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MULTINATIONAL CORPORATION

Introduction

A multinational corporation/ company is an organization doing business in more than one

country. Transnational company produces, markets, invests, and operates across the world. It

is integrated global enterprise which links global with global market at profit. These

companies have sales offices and/ or manufacturing facilities in many countries. A

corporation ( !"# engages in various activities like e$porting, importing, manufacturing in

different countries. !"s have worldwide involvement and global perspective in its

management and decision% making

.&. !"s consider opportunities throughout the globe through they do the business in a few

countries.

'. !"s invest considerable portion of their assets internationally.

. !"s engage in international production and operate plants in the number of countries.

). !"s take managerial decision based on a global perspective. The international operations

are integrated into the corporations overall business.

!"s are huge industrial/ business organizations. They e$tend their industrial/ marketing

operations through a network of branches or their ma*ority owned foreign affiliates. !"s

produce the products in one or few countries and sell them in most of the countries.

Transnational corporations produce the products in each country based on the specific needs

of the customers of that country and market these. A transnational corporation mostly uses the

inputs of the host country where it operates unlike a multinational company. +arge

corporations having investment and business in a number of countries, knows by various

names such as multinational corporations, international corporations and global corporations

have become

a very powerful driving force at the world s economy.

Strategies

"orporations may make a foreign direct investment. -oreign direct investment is direct

investment into one country by a company in production located in another country either by

buying a company in the country or by e$panding operations of an e$isting business in the

country.

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A subsidiary or daughter company is a company that is completely or partly owned and

wholly controlled by another company that owns more than half of the subsidiary s stock . 01&21

A corporation may choose to locate in a special economic zone , which is a geographical

region that has economic and other laws that are more free%market%oriented than a country stypical or national laws.

Business Strategy 3 global profit ma$imization

According to 4oward 5erlmutter (&060#73

ultinational companies may pursue policies that are home country-oriented .

or host country-oriented or wor d-oriented . 5erlmutter uses such terms as ethnocentric,

polycentric and geocentric.4owever, 8ethnocentric8 is misleading because it focuses on race

or ethnicity, especially when the home country itself is populated by many different races,

whereas 8polycentric8 loses its meaning when the !"s operate only in one or two foreign

countries.

According to -ranklin 9oot (&00)#, an !" is a parent company that

&. engages in foreign production through its affiliates located in several countries,

'. e$ercises direct control over the policies of its affiliates,

. implements business strategies in production, marketing, finance and staffing that

transcend national boundaries (geocentric#.

In other words, !"s e$hibit no loyalty to the country in which they are incorporated

Three Stages of Evolution

1. Export stage

• initial in:uiries ;< firms rely on e$port agents

• e$pansion of e$port sales

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• further e$pansion = foreign sales branch or assembly operations (to save transport

cost#

2. Foreign Production Stage

!"I #ersus Licensing

>nce the firm chooses foreign production as a method of delivering goods to foreign markets,

it must decide whether to establish a foreign production subsidiary or license the technology

to a foreign firm.

Licensing

+icensing is usually first e$perience (because it is easy#

e.g.3 ?entucky -ried "hicken in the @.?.• it does not re:uire any capital e$penditure

• it is not risky

• payment ; a fi$ed of sales

5roblem3 the mother firm cannot e$ercise any managerial control over the licensee (it

is independent#

The licensee may transfer industrial secrets to another independent firm, thereby

creating a rival.

Direct Investment

It re:uires the decision of top management because it is a critical step.• it is risky (lack of information# (@B %< "anada#

• plants are established in several countries

• licensing is switched from independent producers to its subsidiaries.

• e$port continues

3. Multinational Stage

The company becomes a multinational enterprise when it begins to plan, organize and

coordinate production, marketing, 9CD, financing, and staffing. -or each of these operations,

the firm must find the best location.

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important role in developing the economies of developing countries like investing in these

countries provide market to the !" but provide employment, choice of multi goods etc.

>n the other hand, economist Hagdish Khagwati has argued that in countries with

comparatively low labor costs and weak environmental and social protection, multinationalsactually bring about a race to the top. Lhile multinationals will certainly see a low ta$

burden or low labor costs as an element of comparative advantage, Khagwati disputes the

e$istence of evidence suggesting that !"s deliberately avail themselves of la$

environmental regulation or poor labor standards. As Khagwati has pointed out, !" profits

are tied to operational efficiency, which includes a high degree of standardisation. Thus,

!"s are likely to adapt production processes in many of their operations to conform to the

standards of the most rigorous *urisdiction in which they operate (this tends to be either the@BA, Hapan, or the G@#. As for labor costs, while !"s clearly pay workers in developing

countries far below levels in countries where labor productivity is high (and accordingly, will

adopt more labor%intensive production processes#, they also tend to pay a premium over local

labor rates of &2 to &22 percent. -inally, depending on the nature of the !", investment in

any country reflects a desire for a medium% to long%term return, as establishing plant, training

workers, etc., can be costly. >nce established in a *urisdiction, therefore, !"s are

potentially vulnerable to arbitrary government intervention such as e$propriation, sudden

contract renegotiation, the arbitrary withdrawal or compulsory purchase of licenses, etc.

Thus, both the negotiating power of !"s and the race to the bottom criti:ue may be

overstated, while understating the benefits (besides ta$ revenue# of !"s becoming

established in a *urisdiction.

!e$inition

An enterprise operating in several countries but managed from one (home# country. enerally,

any company or group that derives a :uarter of its revenue from operations outside of itshome country is considered a multinational corporation.

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There are four categories of multinational corporations 3

(&# a multinational, decentralized corporation with strong home country presence,

('# a global , centralized corporation that ac:uires cost advantage through centralized production wherever cheaper resources are available,

( # an international company that builds on the parent corporation s technology or 9CD, or

()# a transnational enterprise that combines the previous three approaches. According to @!data , some E,222 companies have direct investment in foreign countries, and the largest &22of them control about )2 percent of world trade .

Mu tinationa Cor&orations ' Characteristics And Signi$icance O$ Mncs

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ultinational "orporations ( ncs In Bhort# Are Also ?nown As Transnational "orporations

(Tncs#, Buper !ational Gnterprises, lobal "ompanies, "osmocorps And Bo >n.

According To 5rof. Hohn 4. Dunning, 8A ultinational Gnterprise Is >ne Lhich @ndertakes

-oreign Direct Investment, I.G ., Lhich >wns >r "ontrols Income athering Assets In ore

Than >ne "ountryM And In Bo Doing 5roduces oods >r Bervices >utside Its "ountry >f

>rigin, I.G., Gngages In International 5roduction.8

A ultinational "orporation 4as Also Keen Defined As 8An Gnterprise3 Lhich >wns

And/>r "ontrols 5roducing -acilities In ore Than >ne "ountry Buch As -actories, ines,

>il 9efineries, Distribution "hannels, >ffices, Gtc.8

According To Another Definition, 8Any Kusiness "orporation In Lhich >wnership,

anagement, 5roduction And arketing G$tend >ver Beveral !ational Hurisdictions Is

"alled A ultinational "orporation.8 Today, In International Gconomic Affairs They

"onstitute The ost Important Institutions. There Are -our 5articipants In The Drama >f

ultinationals. -irst, The ncs ThemselvesM Becondly, The 4ost "ountries M Thirdly, The

4ome "ountries M And -ourthly, The International "ommunity.

Characteristics o$ mu tinationa cor&orations (MNCs)'

The multinational corporations have certain characteristics which may be discussed below 3

(*) +iant Si,e '

The most important feature of these !"s is their gigantic size. Their assets and sales run

into billions of dollars and they also make supernormal profits. According to one definition

an !" is one with a sales turnover of f &22 million. The !"s are also super powerful

organisations. In &0N& out of the top ninety producers of wealth, as many as '0 were !"s,and the rest, nations. Kesides the operations, most of these multinationals are spread in a vast

number of countries. -or instance, in &0N out of a total of (,222 firms identified nearly )E

per cent had affiliates in more than '2 countries.

( ) Internationa O&eration '

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A -undamental feature of a multinational corporation is that in such a corporation, control

resides in the hands of a single institution. Kut its interests and operations sprawl across

national boundaries. The 5epsi "ola company of the @.B operates in &&) countries. An !"

operates through a parent corporation in the home country. It may assume the form or a

subsidiary in the host country. If it is a branch, it acts for the parent corporation without any

local capital or management assistance. If it is a subsidiary, the ma*ority control is still

e$ercised by the foreign parent company, although it is 8 incorporated in the host country. The

foreign control may range anywhere between the minimum of E& per cent to the full, &22 per

cent. An !" thus combines ownership with control. The branches and subsidiaries of

!"s operate under the unified control of the parent company.

(.) O igo&o istic Structure '

Through the process of merger and takeover, etc., in course of time an !" comes to assume

awesome power. This coupled with its giant size makes it oligopolistic in character. Bo it

en*oys a huge amount of profit. This oligopolistic structure has been the cause of a number of

evils of the multinational corporations.

(/) S&ontaneous 0#o ution '

>ne thing to be observed in the case of the !"s is that they have usually grown in a

spontaneous and unconscious manner. Oery often they developed through 8"reeping

incrementalism.8 any firms become multinationals by accident. Bometimes a firm

established a subsidiary abroad due to wage differentials and better opportunity prevailing in

the host country.

(1) Co ecti#e Trans$er o$ Resources '

An !" facilitates multilateral transfer of resources @sually this transfer takes place in the

form of a 8package8 which includes technical know%how, e:uipment s and machinery,

materials, finished products, managerial services, and soon, 8 !"s are composed of a

comple$ of widely varied modern technology ranging from production and marketing to

management and financing. K.!. anguly has remarked in the case of an ! 8resources

are transferred, but not traded in, according to the traditional norms and practices of

international trade.8

(2) American dominance '

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Another important feature of the world of multinationals is the American dominance. In

&0N&, out of the top 'E !"s, as many as &F were of @.B. origin. In that year the @.B. held

E' per cent of the total stock of direct foreign private investment. The @.G. has assumed more

of the role of a foreign investor than the traditional e$porter of home products.

Signi$icance o$ mu tinationa cor&orations (MNCs)'

The multinational corporations today have a revolutionary effect on the international

economic system. It is so because the growth of international transactions of the

multinationals has affected the more traditional forms of capital flows and international trade

for many economies. Today they constitute a powerful force in the world economy.

The value of the products sold by the !"s in &0N& was more than P E22 billion which was

about one%fifth of the !5 of the entire world, e$cepting that of socialist economies. In the

host countries, the volume of their production was about P 2 billion. The present growth

rate of their output in the host countries is a spectacular &2 per cent per annum which is

almost double the growth rate of the world !5.

In the field of international trade and international finance, the multinational firms have come

to e$ercise enormous power. In early seventies the !"s accounted for about one%eighth of

all international trade% -rom the nature of their growth it may be presumed that in the early

eighties their share will rise to one%fourth.

Among the developing countries only India had an annual income twice that of eneral

otors, which is the biggest multinational corporation. >therwise the annual income of the

other less developed countries is much less than that of the giant !"s. Ky their sheer size

the ! s can disrupt the economies of the less developed countries, and may even threaten

their political sovereignty.

Le may comprehend the relative economic power of the !"s vis%a%vis the nation%states by

ranking them together according to gross annual sales and gross national product

respectively. As +ester 9. Krown has shown, out of &22 entries in the merged list E6 were

nation%states and as many as )) were !"s.

According to one estimate by early eighties some 22 large !"s will come to control NE

per cent of the world s manufacturing assets.

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Ad#antages O$ Mu tinationa Com&any'-

The ultinational "orporations have been observed as the instrument of development in the

developing states for e$ample !ational 5etroleum "onstruction "ompany !55" has been

awarded contract of laying transmission line in ?uwait. -ollowing are the important

advantages of !"s.

Globalization

The first advantage of ultinational "orporations !"s is that they work for the

globalization and went to give global village shape to the whole world. -or e$ample, shell

works nearly in & ' states of the world that has integrated the 4olland, with the host

countries because in millions the employees are paid by the shell that simply means that they

are the citizen of 4olland, because 4olland cant not provide here own citizen to all these & '

states of the world.

If shell has been closed million employees will become *obless and due to this billion of

families will be affected. Thus it means that from only one !"s (Bhell# billion of people

are taking advantages and the same is the case of the other !"s also.

Increase world dependency

The most important advantage of !"s is that it increasing the dependency of world

countries over each other due to that they become friends of each other.

No war

!"s also plays very important role in the maintenance of world peace. -or e$ample thereare a lot of ermany and -rench !"s that are working in ermany and -rench, they will

always try to focus on friendly and good relationship and boost their economies.

Integration of world mind

>ne of the most significant role of ultinational "orporation is unification of world mind

and have become successful in this regard. Through out the globe, instead of domestic goods,

imported products are used. It means that the !"s have made the world as a global village.

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Mixture of whole world culture

Due to its comprehensiveness throughout the world, different states of the world i.e. their

cultures and civilization have become amalgamated with each other. -or e$ample Kritish

ladies and male like uslims clothes and their civilization while on the other hand uslims

wants to wear Kritish clothes and caps etc. Bo we can say that it is all due to the role of

!"s.

Transfer of technology

!"s also have played and are playing a contributing role in the transfer of highly

sophisticated technology from the developed countries of the world to the less developed

countries of the world to the less developed countries, especially to third world countries.

Economic growth

In some countries where neither domestic investment nor foreign economic aid is available in

sufficient :uantities for repaid development, the help of foreign firms, companies and

enterprises is sought for capital to speed up the process. 5rivate foreign capital can be ma*or

stimulus to the economic growth of under developed countries.

Job opportunities

In countries where unemployment is a ma*or problem foreign corporations or firms provide

great opportunities to the local people. Bince, it is too e$pensive to import large number of

skilled labours from abroad or from the home country. The foreign investors find it cheaper to

train unskilled labours needed by the enterprise.

MNCs produce more and better products

!"s produce more and better products at lower costs because they establish their plants in

those countries where they can draw resources easily.

orld modernization

!"s are regarded as agents of world modernization in the developing countries. They

produce new *obs, introduce new technology, and train the local people in the art of scienceand technology.

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MNCs brings foreign exchange

Another most important advantage of !"s is that it brings foreign e$change to developing

countries because in developing countries, the rate of saving is very low.

MNCs ta!e economic ris!

Another important advantage of !"s is that it takes economic risk in business in

developing countries because they have financial powers and developing or third world

countries are not in such a position to take economic risk.

!isad#antages O$ Mu tinationa Com&any

(*) 3igh Pro$it Low Ris4 In#estment'

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The multinational company prefer to invest in areas of low risk and high profitability. Issue

like social welfare, national priority etc. have less priority on their agenda. ostly they invest

in consumer goods industry.

( ) Inter$erence in Po itica Matters'

The multinational company from developed countries interfere in the political affairs of

developing nations. There are many cases where multinational company has bribed political

leadership for their own economic gains.

(.) Create Arti$icia !emand'

These companies create artificial and unwarranted demand by making e$tensive use of

advertising and ales and promotion techni:ues.

(/) 05& oitation'

These companies are financially very strong and adopt aggressive marketing strategies to sale

their products, adopt all means to eliminate competition and create monopoly.

(1) Techno ogica Pro% em'

Technology they use is capital intensive so sometimes that technology does not fully fit in the

needs of developing countries. Also, multinational company is criticized for transferring

outdated technology to developing countries.

(2) "oreign 05change go outside the Country'

The working of multinational company is a burden on the limited resources of developing

countries. They charge high price in the form of commission and royalty paid by local

business subsidiary to its parent company. This leads to outflow of foreign e$change.

(6) Nationa Threat'

Bometimes outdated technology is used by domestic industries which hamper the :uality and

price of their products so they cannot compete with those multinational company. 4ence,there is a threat of nationwide opposition to multinational company. Arrival of these

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companies creates an atmosphere of uncertainly to the domestic industries.

(7) Im&ose their Cu ture'

ultinational company impose their culture on developing countries. Along with the

products they also indirectly impose the culture of developed nations. These companies have

imposed the culture of fast food and soft drinks onto the developing nations. -or e$amples3%

burger and coke.

(8) 9or4 $or Se $ Interest'

ultinational company work toward their own self interest rather than working for the

economic development of host country. They are more interested in marketing of profits at

any cost.

Mu tinationa Com&anies(MNC:s) Im&act on Indian 0conomy;

!" may be defined as a company, which operates in number of countries and has

production and service facilities outside the country of its origin. They are also called Trans

!ational "ompany (T!"# Their activities have both good and bad impacts on the economy.

They take decisions on a global conte$t or basis. Their ma$imum profit ob*ectives take no

account of the reactions produced in the countries felling in their orbit. They operate in

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different institutionalforms Bome are3 Bubsidiaries companies wholly owned by !" in

other countriesBubsidiary company enter into *oint venture with a company another company

Agreement among companies of different countries regarding production and discussion of

market. Development and Activities3 Boon after independence foreign capital entered India in

the form of direct investments through !" s "ompanies had been formed in advanced

countries with the specific purpose of operating in India. Buch companies started their

subsidiaries, branches and affiliates in India . At times government gave some ta$ concession

to them with in the -G9A (-oreign G$change 9egulation Act# and streamlined the licensing

procedures. The purpose was to secure advanced, technical and industrial know how. During

the *anata rule the policy was outright purchase of technical know how skills and machinery.

They took two ma*or decisions. "oco cola was asked to wind up their operation . Asked IK

to reduce their foreign e:uity to )2 . They did not agree, so asked to wind up !" s operate

in several sectors like tobacco, toiletries beverages etc.

Industrial 5olicy of &00& accepted foreign investment essential for modernization

technology up gradation and industrial development. Beveral concessions were given -G9A

regulations were liberalized and permitted to use their trademarks in the domestic market.

!ow has become a wide spread phenomena with @BA the biggest among them. 9ecently a

large number of Indian brands were taken over by them some important takeovers are

Asian 5aints I"I (@?#

5remier Automobiles transferred two plants to 5eugeot (-rance#

+akeme brand by +ever.

4ero 4onda by TOB Buzuki etc.

Mncs Are Creations O$ 9ea thy Countries

!ot anymore. 4istorically this has been the case, with the @nited ?ingdom and @nited Btates

in leading positions. Kut many of the newcomers are based in developing countries. -or

e$ample, Taiwan is now home to many !"s, such as computer companies Acer and itac,

that have secured high world market shares in many niche products % most notably, handy

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scanners (06 percent# and the 5" mouse (6 percent#. any developing%country firms that

deal in natural resources, such as 5etrobras in Krazil and ?uwait >il, have e$panded abroad

to control more of the chain of supply and get closer to consumers. -or instance, 5etroleos de

Oenezuela owns "itgo, a leading chain of gas stations in the @nited Btates. any new forms

of multinationals are emerging % such as the family empires of the overseas "hinese % that add

further variety to the stew of organizational forms now represented by the multinationals.

overnments in some of the smaller countries now find that they must contend with both

host%and home%country influences in their negotiations with !"B.

Mncs Are Beyond +o#ernment Contro

Absolutely not. The relationship between governments and multinationals is characterized by

a comple$ distribution of benefits. ultinational corporations increasingly demand the

8freedom8 they need to optimize their operations across borders, with the goal of lowering

their total costs and continuously upgrading :uality. Their key bargaining chip in dealing with

host governments is that they have the option not to invest. Kut once multinationals enter a

country, they are, to some degree, locked in by the commitments that they have made to

develop local operations and provide *ob training. ultinationals need access to local skills

and other resources such as hotspot clusters. 4ost governments need !"B to act as agents

in building competitiveness and trade.

Instead of engaging in adversarial bargaining about the distribution of wealth, both sides have

a strong incentive to work on building partnerships that create wealth in the first place. The

growth of 8welcome%mat8 investment incentives % ta$ breaks, investments grants, sometimes

even preferential access to capital and guarantees of e$clusive market rights % is one indicator

of the sea change in government thinking. overnments would do well to employ officials

who not only understand the economics of traditional market structures but also the

managerial forces that change those structures. In addition, more vigorous intergovernmental

collaboration is needed to strengthen institutions such as the Lorld Trade >rganization.

5olicymakers urgently need a new mindset if they are to maintain a reasonable e:uity in the

balance of power among states, firms, and consumers. Hust as domestic banks re:uire

regulatory institutions that restrain their speculative instincts, !"B re:uire regulatory

mechanisms that check their instincts to put profit above all else. The challenge is to maintain

fairness without sabotaging the innovation engine that drives both new and old !"B and

creates new wealth. "onsumers and governments can no longer rely e$clusively on market

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mechanisms to rein in multinationals, nor can they blindly trust e$ecutives in the boardroom

to do the 8right thing

MNCs Are< "irst and "oremost< Creatures o$ Their 3ome Countries;

!ot always. ost people assume that the home country always gets first priority whenever

!"B have to make hard choices3 If faced with a downturn in the market, multinationals

will close facilities abroad to protect those at home. Qet Hapanese !"B have strived to

remain competitive by developing lower%cost capacity in facilities abroad. In doing so,

corporate e$ecutives have played a role in 8hollowing out8 Hapan s economy and have broken

with generations of tradition that put national interest above all else.

oreover, corporations now place higher priority on the innovation process % regardless ofwhere that process is centered % than on outdated notions of home country. Bome !"B have

developed world product mandates that farm out management authority and research%

anddevelopment leadership to foreign units. Tokyo is 8home8 to IK s personal computers,

while Taiwan is 8home8 to 5hi Indeed, there is now widespread unease that !"s are

becoming truly 8stateless,8 acting in the interests of shareholders who are themselves

becoming globally dispersed. These concerns are amplified by the growing trend among

ma*or corporations to promote foreign nationals to top management positions. Bome -renchand erman companies even use Gnglish as the lingua franca for their management

communications globally. lips computer monitors.

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On y Some Industries Are +oing + o%a

!ot anymore. A few years ago, the conventional wisdom held that many industries were

impervious to globalization, particularly those in the service sector. Qet today we find !"s

in office cleaning (International Bervice Bystems in Denmark#, dialysis treatment clinics

(-resenius in ermany#, and fresh%food retailing (Bainsbury in the @nited ?ingdom#. There

are international operators in real estate, law, and even simple services such as ta$is and

hairdressing. In the absence of protective regulations, no sector in any country can be

confident that it will never be confronted by foreign competitors. !one of these developments

suggest that all firms must go global. Kut to survive even local businesses can (and must#

adopt global standards. A firm can be world%class in behavior without being global in its asset

disposition, provided it has a global perspective, a global information base, and the necessary

imagination to strive for continuous improvement and adapt to shifting circumstances. -or

e$ample, there are many fast%growing businesses in India % such as the luggage company OI5

% that have achieved world%class status in operational efficiency and technical proficiency and

that are run by entrepreneurs who relentlessly travel the world in search of fresh inspiration.

These firms may well be some of tomorrow s !"s, leveraging the advantages that they

have already created at home. In many industries, the greatest challenge to purely local

businesses comes from their immediate neighbors, firms that have been faster to seize the

opportunities afforded by the information revolution and liberalization.

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Microso$t Cor&oration

Microso$t Cor&oration is an American multinational corporation head:uartered

in 9edmond , Lashington , that develops, manufactures, licenses, supports and sells computersoftware, consumer electronics and personal computers and services. Its best known software

products are the icrosoft Lindows line of operating systems , icrosoft >ffice office suite ,

and Internet G$plorer web browser. Its flagship hardware products are Rbo$ game consoleand the icrosoft Burface series of tablets. It is the world s largest software maker measured

by revenues. It is also one of the world s most valuable companies .

icrosoft was founded by Kill ates and 5aul Allen on April ), &0NE to develop and

sell KABI" interpreters for Altair FF22 . It rose to dominate the personal computer operating

system market with B%D>B in the mid%&0F2s, followed by the icrosoft Lindows . Thecompany s &0F6initial public offering, and subse:uent rise in its share price, created anestimated three billionaires and &',222 millionaires from icrosoft employees. It is

considered the third most successful startup company of all time by market capitalization,revenue, growth and cultural impact. Bince the &002s, it has increasingly diversified from theoperating system market and has made a number of corporate ac:uisitions . In ay '2&&,

icrosoft ac:uired Bkype Technologies for PF.E billion in its largest ac:uisition to date.

As of '2& , icrosoft is market dominant in both the IK 5"%compatible operating systemand office software suite markets (the latter with icrosoft >ffice #. The company also

produces a wide range of other software for desktops and servers, and is active in areasincluding internet search (with King#, the video game industry (with the Rbo$ , Rbo$

62 and Rbo$ >ne consoles#, the digital services market (through B! #, and mobile phones(via the Lindows 5hone >B#. In Hune '2&', icrosoft entered the personal computer

production market for the first time, with the launch of the icrosoft Burface, a line of tablet

computers .

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9indows !i#ision< Ser#er and Too s< On ine Ser#ices !i#ision

The company s "lient division produces the flagship Lindows >B line such as Lindows FM it

also produces the Lindows +ive family of products and services. Berver and Tools producesthe server versions of Lindows, such as Lindows Berver '22F 9' as well as a set of

development tools called icrosoft Oisual Btudio , icrosoft Bilver light , a web applicationframework, and Bystem, a collection of tools providing remote%control abilities, patchmanagement, software distribution and a hardware/software inventory. >ther server products

include3 icrosoft BS+ Berver , a relational database management system, icrosoftG$change Berver , for certain business%oriented e%mail and scheduling features, Bmall

Kusiness Berver , for messaging and other small business%oriented featuresM and icrosoftKizTalk Berver , for business process management .

icrosoft provides IT consulting (8 icrosoft "onsulting Bervices8# and produces a set ofcertification programs handled by the Berver and Tools division designed to recognize

individuals who have a minimal set of proficiencies in a specific roleM this includesdevelopers ( 8 icrosoft "ertified Bolution Developer8 #, system/network analysts ( 8 icrosoft

"ertified Bystems Gngineer8 #, trainers (8 icrosoft "ertified Trainers 8# and administrators(8 icrosoft "ertified Bystems Administrator 8 and 8 icrosoft "ertified Database

Administrator8 #. icrosoft 5ress , which publishes books, is also managed by the division.The >nline Bervices Kusiness division handles the online service B! and the search

engine King. As of December '220, the company also possesses an &F ownership ofthe cable news channel B!K" without any editorial controlM however, the division developsthe channel s website, msnbc.com , in a *oint venture with the channel s co%owner, !K"

@niversal.

Business !i#ision

The icrosoft Kusiness Division produces icrosoft >ffice including icrosoft >ffice '2&2 ,

the company s line of office software. The software product includes Lord (a word

processor#, Access (a relational database program#,

G$cel (a spreadsheet program#, >utlook ( roupware , fre:uently used with G$change

Berver #, 5ower5oint (presentation software#, 5ublisher (desktop publishing software #

and Bharepoint . A number of other products were added later with the release of >ffice '22

including Oisio , 5ro*ect, ap5oint , Info5ath and >ne!ote . The division also

develops enterprise resource planning (G95# software for companies under the icrosoft

Dynamics brand. These include3 icrosoft Dynamics AR , icrosoft Dynamics

!AO , icrosoft Dynamics 5 , and icrosoft Dynamics B+ . They are targeted at varying

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company types and countries, and limited to organizations with under N,E22 employees. Also

included under the Dynamics brand is the management software icrosoft Dynamics "9 ,

part of the Azure Bervices 5latform.

0ntertainment and !e#ices !i#ision

The Gntertainment and Devices Division produces the Lindows "G >B for embedded

systems and Lindows 5hone for smart phones. icrosoft initially entered the mobile market

through Lindows "G for handheld devices , eventually developing into the Lindows

obile >B and now, Lindows 5hone. Lindows "G is designed for devices where the >B

may not directly be visible to the end user, in particular, appliances and cars. The division

also produces computer games , via its in%house game publisher icrosoft Btudios , that run onLindows 5"s and other systems including titles such as Age of Gmpires , 4alo and

the icrosoft -light Bimulator series, and houses the acintosh Kusiness @nit which

produces ac >B software including icrosoft >ffice '2&& for ac. icrosoft s

Gntertainment and Devices Division designs, markets, and manufactures consumer

electronics including the Rbo$ 62 game console, the handheld one media player, and the

television%based Internet appliance B! TO . icrosoft also markets personal computer

hardware including mice, keyboards , and various game controllers such

as *oysticks and gamepads .

cu ture

Technical reference for developers and articles for various icrosoft magazines such

as icrosoft Bystems Hournal ( BH# are available through the icrosoft Developer

!etwork ( BD!#. BD! also offers subscriptions for companies and individuals, and the

more e$pensive subscriptions usually offer access to pre%release beta versions of icrosoft

software. In April '22) icrosoft launched a community site for developers and users,

titled "hannel0 , that provides a wiki and an Internet forum . Another community site that

provides daily videocasts and other services, >n&2.net, launched on arch , '226. -ree

technical support is traditionally provided through online @senet newsgroups,

and "ompuBerve in the past, monitored by icrosoft employeesM there can be several

newsgroups for a single product. 4elpful people can be elected by peers or icrosoft

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employees for icrosoft ost Oaluable 5rofessional ( O5# status, which entitles them to a

sort of special social status and possibilities for awards and other benefits.

!oted for its internal le$icon , the e$pression 8eating our own dog food8 is used to describe

the policy of using pre%release and beta versions of products inside icrosoft in an effort totest them in 8real%world8 situations. This is usually shortened to *ust 8dog food8 and is used as

noun, verb, and ad*ective. Another bit of *argon, -QI-O or -QIO (8-uck Qou, I m -ully1

Oested8#, is used by an employee to indicate they are financially independent and can avoid

work anytime they wish. The company is also known for its hiring process, mimicked in

other organizations and dubbed the 8 icrosoft interview 8, which is notorious for off%the%wall

:uestions such as 8Lhy is a manhole cover roundU8.

icrosoft is an outspoken opponent of the cap on 4&K visas , which allow companies in the@.B. to employ certain foreign workers. Kill ates claims the cap on 4&K visas makes it

difficult to hire employees for the company, stating 8I d certainly get rid of the 4&K cap8 in

'22E. "ritics of 4&K visas argue that rela$ing the limits would result in increased

unemployment for @.B. citizens due to 4&K workers working for lower salaries. The 4uman

9ights "ampaign "orporate G:uality Inde$, a report of how progressive the organization

deems company policies towards + KT (lesbian, gay, bise$ual and transse$ual# employees,

rated icrosoft as FN from '22' to '22) and as &22 from '22E to '2&2 after theyallowed gender e$pression.

Criticism

"riticism >f icrosoft 4as -ollowed The "ompany s G$istence Kecause >f Oarious Aspects

>f Its 5roducts And Kusiness 5ractices. Gase >f @se , Btability, And Becurity >f The

"ompany s Boftware Are "ommon Targets -or "ritics. ore 9ecently, Tro*an 4orses And

>ther G$ploits 4ave 5lagued !umerous @sers Due To -aults In The Becurity >f icrosoft

Lindows And >ther 5rograms. icrosoft Is Also Accused >f +ocking Oendors Into Their

5roducts, And !ot -ollowing And "omplying Lith G$isting Btandards In Its Boftware. Total

"ost >f >wnership "omparisons >f +inu$ As Lell As >B R To Lindows Are A "ontinuous

5oint >f Debate.

The "ompany 4as Keen In !umerous +awsuits Ky Beveral overnments And >ther

"ompanies -or @nlawful onopolistic 5ractices. In '22), The Guropean @nion -ound

icrosoft uilty In A 4ighly 5ublicized Anti%Trust "ase. Additionally,

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icrosoft s G@+A -or Bome >f Its 5rograms Is >ften "riticized As Keing Too 9estrictive As

Lell As Keing Against >pen Bource Boftware.

icrosoft 4as Keen "riticized (Along Lith Qahoo , A>+ , oogle And >thers# -or Its

Involvement In "ensorship In The 5eople s 9epublic >f "hina. icrosoft 4as Also "ome@nder "riticism -or >utsourcing Hobs To "hina And India . There Lere 9eports >f 5oor

Lorking "onditions At A -actory In Bouthern "hina That akes Bome >f icrosoft s

5roducts.

"inancia

Btandard and 5oor s and oody s have both given a AAA rating to icrosoft, whose assets

were valued at P)& billion as compared to only PF.E billion in unsecured debt. "onse:uently,

in -ebruary '2&& icrosoft released a corporate bond amounting to P'.'E billion with

relatively low borrowing rates compared to government bonds .

-or the first time in '2 years Apple Inc. surpassed icrosoft in S& '2&& :uarterly profits and

revenues due to a slowdown in 5" sales and continuing huge losses in icrosoft s >nline

Bervices Division (which contains its search engine King#. icrosoft profits were PE.'

billion, while Apple Inc. profits were P6 billion, on revenues of P&).E billion and P').N billion respectively.

icrosoft s >nline Bervices Division has been continuously loss%making since '226 and in

S& '2&& it lost PN'6 million. This follows a loss of P'.E billion for the year '2&2.

>n Huly '2, '2&', icrosoft posted its first :uarterly loss ever, despite earning record

revenues for the :uarter and fiscal year, with a net loss of P)0' million due to

a writedown related to the advertising company aSuantive , which had been ac:uired for P6.'

billion back in '22N.

As of Hanuary '2&), icrosoft s market capitalization stands at P &)K, making it the Fth

largest company in the world by market capitalization.

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Cor&orate a$$airs

he company is run by a board of directors made up of mostly company outsiders, as is

customary for publicly traded companies. embers of the board of directors as of -ebruary

'2&) are3 Hohn L. Thompson , Bteve Kallmer , Dina Dublon , Kill ates , aria?lawe, Btephen +uczo , David ar:uardt ,Batya !adella , "harles !oski, and 4elmut 5anke .

0 1 Koard members are elected every year at the annual shareholders meeting using a

ma*ority vote system. There are five committees within the board which oversee more

specific matters. These committees include the Audit "ommittee, which handles accounting

issues with the company including auditing and reportingM the "ompensation "ommittee,

which approves compensation for the "G> and other employees of the companyM the -inance

"ommittee, which handles financial matters such as proposing mergers and ac:uisitionsM theovernance and !ominating "ommittee, which handles various corporate matters including

nomination of the boardM and the Antitrust "ompliance "ommittee, which attempts to prevent

company practices from violating antitrust laws.

-ive year history graph of !ABDAS 3 B-T stock on Huly &N, '2&

Lhen icrosoft went public and launched its initial public offering (I5># in &0F6, the

opening stock price was P'&M after thetrading day , the price closed at P'N.NE. As of Huly '2&2,

with the company s nine stock splits , any I5> shares would be multiplied by 'FFM if one was

to buy the I5> today given the splits and other factors, it would cost about 0 cents . F13' EJ' 6 061

0N1The stock price peaked in &000 at around P&&0 (P62.0'F ad*usting for splits#. 0F1 The

company began to offer a dividend on Hanuary &6, '22 , starting at eight cents per share for

the fiscal year followed by a dividend of si$teen cents per share the subse:uent year,switching from yearly to :uarterly dividends in '22E with eight cents a share per :uarter and

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a special one%time payout of three dollars per share for the second :uarter of the fiscal

year. Though the company had subse:uent increases in dividend payouts, the price of

icrosoft s stock remained steady for years.

>ne of icrosoft s business tactics, described by an e$ecutive as 8 embrace, e$tend ande$tinguish ,8 initially embraces a competing standard or product, then e$tends it to produce

their own version which is then incompatible with the standard, which in time e$tinguishes

competition that does not or cannot use icrosoft s new version. Oarious companies and

governments sue icrosoft over this set of tactics, resulting in billions of dollars in rulings

against the company. icrosoft claims that the original strategy is not anti%competitive, but

rather an e$ercise of its discretion to implement features it believes customers want.

0n#ironment

In '2&&, reenpeace released a report rating the top ten big brands in cloud computing on

their sources of electricity for their data centers. At the time, data centers consumed up to '

of all global electricity and this amount was pro*ected to increase. 5hil 9adford of

reenpeace said 8we are concerned that this new e$plosion in electricity use could lock us

into old, polluting energy sources instead of the clean energy available today,8 and called on

8Amazon, icrosoft and other leaders of the information%technology industry must embrace

clean energy to power their cloud%based data centers.8 In '2& , icrosoft agreed to buy

power generated by a Te$as wind pro*ect to power one of its data centers.

icrosoft is ranked on the &Nth place in reenpeace s uide to reener Glectronics (&6th

Gdition# that ranks &F electronics manufacturers according to their policies on to$ic

chemicals, recycling and climate change. icrosoft s timeline for phasing out K-9s and

phthalates in all products is '2&' but its commitment to phasing out 5O" is not clear. As yet

(Hanuary '2&&# it has no products that are completely free from 5O" and K-9s.

icrosoft s main @.B. campus received a silver certification from the +eadership in Gnergy

and Gnvironmental Design (+GGD# program in '22F, and it installed over ',222 solar panels

on top of its buildings in its Bilicon Oalley campus, generating appro$imately &E percent of

the total energy needed by the facilities in April '22E.

icrosoft makes use of alternative forms of transit. It created one of the worlds largest

private bus systems, the 8"onnector8, to transport people from outside the companyM for on%

campus transportation, the 8Bhuttle "onnect8 uses a large fleet of hybrid cars to save fuel.

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The company also subsidises regional public transport as an incentive. In -ebruary '2&2

however, icrosoft took a stance against adding additional public transport and high%

occupancy vehicle (4>O# lanes to a bridge connecting 9edmond to BeattleM the company did

not want to delay the construction any further.

icrosoft was ranked number & in the list of the Lorld s Kest ultinational Lorkplaces bythe reat 5lace to Lork Institute in '2&&.

Mar4eting

In '22), icrosoft commissioned research firms to do independent studies comparing

the total cost of ownership (T"># of Lindows Berver '22 to +inu$ M the firms concluded

that companies found Lindows easier to administrate than +inu$, thus those using Lindows

would administrate faster resulting in lower costs for their company (i.e. lower T">#. This

spurred a wave of related studiesM a study by the Qankee roup concluded that upgrading

from one version of Lindows Berver to another costs a fraction of the switching costs from

Lindows Berver to +inu$, although companies surveyed noted the increased security and

reliability of +inu$ servers and concern about being locked into using icrosoft

products. Another study, released by the >pen Bource Development +abs, claimed that the

icrosoft studies were 8simply outdated and one%sided8 and their survey concluded that theT"> of +inu$ was lower due to +inu$ administrators managing more servers on average and

other reasons.

As part of the 8 et the -acts8 campaign, icrosoft highlighted the .!GT trading platform

that it had developed in partnership with Accenture for the +ondon Btock G$change , claiming

that it provided 8 five nines 8 reliability. After suffering e$tended downtime and

unreliability . the +BG announced in '220 that it was planning to drop its icrosoft solution

and switch to a +inu$ based one in '2&2.

In '2&', icrosoft hired a political pollster named ark 5enn, whom the !ew Qork Times

called 8famous for bulldozing8 his political opponents as G$ecutive Oice%5resident,

Advertising and Btrategy. 5enn created a series of negative ads targeting one of icrosoft s

chief competitors, oogle . The ads, called 8 Bcroogled 8, attempt to make the case the oogle

is 8screwing8 consumers with search results rigged to favor oogle s paid advertisers,

that ail violates the privacy of its users to place ad results related to the content of their

emails and shopping results which favor oogle products. Tech publications like Tech

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"runch have been highly critical of the ad campaign, while oogle employees have

embraced it.

Coo&eration with the United States +o#ernment

icrosoft provides information about reported bugs in their software to intelligence agencies

of the @nited Btates government, prior to the public release of the fi$. A icrosoft

spokesperson has stated that the corporation runs several programs that facilitate the sharing

of such information with the @.B. government.

-ollowing media reports about 59IB , !BA s massive electronic surveillance program , in

ay '2& , several technology companies were identified as participants, including

icrosoft. icrosoft *oined the 59IB program in -ebruary '2&&. 4owever, in Hune '2& ,

an official statement from icrosoft read3

Le provide customer data only when we receive a legally binding order or subpoena to do so,

and never on a voluntary basis. In addition we only ever comply with orders for re:uests

about specific accounts or identifiers. If the government has a broader voluntary national

security program to gather customer data, we don t participate in it.

During the first si$ months in '2& , icrosoft had received re:uests that affected between&E,222 and &E,000 accounts.

"ompanies with multi%national operations know how time%consuming and labor%intensive it

can be to consolidate their financial information. Data aggregation and reconciliation for

month%end can take days, or even weeks. Gven worse, manual systems and spreadsheets tend

to be error%prone. Lhile these issues affect any company with multi%organization

re:uirements, the Barbanes%>$ley Act places additional pressure on public companies to

comply with airtight and auditable procedures.

Tensoft ulti%!ational "onsolidation ( !"# consolidates financial data across companies

that operate in different functional currencies. This allows companies with multi%national

entities to perform local accounting functions in their local currencies. It also keeps the

information consolidated and maintained in a central location, while reducing monthly

closing from days to hours.

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Microso$t 9indows

Microso$t 9indows is a series of graphical interface operating systems developed, marketed,

and sold by icrosoft .

icrosoft introduced an operating environment named Windows on !ovember '2, &0FE as a

graphical operating system shell for B%D>B in response to the growing interest in graphical

user interfaces ( @I#. icrosoft Lindows came to dominate the world s personal computer

market with over 02 market share , overtaking ac >B , which had been introduced in &0F).

As of >ctober '2& , the most recent versions of Lindows for personal computers,

smartphones , server computers and embedded devices are respectively Lindows F.& ,

Lindows 5hone F , Lindows Berver '2&' 9' and Lindows Gmbedded F .

Logo

icrosoft adopted the so%called 8 5ac% an +ogo =< designed by Bcott Kaker, in &0FN. Kaker

stated 8The new logo, in 4elvetica italic typeface, has a slash between the o and s to

emphasize the 8soft8 part of the name and convey motion and speed.Dave !orris ran an

internal *oke campaign to save the old logo, which was green, in all uppercase, and featured a

fanciful letter >, nicknamed the blibbet, but it was discarded . icrosoftVs logo with the 8Qour

potential. >ur passion.8 tagline below the main corporate name, is based on a slogan

icrosoft used in '22F. In '22', the company started using the logo in the @nited Btates and

eventually started a TO campaign with the slogan, changed from the previous tagline of

" Where do you want to go today? " .During the private R ( icrosoft lobal G$change#

conference in '2&2, icrosoft unveiled the company s ne$t tagline, 8Ke Lhat s !e$t.8.

>n August ' , '2&', icrosoft unveiled a new corporate logo at the opening of its ' rdicrosoft store in Koston indicating the company s shift of focus from the classic style to the

tile%centric modern interface which it uses/will use on the Lindows 5hone platform, Rbo$

62, Lindows F and the upcoming >ffice Buites.The new logo also includes four s:uares

with the colors of the then%current Lindows logo. 4owever this logo is not completely new %

it was featured in Lindows 0E commercials from the mid%&002s.

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&0FN

&002

'226%'2&& '2&&%'2&'

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conc usion

5ublic opinion and government policy with respect to !"s, in other words, con*ure up the

image of a fault line along the earth s crust, :uiet for the moment but with pressures building

below that couldWwillWdivide the earth above. Despite the best%educated guesses, however,

nobody really knows *ust when and under what circumstances this will happen or how severe

the damage will be. Already odd alliances have been formed among the parties most affected

by the growth of !"s. >ne of these took place beginning in &00& when free%trade

advocates in the @nited Btates found themselves *oined by the multinationals but strongly

opposed by rank%and%file workers over the approval of the !orth American -ree Trade

Agreement (!A-TA#, which was ratified in &00' despite labor s ob*ections. In &00) the

!"s and free traders won a limited victory with the establishment of the Lorld Trade

>rganization (LT>#, which since its founding has focused much of its attention on breaking

down remaining restrictions on the e$pansion of !"s worldwide. It has had only moderate

success, however, because it lacks *udicial authority, something the @.B. negotiators refused

to give it because of congressional reservations about granting e$tensive powers to the new

body.

In the late &0F2s, free traders in Gurope *oined with Guropean workers in successfullyopposing the proposed merger of 4oneywell International and eneral Glectric on antitrust

grounds. The @nited Btates and the Guropean @nion also entered in a trade war. They clashed

over Guropean restrictions on imports of American beef and bananas, and the @.B. steel

industry accused Guropean firms of dumping steel on American markets. Guropean business

and political leaders retaliated with charges that Lashington unfairly subsidized @.B. e$ports

and re*ected its efforts to resolve trade disputes.

These claims and counterclaims suggest that, in a world becoming smaller each day, withcorporate mergers across national boundaries becoming more common and a technological

and information revolution unlike any in the past, calls will continue to grow about bringing

the aspirations of private enterprise more in line with national needs. 4ow that will happen or

whether it is even possible remain unanswered :uestions.

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9eferences list

• www.google.com

• www.yahoo.com

• www.study circle .com

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