, Distribution of Market Power and Strategic Behavior of Competitors
As it has been mentioned before, Microsoft is considered the largest and leading producer of software products and services worldwide. However, to maintain its position, the corporation should work out a specific approach to constantly gain a competitive edge over other important producers, including Google, Apple, and others. The orientation to different markets, aggressive pricing policies, and price fluctuations, as well as developing a new customer framework are among the pillars of successful penetration of the global marketplace. Additionally, the competitive position of Microsoft is also ensured by the strong ideological framework that is premised on the social schemes, costs compensations and performance tracking. The task of the executive managers is to perform analysis of internal and external environment and introduce individual compensation elements for all stakeholders concerned.
Non-Price Competitive Strategies
Apart from the set of pricing strategies, Microsoft is also concerned with other important aspects of business. In particular, the company strives to develop a specific approach to managing a coherent Global Inclusion and Diversity strategy related to the its vision and business. Further, the global perspective and integration are strengthened through the diversity approach within the organization and outside it. Advanced leadership involvement of the chief executive officer and sponsors are also the main underpinnings of the company’s policy (Burrows, 2009). Finally, Microsoft has developed a rich portfolio of inclusion and diversity training courses and tools. The results show that interaction of various cultures, perspectives, and ideas define the organizational values and contribute to greater creativity.
Gaps in the Company’s Decisions and Recommendations on Improvement
Despite the steady and convincing economic and financial growth, the company should seek to establish new techniques in managing diversity issues as well as keep track of the new technologies. The rapid technological progress is premised on scientific research and development and therefore, the task of the managers is to predict the emergence of new technologies. Therefore, the major gap in the organization’s decisions consists in inadequate and risky policy of pricing and cost assessment. In order to address the problem, the emphasis should be placed on the rational distribution of resources that would allow Microsoft to sustain competitive advantage over other leading software providers.