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Description of environmental analysis

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An organization's external environment has three components: the remote environment (macroeconomic), the industry environment, and the operating environment (in the organization itself). Conduct an environmental analysis using your organization or an organization with which you are familiar.
Your analysis should include the following:
a. Identify the industry in which your organization operates.
b. Identify key macroeconomic variables that affect your industry.
c. Choose two macroeconomic variables from item b. Identify and locate in the Library and government databases the corresponding industry variable. For the last five years, create two charts. Each chart will include the macroeconomic variable and the corresponding industry variable.
d. Based on the environmental scan completed in items b. and c. above, what challenges and opportunities exist for your firm in the operating environment?
For additional information, please visit the University of Phoenix Library. Select Country Profiles and Economic Data, and select any of the major databases: CountryWatch, EIU Country Intelligence, EIU Data Services, or EIU Viewswire. You may also access the Links Library by going to the rEsourceSM course page and clicking on "Links Library." Here you will be directed to various sources of information, including the Bureau of Labor Statistics (http://stats.bls.gov/), the U.S. Department of Commerce Bureau of Economic Analysis (http://www.bea.gov/), the U.S. Department of Commerce Economics and Statistics Administration (http://www.esa.doc.gov), and the Federal Reserve Bank of St. Louis (http://research.stlouisfed.org/). Sources of economic forecasts are also the Congressional Budget Office (http://www.cbo.gov/), the Federal Reserve (http://www.federalreserve.gov/), the Mortgage Banker's Association (http://www.mbaa.org/), and the Conference Board (http://www.conference-board.org/).

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Company Background

Microsoft is one of the largest computer software organizations in the world having revenues of more than $45 billion annually. It has a monopoly in the operating software industry and provides a wide variety of software and e-commerce services and products. This includes operating systems for personal computers and servers; server applications for client/server environments; business and consumer productivity applications; software development tools; and Internet and intranet software and technologies. The company has expanded its interactive content efforts, including MSN (the Microsoft Network online service), various Internet-based services, and entertainment and information software programs. Microsoft also sells PC books and input devices, and it researches and develops advanced technologies for future software products. This other important data is as follows:

Corporate Headquarters Address

Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399

Fiscal Year End: on June 30th
Vision Statement
"Empowering people through software."

Mission Statement
"Our mission is to enable people and businesses throughout the world to realize their full potential. We work to achieve our mission through technology that transforms the way people work, play, and communicate. Since our founding in 1975, we have been a leader in this transformation. We develop and market software, services, and solutions that we believe deliver new opportunity, convenience, and value to people's lives. We do business throughout the world and have offices in more than 100 countries."

Environmental Analysis
Environmental analysis
If we closely analyze this statement, the patterns of an organization's actions will be clearly reflected not only in the financial performance of an organization over the years but in the relative strengths, weaknesses and strategic positioning of the firm in the business environment, industry or economy it operates in. The understanding of these elements is the prima facie requirement in the strategic planning and management process and is closely analyzed in the environmental scanning process of an organization. These factors are very important in establishing the corporate level strategies of an organization. But one has to remember that there are numerous other factors also such as the general state of the economy and industry growth rates which influence the formulation of strategy. Thus let us discuss the environmental analysis of Microsoft in detail.
External Environment

Here we will analyze the affect of societal forces and to see what trends are likely to affect Microsoft. The business environment of the new millennium will have to contend with:

1. Turbulent markets that change rapidly and unpredictably
2. Highly fragmented 'niche' markets instead of mass markets
3. Ever greater rates of technological innovation in products and processes
4. Shorter product life-cycles
5. Growing demand for tailored products - 'mass customization'
6. The delivery of complete 'solutions' to customers, comprising products and services.

Economic Forces

Globalization has increased opportunities. Moreover, globalization leads to the creation of the universal customer, one who expects the same quality of products and services regardless of where he or she is located in the world. This does not mean one customer, one world, one brand or one positioning platform.
Exchange rate exposure may affect financing costs volatile cash flow. Transaction exposure reflects the exposure of Microsoft's future cash transactions to exchange rate movements. Economic exposure measures the direct and indirect risks to cash flows from exchange rate movements. Translation exposure focuses on consolidated financial statements. (Measuring Exposure to Exchange Rate Fluctuations, 2004)

Let us take the impact of inflation

There are various measures of inflation. I have taken CPI, The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. # As an economic indicator. As the most widely used measure of inflation, the CPI is an indicator of the effectiveness of government policy.

In addition, business executives, labor leaders and other private citizens use the index as a ...

Solution Summary

Microsoft is researched.