Economic Uncertainty of Microsoft - Research Paper Example

Effects of Economic Uncertainty to Business Environment: The Case Study of Microsoft. Institution: Name: Date: Table of Contents Abstract 3 Introduction 4 Research objectives 4 Literature review 5 Theoretical Framework 7 Johns’ Economic Perspective 8 Microsoft’s Profile 8 Microsoft’s Overview 8 Microsoft’s Culture 9 Microsoft Business Practices 9 Results and Outcomes 10 Discussion or managerial implications 10 Conclusion 11 References 12 Abstract The economic uncertainty which has been driven by new trade rules impacting on the business environment. However, the advancement in technology have reduced entrance barriers to trade therefore enhanced global completion for all the organisations, big or small, local or international organisations. In this research, we study the broader economic changes which have left organizations reacting to the changes and in this case Microsoft. As such, the aim of this research is to determine the various economic uncertainties that affect organizations globally and specifically Microsoft. Introduction Economic uncertainty is whereby the decision makers or rather those handling management issues concerning economics are not in a position to tell what the economic outcome will be like, thus the probability of economic decision makers estimating the economic results is not certain or rather the cannot guarantee the results. Among the uncertainties that rise after major economic are political shocks or crisis includes that of September 11 attack, Gulf war and the Cuban missile crisis. According to Bernanke(1983) as he points out “when investment projects are expensive to cancel or workers are costly to hire and fire, high uncertainty gives firms an incentive to delay Investment and employment decisions”. Other policies indicating instances or causes of economic uncertainty include the work of (Bloom & Van, 2007), whereby they look into tax on investment as an act that can bring about uncertainty which according to him can cause the firms forgoing investments to point of resolution Research objectives Research the effects of economic uncertainty in the performance of business. Evaluate the causes of economic uncertainty in business. Explore some economic uncertainties and how they are perceived by businesses. Present findings and recommendations for various economic uncertainties. Literature review Over the recent years the world has been receiving or than experiencing the economic an expected and estimated outcome that has brought mixed reactions from different groups, organizations, citizens among others, despite economic management measures and effort. Among the reactions and economic uncertainty Microsoft has experienced an increase in the cost of life which was not received well since there events of protest in various parts of the world (Dixit & Pindyck, 1994). Economic uncertainty was or is still brought about by globalization that is the regular changes in environment, need of effective and talented management and also different corporate cultures bring about this economic uncertainty under globalization. Another cause of economic uncertainty is that of pushing up or rather increasing the cost of finance which in turn increases the aversion in management. This brings about intensified problems to agencies’ thus reducing value of existing business, employment and relations in terms of finances. Microsoft has different thoughts and opinions in the issue of economic uncertainty, and effects that rise as of the same, some of their thoughts were based on experience from the effects of economic uncertainty whereby the are not full able to estimate what to expect economically thus tend be more keen and less indulgent in investments and also with other investors (Choi & Oh, 2003). Since no organization wants to experience loses after having spent much in a given investment this one of the analysis from the data collected in Microsoft. Another analysis from data we obtain from Microsoft concerning economic uncertainty and the effects on them was political uncertainty which in major instances is followed or accompanied by violence, this in turn affects Microsoft business part due to reduced business activities since most cases they are unable to reached to their clients and investors and vice verse, thus leading to reduced activities in their Microsoft which in turn affects their business performance since the rely on clients and investors for financial growth and development. Also, as a result of economic uncertainty, this has affected Microsoft in a number of ways which include hiring skilled and effective management staff which to the organization is an added expense due to the pay they award to this kind of staffs, of which in this case it expressed how important and helpful such employees are of importance in the organization (Choi & Oh, 2003). On the part of tax, Microsoft shows that taxation plays a role on the business performance part of the organization since its normally cuts across what they have made of which in increasing taxation, the organization suffers financially since taxation is just among the many expenses they are require to settle not forgetting that of employees salary, bill among other many more things to be settled of which all that requires are financial solutions, thus organizations find themselves spending much while the profit is minimal, of which the complain for since most their development and growth for the organization are slow due to financial constrains they experience brought about by the factor of taxation which is an economic uncertainty affecting factor (Dixit & Pindyck, 1994). Also on the same note, Microsoft is affected by economic uncertainty as a result of difference in the business environment whereby their investors and client have different corporate cultures and environment thus a times creating poor relationship between the organization, clients and investors which lowers investment progress and hence the organization’s financial progress. Microsoft has come up with strategic plans to curb this gap so that they can be able to invest by having a good relationship with the different investors regardless of the environment and corporate cultural difference between them (Gujarati, 1999). Theoretical Framework As viewed or rather pointed out in the literature review some of effects of economic uncertainty include that of negative returns brought about by increased or more so excess stock market returns. Also as pointed out I the issue of political and activities concerning investment cause the management in the field of economics not to be totally sure or rather have an estimate of a uncertain outcome in terms of the economy (Rodrik, 1991). Also another effect is that of poor relationship between the price of assets and that of increased economic uncertainty, which makes the stock prices come to a decrease due to investors becoming not sure of what to expect as the outcome in the market. The same effect of stock returns is looked into who tells of stocks that fall due to rise in the uncertainty of economy which he points out that even happens in a weeks’ time that is falling of the stock returns in the market (Gujarati, 1999). The theoretical framework surrounding the effects of economic uncertainty such as taxation, globalization, political crisis, difference in cultures among cooperates on business thus financial activities of Microsoft are interfered with. Below is a model that tells more about some of the issues mentioned above how the relatively relate thus leading to the effects the model describes the following as pointed out by John Buck in his model of the economic perspectives. Johns’ Economic Perspective According to Johns’ diagram below which is a graph indicates relationship between the outlays and revenues where by the citizens are expected to pay more tax while the benefits they obtain from the government are few. Johns’ diagram depicts to main elements that is the outlays and Revenues of which the outlays is much by a percentage of 9.3% to that of revenues. The effects that arise based on Johns’ diagrams is that of reduced benefits which in turn bring about financial constrains to both organizations an citizens that’s what the research indicates Johns’ Economic Perspective (2012) Microsoft’s Profile Microsoft’s Overview Microsoft was founded by Bill Gates and Paul Allen in 1975 and it has grown to be a leader in software computing. Microsoft office suite and windows operating system are the major popular products of Microsoft. Among other products, it also produces hardware products namely;Xbox video games, Microsoft mouse,MSNBC as well as msn.com entertainment holdings.It has an employee base of more than 70,000 worldwide and annual sales exceeding $44 billion. Microsoft’s Culture Microsoft has been identified to have an aggressive culture. Even though it has faced a number of antitrust lawsuits and disputes over the years with its competitors and this uncertainity of whom they would get into trouble with have led to Microsoft get in to new legal troubles even when the old ones are not yet resolved. Microsoft Business Practices Microsoft’s market strategy is characterized to embrace, extinguish and extend to dominate the market. The uncertainty of the economic status in the environment it is operating in has led for the company to be sued severally for the infringement of copyright. It is however a place admired y most to work with as it has won various innovation awards as well as flexible work arrangements which are critical in a diverse economy. Microsoft has been praised for commitment to diversity and their competitive compensation with a causal dress code. When the environment is demand deficient, organizations are not only constrained by costs but also by a lack of perceived demand. When the economy is operating under uncertainty, it results to reduction in efficiency and productivity. However, challenges help breed innovation in businesses when the highly skilled are tasked to give ways for sustainability and growth in tough economic times. The economic uncertainties are key drivers to innovations and entrepreneurship evidenced by Microsoft which was born during an economic downturn. Results and Outcomes Based on the research, it indicates that due to economic uncertainty brought about by the cause discussed above which ranges from political uncertainty, taxation , poor relationship between the stock sales, an expected changes of economy and also that with investors among many others have led to high cost of living which brought about chaos and lose of life in the process of protest and violence in some countries hit by the outcome of high cost of living due to economic uncertainty, Another outcome is that of drop of the stock returns this is also as a result of the effect of economic uncertainty which has made in investor uncertain on how to carry out their investments or rather fear of what is to come of the investments the opt to carryout thus the shy off which in turn lowers the prices of stock in the market. Discussion or managerial implications As from the research, Microsoft’s the implications to the effects incurred due to economic uncertainty are; effective and talented management in order to curb the threat of globalization in the platform of business. On the same matter, adopting a flexible regulatory environment has helped Microsoft on the issue of economic uncertainty. Also on the same note to be able to achieve in business, realization of economic scope, skills and scale has been helpful in curbing economic uncertainty by also aligning capable operating strategies in Microsoft. The issue of political uncertainty that brings about uncertainties of the economy can be looked into by electing capable and elite leaders who will be of interest to the economic growth and smooth peaceful politics in order to avoid chaos as a result of high cost of living. On the issue of tax it should be listed and indicated its expiration in order for those taxed to be well informed and aware of what is expected of the on tax issues. Also on the matter of drop in stocks returns this can be controlled by ensuring a smooth relationship in the market for the investors and the sales of stock in the market. Conclusion The research has covered a number of causes, measures and the effects of economic uncertainty to Microsoft such as those of globalization where by the culture adopted and used by corporate global brings about economic uncertainty and in turn the management in Microsoft is required to get skilled person to help in the issues of globalization among other measures as discussed in this research, another effect is that of drop in stock returns which has lead to poor relationship of investors and the selling of stocks since investors fear what is to become in the event of uncertain economic outcomes, thus they shy off from investing this in turn bring down the stock sales. Another emerging issue is that of cultural difference in corporate which has an effect of poor relationship in Microsoft. Investors and the market at large of Microsoft are trying to do away with this problem or rather the barrier by coming up with strategic plans, that will create a smooth and comfortable relationship between them and investors in order to enhance and increase investments which in turn boost their financial position and growth and development of Microsoft. References “Managing Global Growth and Economic Uncertainty” 2012-12-07 Reference http://www.thehackettgroup.com/events/eubp2011/docs/TheHackettGroup-2011EUBPC-Agenda.pdf Bloom, Nick, S. Bond, and J. Van Reenen (2007): ―Uncertainty and Investment Dynamics, Review of Economic Studies, 74, pp. 391–415. Bomberger, W. A. (1996), "Disagreement as a Measure of Uncertainty", Journal of Money, Credit and Banking, 28(3), 381-392. Choi, G. and Oh, S, (2003), "A Money Demand Function with Output Uncertainty, Monetary Uncertainty, and Financial Innovations", Journal of Money, Credit and Banking, 35, 685-709. Dixit, A. and R. Pindyck, (1994), Investment Under Uncertainty. Princeton, NJ: Princeton University Press. Gujarati, Damodar N, (1999), "Essential of Econometrics", 2d ed., McGraw-Hill, New York. Miller, R. L., & Brewer, J. D. (2003). The A-Z of Social Research: A Dictionary of key social science research concepts. Thousand Oaks, CA: Sage Publications Rodrik, Dani, (1991),Policy Uncertainty and Private Investment,‖ Journal of Development Economics, 36, 229-242. Read More