Microsofts Reaction to Geopolitical Risks - Case Study Example

Geo-Political Environment Research Student’s Name Institutional Affiliation Table of Contents Table of Contents 2 Geo-Political Environment Research 3 Introduction 3 Microsoft Major Geo-political Issue 3 Microsoft’s First Reaction to Geo-Political Risks 4 Microsoft’s Response to Geopolitics in America 6 Microsoft’s Response to the Global Geopolitical Environment 7 Conclusion 8 References 9 Geo-Political Environment Research Introduction The intensified globalization and aggressive competition between international corporates has made the process of international business very complex. An active but mostly undermined force in this context is the geo-politics and events happening globally. Political events taking place around the world have numerous influences businesses across the world. The geo-political environment focuses on how foreign policies are being established and changed based on the international political behavior. The issue of business remains an international concept, but when it comes to laws, regulations, and policy, it is a matter of individual state (Dodds, 2001). Therefore, most businesses operating internationally face increased complexities and risks in terms of geo-political impediments such as sanctions, terrorism, foreign policy, taxation, as well as compliance. Overall, the geo-political aspect has proved to be an important factor for corporate leaders as well as corporate governance. This is in terms of determining and making decisions that reduce the risks of corporates from the impacts of geo-political events. The following research paper aims at investigating how Microsoft corporation leadership has responded to numerous geo-political events. Microsoft Major Geo-political Issue Microsoft Inc. is a multinational tech company that operates in over 60 countries while its products are sold internationally. According to Thorel (2015), geo-political issues and events have cost Microsoft millions of dollars in loses. In 1995, the launch of Microsoft’s Windows 95 operating systems came with increased criticism due to geo-political factors. Its launch in India was sparked with increased political tension as the time zone option illustrated a map of India that excluded some main parts such as Kashmir not being part of India (Thorel, 2015). The main concern was that the zones illustrated as not being part of India were disputed territories with Pakistan and China also claiming to be part of their territory (Microsoft, 2000). The operating system was banned in India while the government requested for an official apology. Microsoft was forced to recall all its 200,000 copies of the operating system and make an official apology to the Indian government. This was a costly lesson for the tech giant that was increasingly taking over the computer and technology industry. Nonetheless, these events were the foundation of Microsoft’s response or reaction to future geo-political events and issues. Fig 1 Time Zone Map illustrating Kashmir as not part of India Microsoft’s First Reaction to Geo-Political Risks Following the events in 1995, Microsoft leadership developed a Geopolitical Product Strategy (GPS) team under its pioneer, Tom Edwards (Microsoft, 2000). The Geopolitical Product Strategy department was developed to help Microsoft understand and tackle geo-political issues and events in developing and marketing its products. With its products being targeted at global customers, Microsoft has to utilize maps, artwork, scenarios, languages, and scenarios that focus on delicate international events and issues. According to Munoz (2013), there is need for international corporates and their leaders to recognize the awareness of geopolitical issues and the need to for their products and services to match local social and cultural anticipations and beliefs. This means that corporate leadership must work on satisfying cultural, social, and political needs of individual countries in terms of its product and service design. Moreover, corporate leadership also plays a crucial role in the management of geo-political impacts (Bremmer, 2016). Leadership involves vision, foresight, and decisiveness where current leaders of global businesses are expected to possess a basic understanding of geo-politics and how it might influence their businesses and how geo-political responsibility can be nurtured in their corporate DNA (Munoz, 2013). Microsoft has taken a bold decision and move in establishing the GPS to handle the little details and marketing evaluations that can potentially escalate into serious business issues based on the international nature of the business. The GPS department is also responsible for guaranteeing that Microsoft’s products appropriately represent its international customers’ understandings of the world (Microsoft, 2000). This means researching the most simple and ignored issues that could be taken negatively by consumers who do not share the same view as that of the company. For instance, the GPS team recognized that numerous websites accessed by its customers in Mexico referred Mexico as part of Central America, which was geographically and politically incorrect since Mexico is part of North America (Microsoft, 2000). Therefore, such little issues can be taken negatively by customers or even political institutions. The GPS leadership at Microsoft is also tasked with offering background guidelines and information on how to illustrate delicate areas, and ensure that its product offering are up-to-date on laws that influence their content in specific geographical regions (Microsoft, 2000). The team has launched a long-term plan of delivering products for the international market that meet the local expectation on geo-political matters. Microsoft’s Response to Geopolitics in America According to Munoz (2013), businesses can exploit certain opportunities that arise from geo-political impacts. This is in terms of determining market strategies at given times of geo-political events. Nonetheless, this is not the case for all companies since assessing geo-political issues is a complex process. Most companies use external consulting firms to assess the risk of geo-political events and issues. Besides, companies that cannot afford consulting firms prefer to use straight forward strategies such as closing facilities or reducing their presence in areas worst hit by geo-political issues. Microsoft’s corporate leadership has also applied the withdrawal strategy when faced with numerous geo-politically related issues. For instance, in the U.S, the company went ahead to halt and migrate the development of its Windows Azure software following changes in local tax regulations (Maio, 2009). Before the change, Microsoft enjoyed a tax break as a manufacturer, but the tax laws were ratified and required that data centers also pay manufacturer tax. This led Microsoft and other tech companies such as Yahoo to stop construction of new data center in the state of Washington (Maio, 2009). This reaction is common since most companies do not perceive geo-political events as a threat to smooth business operations. Again, Microsoft’s corporate leadership applied the same response in India, Saudi Arabia, and China (Gault & Nicol, 2004). This is because all the products sold in these countries received a negative perception due to offensive conflicting issues that led all these products to be pulled from these markets. Most companies are uncertain on the process of averting geo-political impacts based on the unpredictability and complexity of geographical political across the world. Leaders are not keen on investigating the geo-political environment that can help in such situations. Geo-political issues and events can be an opportunity for corporates to re-define their marketing and product development strategies. Running away from geo-political issues and its impacts can be at a loss such as what Microsoft has undergone. However, a focus on geo-political environment can reduce the risk of losses and brand reputation damage. Microsoft’s Response to the Global Geopolitical Environment Microsoft’s corporate leadership has also responded positively to geo-political events. The company announced that it would launch a strategic plan to fight terrorism on the internet. The company developed a policy to remove terrorist content on the internet. Its main aim is to precisely ban posting of terrorism-related content on its hosted consumer services such as the online OneNote application (King, 2016). The company acknowledged that if any terrorism-related content was to be flagged by their online reporting application, it would be immediately removed (King, 2016). In this move, the company explicitly acknowledged the rising geo-political issue of terrorism that has profound impacts on international trade and economies. Furthermore, this illustrates a strong leadership step in positively addressing geo-political issues that should not be ignored for such a giant corporation. Microsoft is also in support of the European Union and the role it plays in uniting European states especially in terms of trade, economic, technology, and political issues (Lim, 2008). Microsoft believes that working with the EU is much more effective and efficient than having to deal with each country especially when it comes to taxation, compliance policies, and the conduct of business. Recently, Microsoft strongly backed for the UK to remain in the EU based on the key role the country plays in their international business continuity. Despite the historical fines imposed on the company by the EU, Microsoft has continued to work positively with the commission. The company has strongly backed data sharing policies and regulations offered by the EU as well as collaboration in science and technology research. In addition, Microsoft is also a pioneer in climate change initiatives by implementing a carbon taxation model that covers emissions from its software labs, offices, data centers, and air travel (Moodie, 2013). This is based on the changing politics of climate change and environmental sustainability. Microsoft’s leadership has illustrated increased commitment and dedication in the fight against climate change and global warming (see fig 2). The company has also made these strategic moves in order to meet numerous sustainability policies such as the European Union Emissions Trading System (Moodie, 2013). Fig 2 Microsoft Carbon Fee Initiative Impact Conclusion In conclusion, Microsoft has undergone numerous losses due to geo-political issues. Nonetheless, the company has enhanced its response to these issues by developing a strategic team of consultants on geo-political issues and events. The company has also responded by withdrawing its products and business from areas facing geo-political issues. However, Microsoft has taken the opportunity to address some geo-political issues by working to aid in resolving such issues as well as developing corporate strategies and policies that enhance its business processes even in the wake of geo-political issues. References Bremmer, I., (2016). Why geopolitics is the biggest threat to the IT industry. Retrieved from https://www.weforum.org/agenda/2016/02/is-geopolitical-competition-harming-the-it-industry/ Dodds, K. (2001). Political geography III: critical geopolitics after ten years. Progress in human geography, 25(3). Gault, I.T & Nicol, H., (2004). Holding the Line: Borders in a Global World. Vancouver, UBC Press. King, H.,(2016). Microsoft goes to battle against terrorists online. Retrieved from http://money.cnn.com/2016/05/23/technology/microsoft-terrorism/index.html?section=money_technology Lim, D. (2008). Beyond Microsoft: Intellectual Property, Peer Production and the Law's Concern with Market Dominance. Fordham Intellectual Property, Media & Entertainment Law Journal, 18(292). Maio, A., (2009). The Geopolitics of Cloud Computing. Retrieved from http://blogs.gartner.com/andrea_dimaio/2009/08/17/the-geopolitics-of-cloud-computing/ Microsoft, (2000). Microsoft’s Geopolitical Bug Experts. Retrieved from https://news.microsoft.com/2000/12/06/microsofts-geopolitical-bug-experts/#sm.00006481w510cge4esgh7zx5s7re3 Moodie, A., (2013). Microsoft leads the way with innovative carbon fee model. Retrieved from https://www.greenbiz.com/news/2013/02/20/microsoft-leads-way-innovative-carbon-fee-model Munoz, J., (2013). Handbook on the Geopolitics of Business. Northampton, MA: Edward Elgar Publishing. Thorel, J., (2015). 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