Microsoft Analyzed & Evaluated
The economic state of a country and the performance of the different companies are interdependent. In the study of the potentials of a company it is important to consider the state of the country. The factors brought about by the economic dynamics of a country are one of the main considerations in the study and analysis of the performance of a company.
In the process towards success, the interaction of the different factors can be considered as a complex method. The market usually dictates the success and survival of the company. The market share of the different companies can determine their performance in the national and international arena. The companies that achieve success in this aspect can be deemed as leading and assertive groups in the world of commerce and trade. The state of being the overriding force in the market can have both the positive and the negative effects. These factors are included in the dynamic aspects that are taken into consideration in the study of the management of a company (Rosenbaum, 1998).
To achieve an understanding of the elements that can either promote the growth of a company or hinder it necessitates a study that focuses on the factors that result to such areas in the commercial world. The main goal of the study that was conducted is to be able to present the elements that affect the success of any venture. The objectives were attained on the view of the economic development and status of the country such as the United States. To be able to demonstrate the processes that a company experiences in the journey towards success, one company was put into focus.
The research that was conducted analyses one of the leading companies in terms of computer technology. The Microsoft is one example that can effectively demonstrate the different consequences and outcome of any decisions and technology applied in the company the growth and development.
U.S.A. Economic Environment
In the attempt to be able to analyze the course that a company takes, the economic environment of a nation is one main focus. The economic state of the nation dictates the possible potential of a company compared to another company with the same capabilities that was set up in another nation with a different type of economic make up.
In a country such as the United States, there are different factors that can affect the trade and commercial world. These factors include the economic elements such as Gross Domestic Product (GDP), Inflation Rate, Unemployment, Industrial Production, Personal Income, Index of Leading Indicators, Interest Rates, Import and Export factors, Government Spending, Determinants of Aggregate Demand and Supply and the Consumer Confidence Index. These are some of the factors that are taken into consideration in the determination of the economic environment of a nation (World Bank Group, 2006).
In the US, the Department of Commerce is the main body that is involved in the study and monitoring of the performance of the nation in terms of the trade and industries. These components are superimposed by the field of economics. In the determination of the performance of the nation in relation to the different elements, data are gathered from 13 different groups that comprise the department (US Department of Commerce, 2006).
Through the goals that are set by the different organizations led by the Department of Commerce, the economic status of the country is determined. Through the goals that was set by the DOC, it can be determined that the economic state of the country is the main factor that can affect the growth of a company aside from the management strategies. One of these goals is to be able to acquire the needed technology both is knowledge and machinery to be able to achieve the financial growth of the country’s commercial enterprise and companies along with the welfare of the people specifically the laborers and the consumers (US Department of Commerce, 2006).
Being one of the most influential countries on the basis of economic power and technological advancement, the United States can be considered as the one of countries can provide growth for a developing company. Compared to other countries that can be drastically affected by the currency inflation and deflation rates, a country such as the United States is an economically stable arena to participate in. In the study conducted by the World Bank Group regarding the economic figures that describes the present status of the nation, certain factors were involved (Table 1) (2006).
Based on the information presented by the World Back Group, there are different factors that are often interdependent to each other that affect the market and the consumer process. These factors can be considered as continuously changing, thus, can be considered as a dynamic and complex process of interaction. The market share and success is directly proportional to the stability that can be incurred when a company is established (US Department of Commerce, 2006).
Table 1. The economic profile of the United States of America.
Economic Factor 2000 2003 2004
GNI, Atlas method (current US$) 9.7 trillion 11.0 trillion 12.2 trillion
GNI per capita, Atlas method (current US$) 34,400.0 37,780.0 41,440.0
GDP (current US$) 9.8 trillion 11.0 trillion 11.7 trillion
GDP growth (annual %) 3.7 3.1 4.2
Inflation, GDP deflator (annual %) 2.2 1.8 2.6
Agriculture, value added (% of GDP) 1.2 1.2 ..
Industry, value added (% of GDP) 24.2 22.3 ..
Services, etc., value added (% of GDP) 74.6 76.5 ..
Exports of goods and services (% of GDP) 11.2 9.6 ..
Imports of goods and services (% of GDP) 15.1 14.1 ..
Gross capital formation (% of GDP) 20.5 18.0 ..
Revenue, excluding grants (% of GDP) .. 17.3 17.2
Cash surplus/deficit (% of GDP) .. -3.9 -3.8
Market Capitalization of listed companies (% GDP) 154.7 130.3 139.4
Merchandise trade (% of GDP) 20.9 18.5 20.0
Net barter terms of trade (2000=100) 100.0 103.0 101.2
Foreign Direct Investment, net inflows
(BoP, current US$) 321.3 billion 67.1 billion 106.8 billion
Workers’ remittances and compensation
of employees, received (current US$) 2.8 billion 3.0 billion 3.0 billion
High-technology exports (% of manufactured
exports) 35.3 32.6 32.3
Source: (World Bank Group, 2006).
One of the most important indicators of the economic status of the nation is the Gross Domestic Product (GDP). It is the total of the gross value of the products produced in the country. Taxes that are charge in the production of these products are added to get the total value. On the other hand the funding incurred in the production is deducted. The value gauged is regardless of the depreciation and downgrading of the assets. It is measured and expressed in US$, thus, for other countries conversion is required. On the other hand, the GDP growth is another factor that is greatly related to the GNP due to the fact that it measures the behavior of the market and the prices, thus, can determine the rise and fall of the economic performance of the country in relation to GDP (World Bank Group, 2006).
Based on the study conducted, the 2004 GDP of the United States of America is 11.7 trillion which can be considered as one of the highest in the world. In the period of 4 years from 2000, the GDP of the country has increased from 9.8 to 11.7 trillion. The growth of the GDP on the basis of the measurement of percentage per year moves from 3.7 to 4.2 percent (World Bank Group, 2006). On the basis of the calculated GDP of the country, it can be determined that it is continuously developing and growing. Such state of the economy can offer stability in the business and corporate arena.
The Inflation Rate can be considered as another economic factor that can greatly influence the success of any company and venture in the country. It is defined as the indicator of the changes occurring in the economy of a country of state. Thus, this factor is inclusive of the elements that can affect the financial status of the country. The measurement of inflation is presented by the World Bank Group on the basis of the ratio between the current local currency and the constant local currency. This is done to be able to decrease the instability of the factor, by measuring it against a constant value. Being a dynamic factor, the Inflation rate on the basis of GDP deflator can increase and decrease, as a result of the different affecting factors. The actual value in 2000 is 2.2 which decrease to 1.8 in 2003. On the other hand, in 2004 it bounced back to 2.6 (World Bank Group, 2006).
Another measure of the economic environment of a country is the import and export of good and services. The percentage of the GNP that measures the total worth of the products allocated for the international market is the export percentage. On the other hand, imports are those good that are received from the other countries and purchased by the local population. The value of the import and export percentage includes every expenses incurred in the production except the labor and the factor services. Both the exportation and importation decreased from 2000 to 2003 (World Bank Group, 2006). This indicate a decrease in the participation of the country in the global market which can be related to different factors such as decrease in demand of imported goods and increase in the demand for local goods.
In relation to exportation factor, one focus of the study is the high-technology exports due to the fact that the company under study is in the software industry, an industry that shaped the technological prowess of the country. This economic element includes the industries that are involved in research and development to be able to continue to give the needs of the consumers. Industries such as the aerospace, computer technology, medical and pharmaceutical fields, and other mechanical and electrical equipments fall under this category. In 2000, the high-technology exports 35.3% of total manufactured goods decreased to 32.3% in 2004 (World Bank Group, 2006).
On the basis of the economic factors and the state of the economy of the United States, it can be deemed relatively conducive site for companies and businesses as compared to other countries. It also promotes the rise of new technologies and the synergy of different types of industries. This is due to the fact that some of the top companies in the world originated, established and grew from the country. Microsoft is one of the companies that stemmed from the US and developed to become a world power.
Industry Economic and Competitive Environment
One of the most influential industries in the market and the economy is the computer industry. This is due the applications that can be incurred in the utilization of the technology. Aside from being an industry in itself that answers the needs of its clientele, the industry also built a powerful niche that had created a need for its application in every other industry present in the commercial arena.
The process that resulted in the application of the technology in other fields is also known as the “Computer Revolution”. In the study conducted by Sichel, a connection of the computer industry and the economic growth was made. The ‘neoclassical framework’ is a knowledge base that describes the income incurred from the use of computes. This is due to the fact that the use of the technology increases the production outcome while also increasing the efficiency. This is on the basis of the assumption that a particular company operates on an ideal management procedure and strategies. Economic growth on was viewed on the basis of the total projected income that can be profited from the use of every computer system utilized for commercial and business purposes (Sichel, 1997). Thus, it can be surmised that due to the fact that the computer industry has an extensive market and clientele, it can be considered as one of the most stable industries in the market.
Included in the computer industry is the production of software. These are program applications that can be utilized for the production in different industries. Microsoft is one of the pioneers in the software industry. On the basis of the requirements for success of a company based on the economic environment, the strength of the chosen industry measured by market share, Microsoft started on a strong ground as the base for continuous growth and expansion.
Company Specific Economic Factors – Demand Structure
Microsoft is the pioneer of the software production in the United States and the world according to Nasdaq (cited in Microsoft, 2006). The company started in 1975 with the aim to answer the problems of the consumers related to the software needs. The needs include finding solutions to the problems (Microsoft, 2006; Rosenbaum, 1998).
The company operates on the basis of the divisions. One department is involved in the production of products and services. Some of the companies that are connected are the Window Client Group, Server and Tools Group and also MSN. Another department is mainly focused on the business department including the Information Worker Group and Microsoft Business Solutions Group. The 3rd department is the Entertainment and Devices that includes companies such as the Home and Entertainment Group. Included is the X-box which is another project by Microsoft (Microsoft, 2006; Rosenbaum, 1998).
A. The History of Microsoft
The beginning of the Microsoft was on the 1974 when Bill Gates and Paul Allen realized the need for a technology that can make a mark in the computer revolution. They realized that there is a pressing need for a microprocessor that can be utilized in a multitude of processes in any types of industry. They deemed that software development will gain increasing power through the development of the computer and the information technology (Microsoft, 2006).
B. Innovations of the Company
The development of the Microsoft started from the minikit computer and led to the growth of the company. It even boosts the revolution of the computer era. From the first release of the MSOffice in 1983 that give rise to the Windows first version in 1989. The different innovations of the company also include the different versions of Windows (such as Windows95, Windows98, WindowsMi, Windows XP, etc.). Even the most widely used tool in surfing and using the internet is a product of the Microsoft which is incorporated in the Operating System software (Microsoft, 2006).
One of the most essential attributes in the success of the company is its capability to integrate with other industries. One of the examples that can be deemed that contributed to the success of the company is its exploration to different fields of application. Entertainment is one of the fields that were explored by Microsoft. This includes the computer animation and gaming such as one of the projects which is the X-box (Microsoft, 2006).
C. Microsoft and its Strategies
On the basis of the effective strategies that are being applied by the company, which includes vision, dedication and even workable and feasible market processes led the way to the attainment of international success. Based on the analysis of the continued success of Microsoft for three decades, researchers have deemed that a synergy of management methods, “announcement, licensing and pricing of products” hold the key to the company’s success (Rosenbaum, 1998).
The success of Microsoft is measured through the different economic elements which can be considered as the external factors of a company. On the other hand, the decisions made by the management and the company itself constitute the internal factors that contribute to the status of the nation. On the basis of these factors, Microsoft can be considered as a successful company. The continuous increase in the revenue of the company is summarized in Table 2.
Table 2. Headcount and Revenue of Microsoft.
Source: (Microsoft, 2006)
In the analysis of the factors that affect the success of a company such as Microsoft, one of the most important analyses is with regards to the setting of innovations. Almost every company that presented an unprecedented type of goods and services, being on a class of its own and made a mark in the consumer world, have instant success (Rosenbaum, 1998).
In the case of Microsoft, the instant success that was achieved on the basis of the presentation of subsequent innovations related to software generation was maintained due to the combination of effective management techniques, sales, advertising and research and development. The company can be referred to as one of the companies in the world that managed to maintain its domination over an industry of its own.
Cherry, M. (2006). Windows Networking Reworked for Enterprises. Direction Microsoft. Retrieved August 30, 2006, from http://www.directionsonmicrosoft.com/
Microsoft (2006). Facts about Microsoft. Microsoft Website. Retrieved August 30, 2006, from http://www.microsoft.com/presspass/inside_ms.mspx
Rosenbaum, D. I. (1998). Market Dominance: How Firms Gain, Hold, or Lose It and the Impact on Economic Performance. Westport, CT: Praeger Publishers.
Sichel, D. (1997). The Computer Revolution: An Economic Perspective. Washington, DC: Brookings Institution.
US Department of Commerce (2006). Commerce’s FY 2005 Performance and Accountability Report. Office of Budget Department of Commerce. Retrieved August 30, 2006, from http://www.osec.doc.gov/bmi/Budget/05APPR/pfhighlights.pdf
World Bank Group (2006). United States Data Profile. World Bank Group Website. Retrieved August 30, 2006, from http://devdata.worldbank.org/external/CPProfile.asp?