Managerial Decision Making Research and Analysis (Essay Sample)

Managerial Decision Making Research and Analysis Student's Name: Course Title: Instructor's Name: Institution: Date: Describe the company and provide a brief history of its operations. Find or use graphs to illustrate its financial performance over the years. Microsoft Corporation, an American high-tech company, based in Redmond, Washington. It was founded on 4th April 1975 by Bill Gates and Paul Allen. It primarily deals with developing, manufacturing, licensing, marketing and selling computer software and hardware, consumer electronics, and personal computers among other products. Its software products include Windows Operating Systems, web browsers, Microsoft Office Suite, and Internet Explorer. Some of its hardware include Microsoft smartphones, tablet lineup, and Xbox games consoles. In 2015, Microsoft was ranked the world's largest software manufacturer by revenue. It operates in a monopolistic competition market where it faces stiff competition from its rivals such as Apple and Google. Bill Gates and Paul had an important goal of developing, marketing and selling necessary interpreters for Altair 8800. However, the company started the Computer OS market with MS_DOS in mid-80's which was then followed by Microsoft Windows. Currently, Microsoft Windows dominates the OS market. For this reason, Microsoft has been enjoying economies of scales due to enlarged market size. The company performance has been increasing since it was founded. Recently, the company entered into a partnership with Apple. Inc. one of its biggest competitor in the computer software industry. In the year 2015, Microsoft Corporation was the dominant firm in the computer software industry. That is; it dominated both the IBM PC-compatible operating system and Office suite software. CITATION Cha14 \l 1033 (Arthur, 2014). However, its market share on Microsoft smartphones declined due to high competition from Android operating system. The following graph shows the performance trend of Microsoft Corporation. The chart above shows the ever non-uniformly increasing retained earnings for Microsoft Corporation. It can be depicted that the overall performance of Microsoft Corporation can attract millions of investors. CITATION Mic16 \l 1033 (Microsoft Corp, 2016) Describe any sources of risk or uncertainty in its operations. Do the financial reports indicate risky or uncertain activities or changes to the economic environment that ultimately appear to have affected the company's financial outcomes? Be specific. Like any other company, Microsoft Corporation is exposed to risk and uncertainties that have adverse effects on its operations. Risks and uncertainties usually affect the cash flows, operations, and the trading price of Microsoft common stock. There are several sources of risk and uncertainties that face this company. Some of them include; the cloud-based computing model, platform based-ecosystems, developing and licensing software, competition, securities vulnerability and inability to protect intellectual property right. Cloud-based computing model is a source of risks and uncertainties in Microsoft Corporation. It results in execution and competitive risks. One of the primary strategies of Microsoft Corporation is to adapt a computing environment characterized by the cloud-based computing model. That is; to transform the current business operations to a computing environment with cloud-based services enhanced by smart client devices. However, the major competitors of Microsoft Corporation (Google and Apple) have started initiatives of developing and implementing cloud-based services for both the consumers and business clients/customers. The process of developing the cloud-based computing model involves costs of building and maintaining infrastructure. However, it is uncertain whether the clouding-based computing model will attract the customers and generate more revenue. There is also the risk of loss/reduced income due to the cost incurred in building and maintaining the cloud-based computing services infrastructure. Another source of risk and uncertainties is the challenges that face business models. For instance, implementation and maintenance of cloud-based computing model will reduce the revenue as well as the operating margins. A challenge emerges when developing and licensing the software. Licensed-based software model attracts massive cost to developers as they will have to convert original ideas into software products. This is done through massive investment in research and development. Thus, Microsoft gets exposed to risks and uncertainties when the cost of developing and implementing software increase. CITATION Mic10 \l 1033 (Aiyub, Subramaniam, & Mohre, 2010) Microsoft Corporation has been successful in developing and implementing platform-based ecosystems which facilitate the building of diverse solutions by the participants. It aims to possess a competing vertically-integrated model that enables it to control the software and hardware elements of the product. However, this strategy maintains a risk of loss or reduced revenue due to the high cost of sales. More so, it is uncertain whether the consumers will accept its products due to high competition in the industry. Recently, Microsoft entered into a partnership with Nokia whereby it started manufacturing smartphones with Windows platform. However, the cost involved in partnership manufacturing reduced the operating margin or revenue. Other sources of risk and uncertainty in Microsoft include competition, unable to adequately protect its intellectual property rights, and security vulnerabilities. Despite the above sources of risk and uncertainty, the company has been performing well in a competitive industry. It has adopted a computing environment characterized by cloud-based services. The eco-systems and licensed-based software have increased its competition power and the size of the market. Although it incurs considerable cost in implementing its strategies, the financial reports show that the risks and uncertainties have little or no adverse effects on the company's performance. Are there any government regulations that have affected this company's operations domestically or abroad? Explain. Microsoft Corporation, as quoted earlier operates in a monopolistic competition market. However, in Windows operating system, and Microsoft tools, it acts a monopoly. That is; it is the only manufacturer of Windows product. However, the company was accused of using anticompetitive techniques to maintain its monopoly power. Basing on the Sherman Antitrust Act (the US cornerstone of antitrust policy), Judge Jackson found Microsoft Corporation guilty of using anticompetitive means to maintain its monopoly power. Jackson claimed that Microsoft tried to monopolize the Web browser market which violated Section 2 of US Sherman Antitrust Act. It violated it through tying Web browser to its operating system. CITATION Wen98 \l 1033 (Rohm, 1998) In May 2004, Microsoft was accused by a class-action lawsuit for overcharging customers in the state of California. However, Microsoft Corporation settled the case for $1.1 billion. The California Court also gave an order to Microsoft Corporation to pay additional legal fees of $258 million. In the long-run, the consumers and schools benefited less from the settlement than the company that accused Microsoft Corporation. As a result of this case, Microsoft revenue reduced and it lost some of its customers to its competitors. Microsoft has also been accused of sending consumers' information to the United States intelligence agencies. One of the reports stated that several programs are controlled by Microsoft, which creates a platform of sending customers information to the government. Although its spokesman argued that the company provides customer data as required by the government, it lost some customers to its rivals. It has recommended that privacy regulation should be enacted to protect consumer data. Describe the inputs that are used in this company's production function and identify any challenges to securing these inputs. Microsoft Corporation uses to primary inputs in its production function. These are labor and capital. Labor is one of the factors of production. Its reward is wages/salaries. Labor has facilitated the success and growth of Microsoft Corporation. The two founders of Microsoft (Bill Gates and Paul Allen) valued labor as one the fundamental factor in production. Like Apple and HP, Microsoft outsources labor force by hiring factories in China. As a matter of fact, it does not make its products in the United States. For quite some time it has been blamed by National Labor Committee over using cheap child labor. The reason behind it outsourcing labor from China factories is to minimize the production cost. That is; the cost of labor in China is lower than that in America. More, Chinese have adequate skills in efficient production and labor force is always available. Currently, Microsoft has 118,584 employees worldwide. The number has been increasing since the company was founded. The employees have impacted positively on the growth of Microsoft Corporation. CITATION Rob13 \l 1033 (Cantrell, 2013) Another input used by Microsoft Corporation in company's production function is the capital. Developing and implementing new software and services need enormous capital. As quoted earlier, the model used by the company to increase its competition power subjects the company into great cost which reduces its revenue. The company has invested a lot of funds in research and development of the products that maximizes its operating margin. More so, the company incurs substantial costs in maintaining the infrastructures that pay many contributions to its progress. For example, the cloud-based model infrastructure...