Risk is the likelihood of occurrence of a loss; the term risk is mostly used in business environments where resources are engaged whose fate is unpredictable. Risks in business are of various types some of which include market risk, economic risks, foreign exchange risks, inflation risks, transportation risks and many others.
Risks in business would cause major losses if inability presents itself that decisions cannot be properly made i.e. inability of making decisions of whether to retain personnel or not, decisions on what are the customers’ tastes and preferences and even those on current market conditions. Such decisions are normally very urgent and mandatory for the progress of any organization (Andreosso & Jacobson, 2005).
Most of the technology companies due to the nature of their operations are normally faced with threats of numerous risks. Technology companies apart from being volatile themselves operate in highly volatile markets where competition itself is cut-throat. Therefore, with not well laid strategies such firms would easily collapse (Andreosso & Jacobson, 2005).
Risks that are likely faced by technology companies like Microsoft include the following:- Competition This has resulted from the constantly and rapidly expanding technology market, where firms come into operations day by day and not with nothing but with even more complex products tailored towards consumer needs.
Products such as the Firefox browser by far posed great threat to Microsoft internet explorer given its more enhanced features like enhanced speed and even more reliable and convenient features to consumers. These resulted into great unrecoverable losses to Microsoft; market share was also greatly lost (Andreosso & Jacobson, 2005).
Piracy Piracy is a great killer in many technology firms. Many firms send spies to firms they consider their bigger rivals and still their business secrets about the products they deal in and which they can produce alike.
Such business has harmed most technology firms given that the pirated products most likely serve the same purposes as the original and they are as well cheap and affordable to lower level consumers who form the largest market base (Andreosso & Jacobson, 2005). Price Risks There has been consistent growth rate in prices most so those of the raw materials like silicon, steel and even copper which are the basis for production.
This has often translated to high prices most so when translation risk also comes along. This even hikes the prices further for the consumers who find technology products unaffordable. Prices of technology firms are normally dictated by the economic forces while those of manufacturers are mostly forecasted by finance managers and firm accountants (Andreosso & Jacobson, 2005).
Transportation Risk This is largely experienced by manufacturing firms like the Caterpillar most so if they have to import raw materials or even export their products which most of the time is bulky and costly to transport. Technology companies like Microsoft on the other hand are mostly situated in central and strategic locations where they have their raw materials readily available.
In America they are mostly found in the Silicon Valley, in this case they don’t have to incur the unnecessary costs (Andreosso & Jacobson, 2005). Economic risks These entail risks such as those that create imbalance in the world economy like the financial crisis resulting from the weakening of the dollar.
The worst ever felt was the great depression and lately the American Financial crush. Such crisis is normally to the disadvantage of multinational companies such as the Microsoft since it normally leads to a big slush in its profits.
Reference
Andreosso, B., & Jacobson, D. (2005). Industrial Economics and Organization. McGraw-Hill Publishing Co.