Anti-trust and Legal Issues - Microsoft - Case Study Example

RЕРОRT ОN МIСRОSОFT Name: Course title: Course code: Tutor: Date: Introduction Success of every organization considers all the factors that may affect the performance of their business activities. They know when to deal with small issues without losing their main focus of the bigger picture of the organization. Having proper information concerning both internal factors affecting the organization provides the organizational leaders the intelligence they require in order to set out the priorities of the organization and make strategic plans for the future. Despite the good performance in the market, Microsoft has attracted both positive and negative criticism from various stakeholders of the organization. The company has been involved with various legal battles that involve litigation over the history of the organization, including cases against the US government, competitors and European Union. The following are some of the issues affecting the company since its inception (Williams, 2011). The company has been involved in several legal issues over its history including cases against United States, European Union and other competitors. Some of the major issues include: Anti-trust and legal issues Legal forces both at home, and foreign countries are major determinants of the success of an organization. There have been a lot of questions from the regulators in the recent years over the monopoly business practices of Microsoft. The company should, therefore, devote their time; effort and resources to learn about the regulations and provide clear ways of complying with them. During 1990s, Microsoft implemented an exclusionary licensing where PC manufacturers were suppose to pay for an MS-DOS license despite the shipment of the system with another operating system. Critics argue that the company utilized its predatory tactics to put its competitors out of the market and that the organization built technical entry barriers to make it look like the competing products never worked properly on its operating system. In a consent decree filed in 1994, Microsoft came into a deal among other things agreed was that Microsoft could not sell any of its operating system on the condition of purchase of any other company product. The attempt of the purchase of Intuit in 1994 was ruined as a result of antitrust issues that Microsoft was acquiring a major player. After the company bundled the Internet Explorer as part of its operating system in late 1990 (without making a separate purchase) and taking the larger market share of the web browser, the antitrust case was brought forward between United States v. Microsoft Company. In several rulings by Judge Thomas Penfield Jackson, Microsoft was found guilty to have violated its earlier consent decree and also found to have misused its monopoly the OS market. During the findings, it was found that Microsoft has a monopoly power in the market especially for the desktop operating system. Some of the findings of this case were; first, Microsoft share market for desktop operating system was extremely stable and high. Second, the company’s domain market was restricted by lots of entry barriers. Third, due to high entry barriers, the company’s customers were denied alternatives to windows (Hitt & Hoskisson, 2008).  In issues arises from those who need to purchase computer without original copy of windows pre-installed and without any extra license fee either to be used by another operating system or since license was already obtained elsewhere, i.e. through the MSDN Alliance program. The company encourages the original equipment manufacturers to provide computers that have already installed windows by offering their dominance in computer sales with the argument that consumers need not install operating systems in their computers. Since the cost of licensing varies depending on discounts offered to OEM, and since there is no same computer that the original manufactures sells without windows, there is no direct way of finding the size of the refund. During the year 2009, Microsoft expressed that it has been charging OEM about $50 for a licensed at a $1000 computer. Although it is easier to get a computer without operating system, almost all big computer sellers continue to install Microsoft Windows with most of the computers in their sizes. They argue that price increase of a computer as a result of inclusion of a Window license fee has been regarded as Microsoft tax or Windows tax by conflicting computer users. It has been found that some of the ways where Microsoft fight piracy is by giving an advice to equipment manufacturers they will required to pay more prices for Windows unless reduce drastically the number of personal computers that they sell in the market without a pre-installed operating system. Microsoft has been accused of providing refunds for licensed Windows through an OEM, which includes licenses accompanying the purchase of a computer or are already pre-installed on a computer. In another case, Microsoft is accused of the distribution of shared resource software to get names of the developers who are exposed to the company’s code, as others believe that these developers could one day be used as a target of lawsuits if they ever try to engage in the development of other competing products. Several organizations have addressed this problem like Open Source initiative and American Bar Association through published papers (Beattie, 2010). Since 1990s, Microsoft Company was accused of keeping “hidden” or “secret” APIs; interfaces to its OS software that deliberate keeps undocumented so as to be competitive its application software products. Nevertheless, Microsoft employees have refuted this allegation claiming that both inside and outside application developers of the company often reverse-engineered DOS and 16-bit Window versions without any support, that create a legacy support issues that is beyond any alleged gain to Microsoft. While responding to court orders, Microsoft has published interfaces components of its OS software, comprising of Windows media and Internet Explorer that is part of windows but is a competition with application software (DAFT, 2006). From its formation, Microsoft defined itself as platform organization and understood the significance of attracting third-party programmers. This can be seen through the provision of development tools, access to proprietary APIs in the initial versions, trainings and partner programs. Though the end result of Microsoft software allows the user to get benefits from network effects, most critics regard it as an extinguish strategy by the company to add proprietary features to open standards, therefore utilizing its market control to gain illegal ownership of standards extended in this manner In addition, the company has battling in court with several private companies. The most prominent one include legal battle with Alcatel-Lucent that alleged that Microsoft had infringed their patents on their playback audio files. In addition, Opera accused Microsoft of making intentionally its MSN service to be not compatible with on Opera browser on various occasions. On the other hand, Microsoft also filed a lawsuit at the international Trade Commission arguing that Alcatel-Lucent infringed its ten patent rights. In and out of courts filing of lawsuits has greatly affected the performance of the company at large. Microsoft is accused of the distribution of shared resource software to get names of the developers who are exposed to the company’s code, as others believe that these developers could one day be used as a target of lawsuits if they ever try to engage in the development of other competing products. Several organizations have addressed this problem like Open Source initiative and American Bar Association through published papers (Beattie, 2010).  From 1990s, Microsoft Company was accused of keeping “hidden” or “secret” APIs; interfaces to its OS software that deliberate keeps undocumented so as to be competitive its application software products (Williams, 2011). Nevertheless, Microsoft employees have refuted this allegation claiming that both inside and outside application developers of the company often reverse-engineered DOS and 16-bit Window versions without any support, that create a legacy support issues that is beyond any alleged gain to Microsoft. While responding to court orders, Microsoft has published interfaces components of its OS software, comprising of Windows media and Internet Explorer that is part of windows but is a competition with application software (DAFT, 2006). The dominance of Microsoft and its products in the market have received various resentments, which is not essentially limited to the competitors of the company. In a certain publication in 2003, it was argued that the dominance of Microsoft products in the market led to a monoculture that is vulnerable for virus to utilize. In another case between European Union and Microsoft, the company was accused of its market dominance according to dominant laws. It started from a mere complaint from Novell against Microsoft over the licensing practices in 1993 later ended up with Microsoft being compelled to reveal some information relating to its server products and release a version of the windows into the market without windows media player (Beattie, 2010). In 2008, European Union competition commission decided to fine Microsoft $1.35 billion for failing to comply with antitrust order. The case regarding the antitrust decision was given in 2004 citing that Microsoft failed to disclose the required interoperability information from competing software companies which restricted them from making their software be compatible with windows. Later on, the commission ordered Microsoft to give out the information. Although Microsoft complied with the directives from the commission, EU was not satisfied with the provided information and later fined the company to the tune of $1.68 billion in three different cases. Microsoft was among the first companies to take part in the PRISM surveillance program, according to leaked NSA information. This kind of program gives authority to the government to access information secretly across the data of non-American citizens hosted by American corporations without any warrant (Chris Bernard, 2009). Nevertheless, Microsoft denied taking part in such a program. The linked information showed that the company provided assistance to NSA to evade its encryption to seize web chats on the outlook.com and offered it unencrypted access to Hotmail.com and Outlook.com. Microsoft offered the NSA with ease access to the data of its users on its cloud storage service. After the company acquired Skype, NSA the amount of Skype calls that were collected through Prism. Despite all these accusations, Microsoft replied through a statement that they only provided customer data only in response to legal procedures. Labor Issues Human resource management has been one of the greatest issues facing the company due to its size. It has been an issue because permanent workers of enjoy some best corporate treatment, where most of the company’s labor force are outside this class. This comprises the use of permatempt workers i.e. (employees employed for some years as temporary, mostly without medical privileges), application of forced retention strategies, where outgoing employees would be sued as a way of reducing departure, and also much of traditional measures of reducing costs for instance reduction of medical benefits, withholding the provisions of towels in the locker rooms within the company. In the past, Microsoft has been charged with overworking its employees in many occasions, leading to burnout few years after working at the company. In several occasions, the company has been regarded as “velvet sweatshop”, a term started way back in 1989 in a Seattle Times article, and was later used to describe the organization by some of the Microsoft employee (Chris Bernard, 2009). This form of characterization comes from this perception that the company offers almost everything to its employees at the right place and time, but on the other hand overworks them to a point where employee’s health is in danger. For instance, the kitchenettes have free drinks, and several buildings have shower and exercise rooms. Nevertheless, the company has been criticized of intending to make employees work in the company for a long period and making them working too much. In 1992, a US lawsuit was brought against the company with a representation of over 8000 employees that had been categorized as “freelance” and “temporary”. Microsoft was forced to define their jobs and was later called to settle their suit at the cost of $93 million. A side effect of permatempt lawsuit resulted to contract employees being kept away from taking part in team morale and other activities that can be seen as making them employees (Williams, 2011). Employees were later limited to a contract of one year and must be out for at least 100 days before renewing the contract. In another labor issue, Microsoft was accused of classifying journalist as “Sketchy”, “Okay”, or “Needs work” and mostly targeted “Needs work” journalist as it attempts to have them terminated. For instance, one of the journalists argued that the company denied him information concerning Windows since he was blacklisted. Another journalist said that she was also denied an interview with some Microsoft executive for a number of years after publication of a story that described various bugs in Windows 2000 immediately it was released. Other issues Microsoft has attracted other issues in various states and foreign countries. For instance, during a class-action lawsuit in Minnesota in 2004, documents subpoenaed from Microsoft Corporation showed that the company had gone against non-disclosure for the previous seven years in getting business plans from Go Corporation, making use of them to design and announce a rival product called PenWindows and compelling Intel to lower its investments in Go. A class-action suit in 2004 accused Microsoft of charging high prices on the customers in California State. Microsoft settled the case at the cost of $1.1 billion, with additional charges of $258 million in legal charges although the charges were later reduced $112 million. In 2006 in Iowa State, Microsoft was also the subject of a court case where it was sued for the Windows Vista Capable logo (Chris Bernard, 2009). Moreover, Microsoft together with other companies like yahoo, Google and other companies has collaborated with the Chinese government in the implementation of internet censorship. Human rights activist and other media have criticized these companies, noting, for instance, that it is quite ironical that organizations that exist because of freedom of expression and freedom have played a role of censorship. When it comes to the issue of doing business globally, Microsoft has been affected by various economic challenges. Global presence of the company has led to various economic challenges. For instance, Economic forces can have an influence on the performance on the performance of an organization. Interest rates, economic growth, inflation rates, availability of credit, foreign trade balances and foreign exchange rates are some of the critical economic factors (Williams, 2011). The company is faced with the uncertainty of foreign exchange rates since profits earned in a foreign country may lead to a loss due to unfavorable exchange rates. References Beattie, A. (2010). A History Of U.S. Monopolies. [online] Investopedia. Available at: http://www.investopedia.com/articles/economics/08/hammer-antitrust.asp [Accessed 4 Sep. 2014]. Chris Bernard. (2009), ‘Cultural innovation in software design: the new impact of innovation planning methods’, Journal of Business Strategy, vol. 30, pp. 57 – 69 DAFT, R. L.( 2006) Organization theory and design. Mason, OH, Thompson-South Western Sunny Baker, 2008, ‘What Every Business Should Learn from MICROSOFT’, Journal of Business Strategy, vol. 19, pp. 36 – 41. Elena Bonfiglioli. Lance Moir. Veronique Ambrosini. (2006), ‘Developing the wider role of business in society: the experience of Microsoft in developing training and supporting employability’, Corporate Governance: The international journal of business in society, vol. 6, pp. 401 – 408 HITT, M. A., IRELAND, R. D, & HOSKISSON, R. E. (2008). Strategic management: competitiveness and globalization. Mason, Ohio, South-Western. HUTT, M. D., & SPEH, T. W. 2013. Business marketing management: B2B. Australia, South-Western, Cengage Learning. MUELLER-EBERSTEIN, M. 2010. Agility Competing and Winning in a Tech-Savvy Marketplace. Hoboken, John Wiley & Sons. Jihye Kim.,Yungwook Kim. 2007. ‘Issues evaluation’: the case of Microsoft, Corporate Communications: An International Journal, Vol. 6, pp. 76 – 81. Williams, J. (2011).What does the future hold for Microsoft’s business model? [online] Computerweekly.com. Available at: http://www.computerweekly.com/feature/What-does-the-future-hold-for-Microsofts-business-model [Accessed 4 Sep. 2014]. Read More