Business Appraisal in the Professional Services Sector - Dissertation Example

The study made use of secondary data garnered mainly from official reports and pronouncements issued by the company for its shareholders, consumer groups, and the government.  Other secondary data were acquired from investment analyses and professional publications, while the financial data were taken from official online databases.  Quantitative analyses were conducted to establish relationships between research and development metrics and the firm’s profitability indicators, to determine which measures in the firm’s financial reports relating to software development impacted how profitably the firm performance. The qualitative analysis provided an appreciation of the software development process and the value-enhancing strategies that improved Microsoft’s comparative advantage over its rival firms.
The study found that the research and development efforts of Microsoft, which principally consists of software development, impacted the firm’s profitability within two years after the software development effort had taken place. Competitively, Microsoft had benefitted from a strategy of operational competence until the present, but Apple is gradually overtaking it with a more effective method of customer intimacy as its value discipline.
This chapter introduces the topic of study and provides the context in which the research problem is conceived and approached. The issue upon which the study is premised is consolidated into a concise statement of the problem, which is subsequently reduced to specific objectives, an articulation of the main research question, its reduction into research sub-questions, and identification of the appropriate hypotheses. The conceptual framework is selected to create a means of anchoring the research topic. The significance of the study is thereafter explained.
The valuation of a service-oriented business is markedly different from that of a manufacturing concern which produces and markets tangible goods. That is because physical items are easier to assess, inventory, and compare quality-wise with the products of the other companies in the industry. It is easier to determine which goods customers prefer over others because the attributes of physical goods are commonly perceived. In the case of services, however, the intangibility of the nature of the product created poses problems in subjective perceptions (i.e., based on feelings and tastes), standardization or even mere description of attributes because the product is perishable, and the impossibility of inventorying services (Lovelock, et al., 2011).
Microsoft is an organization that deals directly with members of the public customers. It creates intangible goods – software for PCs, digital communication devices, and gaming consoles – which may be variably perceived and, therefore, variably valued by different customers depending on their specific software needs. From a business analysis perspective, it is also difficult to value a firm based on its capability and not its physical assets (i.e., cash and equipment). In the case of Microsoft, the potential for earning profit is the basis of determining its business value, and this firm’s profit-making prospects are determined by its software development activity. Service development and innovation are central to the development of software.