Microsoft Company is one of the biggest tech companies who strive to maximize the profit from the its products that they launch in the market. In maximizing the profitability of there are various factors that need to be considered for effective outcome.
Executive Summary
Microsoft have been always the one of the best companies for all age consumers. Microsoft is always being one of the world’s top leading names in technology, and it has always provided the ultimate quality for its products and software. The Virtual Reality Glasses technology is a continuance of Microsoft’s greatness. The innovative technology under the glasses is designed to take consumers to the future by hearing, feeling, and living the moment, rather than wearing a traditional headphone, watching a movie with a naked eye, or talking over a regular phone. The Virtual Reality Glasses is technology that replicates the environment, and simulates the user’s physical presence and interactions within the simulated environment. The Virtual Reality Glasses are designed for the people to experience the real world and develop the way of living.
The technological market is risen. Researches have shown that technological industries are risen quickly and the more delay to process an innovation, there will be a chance that another company will enter the market with a better idea. Individuals and businesses are always looking for the best way to enjoy and solve problems with a minimum work time and a maximum result. The Virtual Glasses will make the world come closer together. People are contacting each other’s remotely, but with the Glasses it will make it remotely and realistic.
The Virtual Reality Glasses will deal with a huge element in entertaining and solving problems. Overall, the technology will reduce boredom, and will increase entertainments, along with a huge impact on the world.
There is need for Microsoft to effectively find a solution by the use of these forecasting, PERT/CPM, and linear programming models to create the Virtual Reality Glasses. The choice of these three models present the best chance to implement the best possible solution to pave way for the generation of Virtual Reality Glasses product. The forecasting model in this research includes both regression analysis and trend analysis. Other models include the project management models PERT/CPM which generally helps in finding the necessary steps that can be followed to have a better strategy to implement a given task which is creating a new product to the market. Linear Programming helps to resolve the challenges and to help maximize the product’s efficiency, along with Microsoft’s revenue for selling the product.
TABLE OF CONTENTS
Introduction 5
Analysis of Forcasting Model
Regression 6-7
Time Series 8
Analysis of Pert/cpm Model
Overview 9
Steps 9-11
Analysis of linear programming Model
Overview 12
constraints 12
Objectives 13
Implementation 14
Conclusion 15-16
Appendix a 17-18
Appendix B 19-20
Appendix C 21
Introduction
Microsoft, whose headquarters are in Redmond, WA, a multinational technology Company. It is the leading developer of computer software and applications. In addition, the company publishes books, offers email services, sells electronic game systems and publishes multimedia titles. Its sales offices are distributed throughout the world and has also opened research labs in different parts of the world.
The company was founded by Bill Gates together with Paul Allen in 1975. By mid 1980s, the company had rose to dominate the personal computer operating system market. This time it had developed the MS-DOS operating system, which it later upgraded to Microsoft Windows. Over the years, the company has been able to upgrade its operating system. In addition, the company has been able to make various acquisitions. For instance, it was able to acquire Skype Technologies in May, 2011, which is its largest acquisition so far. Microsoft is also set to make an acquisition of LinkedIn for $26 billion.
Microsoft become a publicly owned corporation in the year 1986. It has always been one for the most profitable and powerful companies in the US. The company made an entry in the gaming and phone market in 2001 by producing its first gaming application, the Xbox. The game was able to take the second place in the gaming market. Bill Gates was the company’s CEO until 2000 where he relinquished his role to Steve Ballmer. As can be seen, the company has been able to make huge progress and has been able to remain competitive in the market. Its move to buy LinkedIn is one of its next major move.
Analysis of Forecasting Model
Regression analysis models (Appendix A) provide a clearer picture in trying to uncover a certain action in the future using current data. Regression models provide a powerful tool, allowing predictions about past, present, or future events. The researcher employs these models either because it is less expensive in terms of time and money to gather the information to make the predictions than to gather the information about the event itself, or because the event to be predicted will happen in some time in the future.
Interpretation
R2= 0.787 which shows that 78.7% of the variations in revenue are due to variations in independent variables (inventories, investments, diluted earnings per share and basic earnings per share). Sincemultiple R is close to one (0.887), we can conclude that our model is good and there is a strong relationship between dependent (Revenue) and independent variables (inventories, investments, diluted earnings per share and basic earnings per share).
P=0.062>0.05, hence we do not reject null hypothesis that regression coefficients are equal and conclude that there is a no statistical significant difference in regression coefficients. Since p>0.05 then it means that changes in predictor variables (inventories, investments, diluted earnings per share and basic earnings per share) are not associated with changes in the response variable; which is Revenue.
Revenue has a positive relationship with Inventories (billion), Inventories (billion), Investments (billion) and Basic earnings per share, while Basic earnings per share has a negative relationship that is as Basic earnings per share increase the Revenue decreases.
Since P-values for all coefficients are greater than 0.05 there we do not reject null hypothesis and conclude that all there is no statistically significant difference in the coefficients. Also from confidence intervals we find that zero is inclusive to all intervals of the coefficients for both 90% and 95% confidence intervals hence we conclude that there is no statistically significant difference among the regression coefficients.
The following is an interpatient for the correlation results for Microsoft:
- There is a strong positive relationship between Revenue and Inventories=0.76966
- There is a strong positive relationship between Revenue and investments=0.83014
- There is a moderate positive relationship between Revenue and Diluted earnings per share =0.51019
- There is a moderate positive relationship between Revenue and Basic earnings per share =0.50535
- There is a strong positive relationship between Inventories and investments=0.94130
- There is a weak positive relationship between Inventories and Diluted earnings per share=0.18704
- There is a weak positive relationship between Inventories and Basic earnings per share=0.18249
- There is a weak positive relationship between Investments and Diluted earnings per share=0.28270
- There is a weak positive relationship between Investments and Basic earnings per share=0.27746
- There is a strong positive relationship between Diluted earnings per share and Basic earnings per share=0.99995
Time series model (Appendix A)
Negative forecast errors show that forecast value is higher than time series value, while negative forecast errors show that forecast values are less than time series value. Zero error means that they are the same. In our question periods 1, 4,5,6,7 & 8 have predicted values more than time series values, while periods 2, 3, 9 & 10 have lower predicted values than time series values. Mean square error for the 10 periods is 6.08. Period 11, 12, 13, 14, & 15 are predicted as 95.67, 100.72, 105.78, 110.83 and 115.89 respectively. The predictions show that Microsoft will generate more profit in the future from selling the glasses. It clearly tells us how successful it would be.
Analysis of PERT/CPM model
PERT (Program Evaluation and Review Technique) and CPM (Critical Path Method) are project management models (Appendix B) that are employed in ensuring the activities are well planned and executed in the system for effective product generation. From the project activity that constitutes elements that can enable the proper environment for the creation of a new product list table. In order to make the product, it have to go through certain steps; which are:
- Brain Storm
- Research
- Develop a design
- Develop a Model
- Testing the Model
- Adjustments
- Production
- Marketing
- Price/Cost
- Final Results
The project starts by brainstorming and ends with the final report. For the development of the design, brainstorm and research must have been completed. For the development of the model, the project needs to develop the design first.
To test the model, we need first need to develop the model, before adjustments are made, the project needs first to develop the model and test the model. For production to take place testing of the model must have been done. Marketing can only take off if adjustments and production have been completed. Price cost to be determined production and marketing must have been completed. To finish the project, the price cost must have been determined.
Variances of the activities show the degree of variation from the mean. The larger the variation, the larger the risk in our project price cost has the largest variance. Hence, there is a greater risk likely to take when deciding on the price cost.
Slack is the difference between earliest start and latest start or earliest finish and latest finish. The amount of time a non-critical activity can be delayed with affecting the completion time of the project. Inactivity schedule table, we find that brainstorm and production have the slack time of 1.67 and 0.83 respectively. If 1.67 delays brainstorm, it will not affect the completion time for the project. Also, we find that critical path which the longest time path is taken for the project to be complete is research, development of design, development of the model, adjustments, marketing, price cost then final. Expected time for the project to be completed is 36.5 weeks. The variance time for the project to be completed is 5.33 weeks, which is the variability of the completion time from the average time taken for the project to be completed.
For Microsoft to complete the creation of the Virtual Reality Glasses, the project must start by brainstorming and end by final result, in order to sell the product. For the development of the design, brainstorm and research must have been completed; that means that if for the research on Virtual Reality Glasses to be done, and brainstorm must have been done first otherwise the research process would not take place.
For the development of the model, the project needs to be developing the design. First, elsewhere the company it will not proceed to the next activity (development of the model). For Microsoft to the model, it will have to develop the model. Before adjustments are made, the project needs first to develop the model and test the model. For production to take place testing of the model must have been done. Marketing can only take if adjustments and production have been completed.
Analysis of Linear Programming model
Microsoft Company is one of the biggest tech companies who strive to maximize the profit from the its products that they launch in the market. In maximizing the profitability of there are various factors that need to be considered for effective outcome. When it comes to create the Virtual Reality Glasses product, there are several factors need to be considered including market, labor input, machinery, and marketing to produce the Virtual Reality Glasses. Linear programing provides the best possible way that can help Microsoft to enhance their business operations in relation to maximizing the profits and minimizing the costs.
The objective function of 5752.874 (Appendix C) in creating the Virtual Reality Glasses product is to maximize the resulting profits from the sale of the product. From the calculations done, the best strategy that Microsoft can adapt to maximize the profit is to make a profit of $300 from markets coverage, $200 from laborers, $600 from production machines, $100 from offering discounts given to customers, and $250 from advertisements.
To achieve maximum profit of the new Virtual Reality Products, there are some limitations and constraints that are supposed to be considered.
Microsoft can make a maximum profit of $450 from sales of the Glasses, the company must get a profit of $20 from markets, $20 from laborers, $146 from production machines, $ 26 from discounts to customers, and $10 from advertisements. Another constraint, for Microsoft to earn a profitof $ 350, the company have to make a profit of $20 from markets, $10 from labor, $165 from production machines, $82 from discounts offered to customers, and $26 from advertisements. Additional constraint to be considered by Microsoft company in order to make maximum profit of $ 220 of Virtual Reality Glasses, Microsoft company must earn a profit of $12 from markets, $5 from labor,$24 from production machines, $70 from discountsto customers, and $ 2 advertisements made. Another constraint is that to for the company to incur minimum cost in production of virtual reality glasses production of $80, Microsoft must spend $ 26 on markets, $58 on labor, $2 on production machines, $74 on discounts they offer to customers, and $ 25 on advertisements. To make maximum profit of $ 350, Microsoft have to get profit of$20 markets, $5 from laborers, $16 from production machines, $ 90 from discounts they get on materials used in making the Virtual Reality Glasses, and $21 on advertisements which is an additional constraint.
To achieve the objective function which is to maximize profit, Microsoft identified what profit each component taking part in achieving its objective function should make: markets should give $300 profit, labor give $200 production machines $600, discounts $100 and advertisements $ 250. this would give an objective function/maximum profit of $ 5752.874.the binding constraints for this model were markets, labor, machines used in production, discounts given to customers and advertisements made.After the linear programming model was run, it was determined that the optimal solution would be to sell the Virtual Reality Glasses to 16.494 markets and hire 4 laborers, make no use of machines, no discounts to be offered and no advertisements to be made. Linear programming results also shows that Microsoft Company should add more profit by $91.149 from machines, $1356.322 from discounts offered and $109.540 from advertisements. Microsoft also needs to reduce markets profit by $93.655, machines profit by $1.954 and discounts offered by $582.184.
Implementation
Virtual Reality Glasses will take our life into new level of living. Microsoft should identify the role of management agency the specific responsibilities of the key staff during project implementation, and monitoring should be outlined. There are some majors steps and responsibilities should be on place in order for the project to be completely finished with higher quality and standards.
- Beneficiary participation. The involvement of the beneficiaries in planningand what the company is expected of the team to be done.
- The organizational structure. Microsoft has to give the structure for the purses of management, priorities from the highest to lowest. Should also check the qualifications and skills for each staff member, job descriptions and specifications, because every step of the project matters and needed to be perfect.
- Financial management. It will coverthe management’s funding, financial reports and financial statements. These statements most to be accuratefor the public, so Microsoft can rise funding from its investors, and the better the statements are, the more money it will come.
- Reporting system. This system will concentrate onreporting to whom and how often.
- Microsoft need to develop more sustainability on the project. It is important for Microsoft to be sustained for the project to be perfect and done in time.
Conclusion
The three models provide the most basic chance present that can generate a solution to ensure that there is the creation of the Virtual Reality Glasses that Microsoft intends to introduce to the market. Among the three alternative model groups, the forecasting models provide the best possible solution that the company can take to create the Virtual Reality Glasses product. The reason is that the forecasting models can involve almost all the variables that can be considered vital in the creation of the new product.
Microsoft is a business oriented firm, and the need to create a new product must be economically viable. Thus the regression analysis and the trend analysis models outlined provide the necessary solution to the changes that the variables can be able to undergo until the company establishes an equilibrium point where the created of the new product will be without any negative financial implications or incurring extra costs as witnessed with the creation of new products by different companies.
Although the PERT/CPM model provide an illustration on how various variable can interact to produce a final solution to the company, they do not highlight the changes or the different positions that can be assumed by the company to provide a final important solution to the company. Thus, we would advise the company to adopt the forecasting models because they provide a clear interaction of the variables to provide a viable optimal solution for the product creation.
The linear programming results shows that Microsoft Company can still maximize profits. in creating the Virtual Reality Glasses. For Microsoft to realize its objective function of maximizing profits by $ 5752.874 it to should put some mechanisms to ensure that it raises the profits made on machines by $ 91.149, profit made on discounts by $1356.322 and profits gained from making advertisements of the product by $109.540.With the above adjustments made there will be no doubt of Microsoft will achieve its objective functions and making more profits in future.
Appendix A: Forecasting
Regression
FORECASTING WITH LINEAR TREND
*****************************
THE LINEAR TREND EQUATION:
T = 40.063 + 5.055 t
where T = trend value of the time series in period t
TIME PERIOD TIME SERIES VALUE FORECAST FORECAST ERROR
=========== ================= ======== ==============
1 44.28 45.12 -0.84
2 51.12 50.17 0.95
3 60.42 55.23 5.19
4 58.44 60.28 -1.85
5 62.48 65.34 -2.85
6 69.94 70.39 -0.45
7 73.72 75.45 -1.73
8 77.85 80.50 -2.65
9 86.83 85.56 1.28
10 93.58 90.61 2.97
THE MEAN SQUARE ERROR 6.08
THE FORECAST FOR PERIOD 11 95.67
THE FORECAST FOR PERIOD 12 100.72
THE FORECAST FOR PERIOD 13 105.78
THE FORECAST FOR PERIOD 14 110.83
THE FORECAST FOR PERIOD 15 115.89
Appendix B: PERR/CPM
PROJECT SCHEDULING WITH PERT/CPM
********************************
*** PROJECT ACTIVITY LIST ***
IMMEDIATE OPTIMISTIC MOST PROBABLE PESSIMISTIC
ACTIVITY PREDECESSORS TIME TIMETIME
————————————————————————
A – 1 3 5
B – 2 5 6
C A,B 2 4 9
D C 1 2 6
E D 3 8 10
F D,E 4 5 6
G E 2 4 7
H F,G 2 5 6
I G,H 1 3 10
J I 3 4 4
————————————————————————
EXPECTED TIMES AND VARIANCES FOR ACTIVITIES
ACTIVITY EXPECTED TIME VARIANCE
——————————————-
A 3.00 0.44
B 4.67 0.44
C 4.50 1.36
D 2.50 0.69
E 7.50 1.36
F 5.00 0.11
G 4.17 0.69
H 4.67 0.44
I 3.83 2.25
J 3.83 0.03
——————————————-
*** ACTIVITY SCHEDULE ***
EARLIEST LATEST EARLIEST LATEST CRITICAL
ACTIVITY START START FINISH FINISH SLACK ACTIVITY
————————————————————————
A 0.00 1.67 3.00 4.67 1.67
YES B 0.00 0.00 4.67 4.67 0.00
YES C 4.67 4.67 9.17 9.17 0.00
YES D 9.17 9.17 11.67 11.67 0.00
YES E 11.67 11.67 19.17 19.17 0.00
YES F 19.17 19.17 24.17 24.17 0.00
G 19.17 20.00 23.33 24.17 0.83
YES H 24.17 24.17 28.83 28.83 0.00
YES I 28.83 28.83 32.67 32.67 0.00
YES J 32.67 32.67 36.50 36.50 0.00
————————————————————————
CRITICAL PATH: B-C-D-F-H-I-J
EXPECTED PROJECT COMPLETION TIME = 36.5
VARIANCE OF PROJECT COMPLETION TIME = 5.33
Appendix C: Linear Programming
LINEAR PROGRAMMING PROBLEM
MAX 300X1+200X2+600X3+100X4+250X5
S.T.
1) 20X1+20X2+146X3+26X4+10X5<450
2) 10X1+46X2+165X3+82X4+26X5<350
3) 12X1+5X2+24X3+50X4+2X5<220
4) 26X1+58X2+2X3+70X4+5X5>80
5) 20X1+5X2+16X3+90X4+21X5<350
OPTIMAL SOLUTION
Objective Function Value = 5752.874
Variable Value Reduced Costs
————– ————— ——————
X1 16.494 0.000
X2 4.023 0.000
X3 0.000 91.149
X4 0.000 1356.322
X5 0.000 109.540
Constraint Slack/Surplus Dual Prices
————– ————— ——————
1 39.655 0.000
2 0.000 2.874
3 1.954 0.000
4 582.184 0.000
5 0.000 13.563
OBJECTIVE COEFFICIENT RANGES
Variable Lower Limit Current Value Upper Limit
———— ————— ————— —————
X1 186.005 300.000 800.000
X2 174.745 200.000 1380.000
X3 No Lower Limit 600.000 691.149
X4 No Lower Limit 100.000 1456.322
X5 No Lower Limit 250.000 359.540
RIGHT HAND SIDE RANGES
Constraint Lower Limit Current Value Upper Limit
———— ————— ————— —————
1 410.345 450.000 No Upper Limit
2 175.000 350.000 392.500
3 218.046 220.000 No Upper Limit
4 No Lower Limit 80.000 662.184
5 38.043 350.000 353.386
