Operations entails converting inputs into outputs. Operations management is vital for the creation of value in the form of products and services (Olhager, 2013). The central objective of operations management is to ensure that there is a balance between demand and supply. Typically, operations management works alongside the marketing and financing functional areas of a business. Operations management emphasizes value addition, which entails creating a significant difference between the cost of product or service inputs and the price or value of outputs. This paper explores the operation management practices of Microsoft Corporation. Microsoft Corporation is a globalized technology company founded in 1975 (Microsoft, 2016). The company operates in the technology sector of the business software and services industry. Subject to its global presence, the company operates distributed branches in over 100 countries. The company develops, supports and licenses an array of devices and software products that deliver convenience, improved values and opportunities to users. Some of the offered services include cloud services and support for its software products. Microsoft Products include operating systems (OSs) for phones, servers, and computing hardware; server applications; business solution application; server and desktop management software; online advertising; video games; and software development tools. Microsoft also designs and sells various mobile and computing hardware, including tablets, personal computers (PCs), phones, gaming consoles, and related accessories. As of this writing, company was offering cloud-based solutions and product support services, as well as training and certification of developers and integrators. Collectively, the company is operated in six segments: Phone Hardware, Commercial Other, Gaming and Computing Hardware, Devices and Consumer (D&C) licensing and Commercial Licensing. Windows OS faces stiff competition from numerous software products and open source platforms. The main industry competitors include Google and Apple. Its Windows Phone faces competition from Android, Blackberry and iOS operating systems. Microsofts Xbox faces competition from Nintendo and Sony console platforms. Further, the companys resale products and services face competition from various online marketplaces, such as Google, Apple and Amazon. Observably, the company competes effectively with other technology leaders in various segments. As leader among other technology giants, Microsoft pursues patents, and at the time of this research, the company has an assortment of more than 57,000 patents. Despite focusing on internally developed intellectual property (IP) in Microsoft products, the company engages in both inbound and outbound licensing.
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Management Practices of Microsoft
2. STRATEGY OF THE COMPANY
2.1. Microsoft Mission
Microsofts mission is to empower every individual and organization to achieve more (Microsoft, 2016). According to Microsoft (2016), the companys strategy is to develop superior productivity services and platforms to cloud-first and mobile-first world. To meet this strategy, the Corporations R&D efforts focus on creation of personal computing, development of intelligent cloud platform and reinvention of business and productivity processes.
Logically, the company employs a hybrid of differentiation and low cost strategy. The low cost strategy is evident in the pricing of Windows Phones and products such as gaming consoles and server operating systems. Windows products, especially PCs, consoles and phones compete based on their differentiated graphical users interfaces (GUIs), compatibility with Windows OS, and personalized applications, among others (Microsoft , 2016). The umbrella branding approach makes the Corporations products readily visible to existing and new customers (Iacobucci, 2014). For instance, Windows Phone retains the Windows logo. The six operational segments enable the company to align its objectives and strategies across the development, marketing, sales, and services entities. Additionally, the Microsofts segments provide an effective structure for coherent and well-timed allocation of development, marketing and service resources.
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Further, the company measures its performance based on the productivity of each segment. For example, the financial performance of Nokia Corporations Devices and Services (NDS) is reported in Microsofts Phone Hardware segment (Microsoft , 2016). As an illustration of flexibility in its strategic management, the company changed its organizational structure in June 2015 to adapt its operations in the cloud-first and mobile-first business environment. This is in line with Ainapur, Singh and Vittals (2011) assertion that as companies evolve the way they allocate resources and analyze company performance in their organizational structure, there is high possibility that their segments may change significantly. For instance, the company acquired NDS businesses in 2014, thereby changing its organizational structure (Microsoft, 2016).
As a key component of operations management, forecasting helps business entities and their managers to develop reasonable plans and minimize uncertainty of events in their future operations. In that regard, Microsoft managers strive to manage demand with supply; hence, they must predict the space need to supply all the demanded products and services. The key aspects of forecasting at Microsoft are the predicted level of demand and the predictions degree of accuracy.
3.1. Forecasting Approaches
To note, the corporation uses both qualitative and quantitative approaches. The key difference is that the former is subjective in nature, whereas the latter is statistical in nature. Through data-driven analytics, Microsoft makes time-series forecasts. In that regard, the company predicts patterns from the observed trends. At a personal level, managers tend to make judgmental forecasts. To note, judgmental forecasts are based on industry experience and subjective inputs from multiple sources. For example, HR managers in Vietnam would use inputs from various sources to make an urgent decision on when to hire additional casual workers in order to improve the output (supply) matching the demanded products. Quantitative approaches also demand significant judgment, such as projection of future cash flows and estimation of the duration over which demand will grow. According to Microsoft (2016), the company frequently reviews the quantity of inventory at hand and any future purchase commitment with its suppliers. The reviews include analysis of product development plan, current sales levels, demand forecasts, component cost trends, product life cycle (PLC) status and pricing strategy (Microsoft, 2016). For example, upon the determination that the Phone Hardware goodwill was impaired alongside other changes in the industry competition, the company shifted its strategy and expectations. As per the 2015 Annual Report, the company had forecasted lower cash flows and reduction in Phone Hardware volume growth rates.
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4. CAPACITY PLANNING
The key objective of capacity planning is to ensure that the company optimizes its production capabilities, thereby meeting the demand. If the companys production facility fails to meet the demand, it may result in strains on resources, high operational costs, and loss of customers (Ainapur, Singh, & Vittal, 2011). Capacity needs at Microsoft Corporation include human capital, space and equipment. To note, capacity planning at Microsoft Corporation focuses on numerous long-term concerns because of the corporations long-term commitment of financial and human resources. Expectedly, managers at the company appreciate an array of effects capacity and planning decisions have on the entire corporation. Microsoft Corporation employs an array of strategies including leading capacity, following capacity and tracking capacity. Tracking capacity involves the strategic increment of the companys capacity with time to meet the demand of a specific product. Under the leading capacity strategy, increments are initiated to meet the forecasted demand. Lastly, following capacity strategy entails waiting for increases in demand of a product or service before expanding capabilities. Microsoft fair values processes constitute controls designed to ensure that all fair values are documented (Microsoft, 2016). Some of the controls include regular review of model inputs, model validation and analysis of fluctuations. Consequently, the company is able to make informed decisions regarding the allocation of resources to meet the expected demand. The key steps in capacity planning process at Microsoft include estimation of future capacity requirements; identification of options for achieving requirements; evaluation of existing facilities and capacity; identification of gaps; financial analyses; selection of the most strategic alternative; and implementation of the chosen alternative.
5. PROCESS SELECTION AND FACILITY LAYOUT
5.1. Process Selection
Process selection refers to the manner in which products are developed or delivered. Microsoft operates in six segments offering both goods and services. For this reason, its tangible products are manufactured in various locations including the United States, Vietnam and India. Logically, process selection influences various aspects of the company, such as layout of facilities, capacity planning and equipment used. Microsofts warehousing and storage layouts optimize the space of the warehouses.
5.2. Facility Layout
Facility layout is the way an entitys operational area is configured to maximize processes that are pivotal in the achievement of the organizational goals. For example, an office layout is used at the Microsoft headquarters and branch offices (Microsoft, 2016). The office layout marked by an open door policy is effective in the sense that it improves the flow of work and interactions between employees. This layout groups employees, equipment and spaces in a manner that they are comfortable and safe, as well as in a way that the movement of information is effective. By eliminating closed-door offices (bureaucracy), an innovative environment is created because information and ideas are easily shared both vertically and horizontally inside the organizational structure (Hasle, Bojesen, Langaa Jensen, & Bramming, 2012). In contrast, Microsoft facilities employ both assembly line and balance delay approaches. Microsofts process selection is also dependent on its process strategy, which entails process flexibility and capital intensity.
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6. PRODUCT AND SERVICE DESIGN
Microsofts phone product line requires improvements in terms of interoperability. The company should hider developers with the ability to design and code applications that improve interoperability between various platforms. Given that Android-based phones are presenting a significant threat for Windows Phone regarding the interoperability and affordability of mobile apps, Microsoft should strive to develop application programing interfaces (APIs) that enable migration from any non-Windows based platform to Windows. Additionally, the company should continuously conduct security audits of the Windows Phone operating system to fight cyber criminals targeting handheld devices from Microsoft. Further, Microsoft should redesign its phone product line to provide a unique variety of administrative and entertainment features through the use of devices, content, and peripheral from other platforms. By limiting Windows Phone to Microsoft devices and peripheral, the company also limits the purchases because user are increasingly demanding devices that improve collaboration irrespective of the baseline operating system. This is evident in the growing popularity of Android phones sold by Samsung and LG. Given that Microsoft is regulated by the United States government, as well as the governments of the host countries abroad, the company should ensure that harmful substances or components are not included in the product design (Hoyle, 2007; Mitra, 2012). Both legally and ethically, the company should take responsibility of any human or environmental harm caused by the product. Corporate social responsibility demands that the product packaging should be recyclable as part of green supply chain management. If the product is defective, Microsoft should fix the defect in manufacturing phase, and recall any sold product to avoid legal and ethical confrontations.
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Microsofts corporate offices are located in Washington. The offices cover around 15 million sq. feet. Approximately 10 million sq. feet of this space is located at its corporate campus in Redmond. Additionally, the company owns over 5 million sq. feet of data center and office space domestically. According to Microsoft (2016), the company also leases many sites of data center and office space domestically. Microsoft occupies numerous sites internationally, covering over 12 million and 11 million sq. feet of owned and leased space. Some of the international facilities owned by the company include phone manufacturing facilities, largely in Vietnam; R&D centers in India and China; regional operations centers in Singapore and Ireland (Microsoft, 2016). Other operational facilities are located in the United Kingdom, Finland, Japan and Germany. The locations of Microsofts facilities are strategic in the sense that an industrial analysis makes the locations suitable in terms of availability of affordable human capital, political stability and good economic environment to conduct business. For instance, Asian countries such as India, Vietnam, China and Japan provide adequate labor for the development and manufacturing of software, Windows Phones and gaming consoles. In regards to it location in the United States, Microsoft is able to expand its facilities in the land available in Redmond, Washington. This location is suitable for expansion due to good infrastructure and the availability of high talented workers in the United States. Additionally, the offshoring strategy enables the company to cut operational costs and maximize costs. In line with the resource-based view (RBV), Microsoft gains from sustained competitive advantage though the implementation of flexible strategies that has enabled it to exploit its internal strengths (Barney, 2005; Hasle, Bojesen, Langaa Jensen, & Bramming, 2012). By offshoring some of its production activities to Asia and Europe, the company effectively responds to environmental activities while avoiding internal weaknesses and neutralizing external threats (Handfield, Straube, Pfohl, & Wieland, 2013). To recap, Microsofts location are suitable in the sense that they enable the company to localize its products to mirror local conventions and languages. As the consequence, the company will continue to sever the needs of customers from different backgrounds around the world.
8. QUALITY AND QUALITY MANAGEMENT
Windows Phone is an apt example of Microsofts products that employ the concepts of quality management, particularly quality control during product development. Quality control and inspection is essential not only due to the industry pressure to deliver high quality phones, but also due to the need to corporate responsibility to maintain product quality (Microsoft , 2016). Additionally, quality control in the production of Window Phones is motivated by the need to improve customer satisfaction. In that regard, quality control in particular, and quality management in general serves as a differentiating factor. Microsofts emphasis on quality control (QC) and routine inspection is meant to establish a benchmark for gaining reasonable confidence that the manufactured phones and accessories will maintain desirable determinant of quality, including usability, reliability, interoperability, dependability and safety. Usability includes the ease operating the phone though an interactive GUI. Windowss safety relates to the life of its battery and the proven safety while operating the phone. Interoperability regards the ability to use other third-party software, including PDF readers and image managers. At Microsoft, quality control is initiated at the moment an idea in conceived. It is progressed throughout the products development cycle, including the design, testing and actual manufacturing phases.
According to Microsoft (2016), Windows Phones faces stiff competition chiefly from Samsung, Apple and other handheld device manufactures using Android as the base operating system. For this reason, the company is compelled to offer a blend of innovative technologies and high-quality industrial designs across different price points. To improve the usability and quality of its products globally, the company localizes its products. In this context, localization entails modifying the GUI and translating text. To compete effectively, Microsoft should enlist developers with the capability to write software applications for Microsofts marketplace to ensure the application have not only high value and customer appeal, but also high quality. By increasing implementation of data-driven insights, Microsoft is likely to benefit from the improved customers perception of product quality and improved operational efficiency. Additionally, the use of the PDCA cycle depicted in Figure 1 can help the company to identify the source of product variations that may end up deviating the end product from the predefined specifications (Mitra, 2012). All the phases must be considered as opportunities for quality improvement.
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9. CONCLUSION AND RECOMMENDATIONS
Microsoft Corporation is an apt example of a technology giant utilizing a hybrid of low-cost and differentiation strategy. Through this strategy, the company is likely to survive the market shocks in the global village, as well as sustain its competitive advantage. From the research above, it is apparent that quality is paramount feature in differentiating Microsoft products and services. For this reason, the company must continue to invest adequate resources to ensure that quality is controlled from the inception of a product development to the final point of its usage. Given that Microsoft procures most parts for the manufacturing of its hardware products, the company should employ the production part approval process (PPAP) in all its offshore facilities (Mitra, 2012). This methodology will ensure that suppliers demonstrate a deeper understanding of customer requirements. Additional, PPAP will ensure that all suppliers have the capability to fabricate parts that meet Microsofts requirements within the contractual time and in a seamless manner. Furthermore, Microsoft should employ the Six Sigma Statistical Process Control (SPC) to improve quality by preventing defect using statistical techniques instead of focusing on the detection of product defects through inspection. According to Hoyle (2007), training on SPC can enable employees in an entity to have a good understanding of the processes that help manufacturers to limit risks. In the same line, such trainings will help Microsoft employees to understand processes that will deliver benefits such as technology transfer, regulatory compliance, predicable product supply and enhanced product quality. Microsoft should also give attention to the human and process factors of effective capacity planning. By improving productivity and quality processes, the company stands to benefit from increased capacity. Both quantity and quality capability should be leveraged to improve capacity. High quality leads to compliance and standardization, which in turn increases the rate of output due to limited rework and inspection activities. In conclusion, Microsoft should address labor turnover, absenteeism and employee morale because they have a detrimental impact on the output quality and rate.