Analyzing the Business Strategy of Microsoft
The current study intends to analyse events of failure of firm with special orientation to the operations of Microsoft. Microsoft Corporation is particularly an American transnational technology corporation having headquarters situated in Washington. This company develops, producers, licenses, upholds and markets software, specialised services, consumer electronics and personal computers. Also, this study at hand also presents strategic framework particularly (using Business Canvas Model) for conducting strategic analysis. Furthermore, the company also uses tools such as SWOT analysis, PESTEL analysis and scenario planning for analysing businesses and identifying the current issue that is the underlying reason of the recent failure of the firm.
The future of Microsoft became uncertain particularly in the manufacturing business. Therefore, it is necessary to assess the reason behind why Microsoft has struggled to develop a sustainable mobile apparatus business. In essence, one of the primary complaints about Steve Ballmer’s period as chief executive of the firm Microsoft was that CEO did not respond speedily to immense shift to mobile instruments as well as applications. Whilst Google as well as Apple were establishing to increase their overall efforts, the company Microsoft was basically in a specific holding pattern (Walker et al. 2014). However, the time Ballmer responded, the company Microsoft was lagging behind to effectually challenge the enormous lead Apple as well as Google had attained.
As suggested by Tan and Carrillo (2017), the Nokia deal can be considered to be a nightmare. The decision of Microsoft to acquire mobile phone business of Nokia for roughly $7.2 billion is thought to be one of the biggest blunders of the firm. However, after failing to get much value out of the assets or resources of the firm Nokia, the company Microsoft was compelled to write down approximately $7.5 billion associated to the business transaction and reduced roughly 7800 jobs. Particularly, the company Nokia was believed to be the corporation that would improve overall market position of the firm Microsoft (Johnson 2016). Instead, it became a financial milestone that weighed around overall level of profitability of the firm.
Three different tools and techniques that can be used to for strategic analysis include the following:
Business Model Canvas: Microsoft |
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Key Partners -Manufacturers -Wholesalers -Suppliers -Telco Corporations -Foxconn -Value added resellers -Distribution Partners -Retailers (Scarborough 2016) -Technology Alliances -Microsoft is a founding member of Open Networking Foundation -Microsoft partner network -Microsoft joined the institute Linux Foundation as specifically Platinum member particularly through Microsoft’s Connect -Academic – Governing bodies -Acquirements of Microsoft that include LinkedIn, Nokia Devices along with Services, Hexadite, Yanner as well as Mojang and many others – The company was the official jersey financier of National Basketball team of Finland during the year 2015 at the EuroBasket. |
Key Activities – Product design as well as development -Research and development -Development of software -Management of change -Management of release -System of licensing -Deployments -Support for customers -Quality Control -Operations -Management of infrastructure -Sales and marketing -Hardware as well as electronic manufacturing |
Value Propositions -Brand -To enhance overall productivity at superior level -Maker of world’s largest software of particularly Windows (Barney 2014) -Most valuable corporations -Productivity as well as business services -The business concern also delivers a broad range of other customers along with enterprise software for particularly desktops as well as servers (Barney 2014) – Computer Hardware (referring to surface series of specifically laplets by the firm Microsoft) – Consumer Electronics (Windows Phone and Xbox One Console) |
Relationship with customers – Level of trust -Overall quality -Overall firm performance -Differentiation – Level of reliability – Automation (whenever possible) -Assured sales for huge accounts -Assistance towards customers -Program for the company’s partner -Level of certifications of the firm -Community -Effects of same side along with cross side network -Advantages available to each and every group exhibit call for economies of scale |
Customer Segments -Mass Markets -Business enterprises – IT administrators -Developers -Individuals |
Key Resources – Microsoft can be considered to be business enterprise and the products are utilized in roughly every computer on the entire world – The company can be considered to be a symbol of everything that is huge regarding information age -Leadership potential of particularly Satya Nadella -Software Developers (Prajogo 2016) -Bill Gates operating as a technology consultant -Sales Force -Experienced and specialised personnel -Technology -Data Centres as well as other areas of networking -Innovation -Intellectual Property (Gerow et al. 2014) -Determination -Talent as well as Corporate Culture -The company Microsoft can be considered as the third largest manufacturer of mobile phones manufacturing approximately 33 million units -The company has ever more diversified from particularly the operating system market and has carried out a total number of corporate acquirements |
Channels -Internet Bing -Flagship Stores -Microsoft Stores -Microsoft Azure Market Place -Worldwide Sales along with Support teams – Multi-product sales force (Fleisher and Bensoussan 2015) -Business retailers -Blogging -Incidents -Public Relations -Future Decoded can be regarded as a business networking event conducted each and every year by the firm Microsoft that permits business partners of the business concern to share their opinions -Technical references for different developers along with articles for different Microsoft magazines namely Microsoft Systems Journals that are obtainable through Microsoft Developer Network (MSDN) |
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Cost Structure -Development of software -Manufacturing specific hardware -Acquirements as well as development -Marketing as well as sales (Wu et al. 2015) -Research as well as development -Customer Service -Members of the staff -Different projects and projects of development -Roadmap of the product -Data centres -Operations as well as maintenance of information technology (Dzhandzhugazova et al. 2015) -Solar Panels more than 2000 are on top of the buildings that is particularly situated in particularly Silicon Valley creating roughly 15% of overall energy required by firm’s facilities -Different headquarters -Taxation |
Streams of Revenue -Different subscriptions -License fees -Product Sales of the business corporation -Advertisement Revenue -Sales of hardware -Presented as a percentage |
Strengths – Reputed Brand: Microsoft can be considered to be a multinational firm that functions through regional subsidiaries. This can minimize cultural variances in over and above 100 nations. -Technologically advanced firm: The company Microsoft can be considered to be a catalyst functioning in the tech world. Prioritizing innovation as well as optimization by means of strong research as well as development action (Lipman 2015). This functions Microsoft Research that is one of largest computer science research corporations that operate in close collaboration with top notch universities throughout the world. -Product Portfolio: The company Microsoft presents a wide range of software, specialised services along with hardware solutions across diverse classes of clientele. This help in enjoying a foremost position in the market. The company Microsoft generates revenue by means of developing, manufacturing, licensing and upholding software along with services across an extensive variety of computing instruments. The company Microsoft also delivers consulting along with support service for products/services. -Extensive system of distribution: Microsoft maintains and preserves a strong distribution along with network for marketing that leverages various functional performances (Kew and Stredwick 2017). The firm Microsoft sells and at the same time distributes products by means of three different channels that is to say, Original Equipment manufacturers, distributors as well as resellers and online |
Weakness – Legal proceedings: Microsoft can be considered to be a defendant in different unresolved cases marked against the same. The company is currently entangled in different legal proceedings associating to design of product, manufacturing and performance liability along with other litigations associated to agreements, issues of employment as well as intellectual property rights. – Not being able to take charge of counterfeit of software business in different developing countries (Horkoff et al. 2014) -Lagging in the area of innovation: Due to vast utilization, clientele of Microsoft have a common grievance that the firm Microsoft keeps upgrading the product although there is nothing new from the bottom ups from the reputable brand. With respect to operating system capabilities, the firm Apple is considered to be ahead to be that of Microsoft. Owing to which Apple is gradually coming up as the selected operating system. |
Opportunities – Transforming to Razor and Blade Model: In place of offering pricey software can operate on particularly Blade and Razor Model in a bid to counter illegal utilization of software mainly operating system, by means of which they can generate higher revenue. – Strategic Alliance: The business concern can concentrate on entering into new forms of partnerships for improvement of innovative along with technologically advanced products (Joyce and Paquin 2016). This kind of partnerships delivers a competitive edge and permit to garner higher share of the market. For instance, during 2014, the business concern pronounced 9 new hardware partners for Windows Phone. In essence, the partners deliver a direct accessibility to the tools, widening overall scope for firm’s customers and launching novel points of prices across primary growth markets. -Higher demand of smart phones: The company Microsoft can capitalize over the increasing demand of firm’s smart phones that is emerging as an opportunity for growth in both developed as well as developing countries (Aversa et al. 2015). |
Threats -Level of competition: The market for software can be considered to be highly competitive that might perhaps influence overall performance of the corporation. Essentially, the firm encounters stiff competition in different segments. The main rivals in the Windows Live Software along with services comprise of Apple, Yahoo as well as Google and many others (Toro-Jarrín et al. 2016). Also, the Internet Explorer encounters stiff competition from varied browsers designed by particularly Google (Chrome), Mozilla as well as Opera Software Company among many other. Also, the server of the firm along with tool products competes against the associated offerings made by Oracle as well as IBM. – Swift Technological Alterations: The tech-world is constantly altering. Business concerns are finishing up killing their own offering before competition destroys the same. -Pirated Market- It is the most important threat that the company encounters in the segment of software. Each and every year, Microsoft loses billions owing to flow of pirated versions across the entire world. The firm Microsoft loses considerable amount of revenue due to rate of piracy of over and above 30% in several nations. Furthermore, developing countries such as China, India and many other accounts for key market that are engaged in illegal utilization of Microsoft software (Amanullah et al. 2015). |
Managers of the firm Microsoft Corporation comprise of PEST Analysis in their approaches to comprehend business situations of the corporation.
Political Factors:
This segment of PEST analysis model manages impacts of the government on the remote else wise macro business environment of hardware as well as software business of the firm. However, in case of firm Microsoft, the following political external facets can be considered to be strategic decision making:-
Business Model Canvas: Microsoft
1) Overall political steadiness in majority of markets (this can be referred to as opportunity) (Nidagundi and Novickis 2017)
2) Enhancing support for the government for the purpose of automation (this can be indicated as opportunity)
3) Enhancing internal trade contracts (opportunity as well as threats) (Bull et al. 2016)
Political steadiness of majority of different markets generates numerous opportunities for Microsoft to augment its investment and corresponding firm’s performance. For instance, the business concern can augment sales along with investments in marketing in particularly Europe to attain a corresponding enhancement in overall revenue. Contrarily, the enhanced governmental support for mechanization presents opportunities for the firm Microsoft to enhance its overall computer technology sales through governmental clientele (Nidagundi and Novickis 2017). In essence, these external facets are unimportant, taking into account large scale purchases of the firm involving government bodies. Further, enhancing worldwide trade contracts develop a remote otherwise a macro-environmental factor that can support overall overseas sales of Microsoft (Bull et al. 2016).
Economic Factors:
Business effects of economic circumstances on the remote or else macro-environmental can be considered in this segment. Microsoft has the following external economic facets in stratagems for the hardware as well as software business:
– Significant economic steadiness of majority of developed nations (this can be referred to as opportunity)
– Higher rate of growth of developing nations (Jaber et al. 2015)
-Enhancing middle class disposable earnings (this can be referred to opportunity)
The firm Microsoft acquire benefits from the significant economic steadiness of the majority of developed nations. For instance, the firm can anticipate stable performance in these specific markets. The firm Microsoft has the capacity to boost overall sales figure in high growth developing nations. In essence, this specific opportunity translates into steady level of growth in worldwide sales figure of Microsoft (Rothaermel 2015). Furthermore, the economic external facets of the entire worldwide increase of middle class disposable earnings generate opportunities for the firm for higher rate of revenue. In essence, this specific condition is due to fact that middle class clientele are among the most important sources of revenues for the firm Microsoft. Therefore, the corporation can exploit opportunities of growth in the remote otherwise macro-environment (Leiber et al. 2018). Furthermore, the Microsoft have the need to strategically address opportunities in particularly computer hardware as well as software industry settings, as highlighted in this segment of the PEST Analysis.
Social Factors:
Strengths of Microsoft
This segment of the PESTEL analysis model takes into account the manner social settings exerts influence on remote else wise macro-environment of Microsoft, particularly in respect of behaviour of customers as well as expectations. In essence, in the market of computer technology, different socio-cultural external facets that exert immense impact on Microsoft include:
- Steady attitudes regarding leisure (this can be referred to as opportunity)
- Enhancing diversity of culture (this can be referred to as opportunity as well as threat)
- Steady demand for higher quality customer service (this can be referred to as opportunity) (Rothaermel 2015)
The steady attitudes regarding leisure present definite opportunities for the company Microsoft to design products that can meet leisure preferences of different customers. For instance, the firm can enhance its investment in innovating computer gaming products for the current purpose. Furthermore, augmenting cultural diversity can be considered to be potential threat particularly against Microsoft with regard to product-customer disparity in the remote or else macro-environment (Paul et al. 2014). For instance, satisfaction of customers can decline as products of the firm meet only biggest cultural clusters. Nevertheless, the firm has an effective opportunity to enhance its goods as well as services to deal with this issue. Contrarily, the steady demand for higher level of quality of customer service generates opportunities for the corporation to enhance customer support actions.
Technological Factors:
The influences of technologies on the remote else wise macro-environment of particularly computer technology segment are recognized in this area of PEST analysis model (Keller et al. 2017). The firm Microsoft has the need to assimilate the following external technological facets in business strategies:
-Quick implementation of mobile technology (this can be referred to as opportunity as well as threat)
-Enhancing volume of particularly online business transactions (this can be referred to as opportunity as well as threat)
-Augmenting mechanization in particularly business (this can be referred to as opportunity)
Microsoft can enhance business performance by means of rapid innovation of mobile instruments. In this regard, this opportunity is founded on quick adoption and enhancing demand for mobile technology. Nonetheless, this external technological factor can be considered to be a threat that helps competition against Microsoft (Kew and Stredwick 2017). The technology corporations can exploit this opportunity to enter the specific market. Enhancing volume of online business transactions deliver opportunities for the firm Microsoft to design higher number of products that uphold secure online business transactions processing. However, this enhancing online transactions of volume also threatens the firm with regard to corresponding enhancement of cybercrime attacks and this is can be considered to threats recognized in SWOT Analysis of Microsoft (Keller et al. 2017). Further, the firm has a prospect to develop through firm’s products that facilitate businesses to automate more of their procedures.
Conclusion
Environmental Factors:
In this segment of the PESTEL analysis model, influence of environmental issues on particularly hardware as well as software of industries can be considered. Essentially, Microsoft encounters the following ecological external facets in remote else wise macro-environment:
– Augmenting preference for different green products (this can be referred to as opportunity)
-Enhancing concentration on sustainability of business (this can be referred to as opportunity) (Grünig and Kühn 2015)
-Augmenting availability of different recyclable substances (this can be referred to as opportunity)
Founded on the enhancing inclination for green products, the firm Microsoft Corporation has the opportunity to augment its sustainability position. For instance, the business concern can design comparatively more environmentally friendly products and increase utilization of green energy in business opportunities. In association, Microsoft’s endeavour to enhance sustainability to directly address overall opportunity founded on enhanced focus of communities on sustainability of business (Grünig and Kühn 2015). Furthermore, the enhancing availability of recyclable materials is an important external facet that the corporation can utilize as basis for enhancing the usage of recycled materials in hardware as well as software products along with packaging.
Legal Factors:
The significance of rules as well as regulations is ascertained in this segment of the PESTEL Analysis. In the microenvironment of the firm Microsoft, the following external facets affect strategic success comprise of:
– Enhancing rules of electronic waste disposal (this can be referred to opportunity as well as threats)
-Enhancing regulations of patent (Cairns and Wright 2018)
-Regulations of energy consumption (this can be referred to opportunity as well as threats)
Enhancing electronic waste disposal regulations can be considered to be an opportunity for the firm Microsoft to execute more effectual recycling as well as disposal programs that enhance brand image. Nevertheless, these legal external facets can be considered to be a threat that can impose supplementary challenges for the firm in addressing environmental influence of the business (Cairns and Wright 2018). Contrarily, improving patent regulations aid global rate of growth of Microsoft by gradually lessening issues, namely piracy of computer software. In essence, the corporation also has an opportunity to augment products to assist client firms lessen their level of energy consumption by means of energy-efficient computing technologies. Founded on this segment of the PESTEL analysis, the firm Microsoft has growth opportunities in particularly remote else wise macro-environment (Cairns and Wright 2018).
Scenario Planning can be considered to be scenario as well as contingency planning that refers to a structured manner for business concerns. A cluster of executives establish to design a small number of scenarios. The reality is that each and every decision of Business Corporation can be founded on data and evaluation than intuition as well as gut feelings. As rightly indicated by Walker et al. (2014), scenario planning might perhaps not have dire consequences in the business corporation, however, risk opening can lead to enhanced costs, augmented risks along with missed opportunities. The scenario planning in the firm Microsoft holds four different vital steps. After recognizing driving forces along with critical uncertainties, the objectives are to develop four different scenarios. The procedures to generate scenarios in Microsoft can be considered to be simple and are mentioned below:
-Identification of vital uncertainties: After identification of driving forces and listing of the same, it is important to choose the ones that have immense influence on the business. For instance, two significant uncertainties for technology based business of the company are innovation and progression, and demand of consumers (Tan and Carrillo 2017).
-Development of a wide range of feasible scenarios: The objective is to frame a type of matrix with two vital uncertainties as specific axis (Johnson 2016). It is possible to draw four probable scenarios for the upcoming period depending upon directions of the uncertainties.
During the final stage, it is important to illustrate different implications of each and every scenario and reconsider the strategies. Again, it is important to establish mission as well as objectives whilst taking into consideration every state of affairs (Johnson 2016).
In the present case, management of the firm can follow the following fundamental steps for scenario planning procedures that again can be featured as follows:
– Defining issues: Management of the firm can comprehend the issues better with respect to time frame, different decision variables as well as scope. Also, they can make sure that the scope of the scenario is wider than the industry segment, different segments of product, customer clusters and technologies that presently describe the business. Further, it is important to assess the past to get a better comprehend different degrees as well as extent of uncertainty as well as volatility that this industry has witnessed and utilize this specific information as a way of standardizing the time frame and scope. The current issue detected was the lag of Microsoft and the threat of leads taken by the rival firms such as Apple and Google (Barney 2014). Also, the incorrect decision of acquirement of Nokia for approximately $7.2 billion can be supposed to be a mistake for the corporation. This decision compelled the business concern to write down approximately $7.5 million related to business dealings and lessened around 7800 jobs. In particular, the firm Nokia was deemed to be the business concern that would enhance overall market position of the corporation. In its place, it became a financial milestone that weighed overall firm’s profitability level.
-Identification of major stakeholders: The stakeholders who are said to be affected by the identified issue of the firm include creditors, suppliers, employees, owners, unions as well as community from which the company acquires resources (Prajogo 2016). All these stakeholders can be said to have interests in these identified issues and get affected by the same and are the ones who can exert influence on matters substantially.
-Identification of primary forces that outline the future and are within the scope of identified issues
The forces that are within the scope of the identified issue include social, economic, environmental, technological as well as political domain. Essentially, the sub domains comprise of legal factors, medical aspects or else scientific factors. The overall objective in this stage is to acquire pertinent information regarding the forces that might alter or else shape the upcoming period (Wu et al. 2015). The PESTEL analysis carried out in this study also helps in explaining the environmental forces.
It can be hereby observed that Microsoft enjoys government support and has the opportunity of augmenting sales through governmental clients. Further, the company has worldwide trade contracts that can uphold sales figure of the firm. Therefore, it can be mentioned that ill effects of incorrect decision and consequently failure of the firm can be overshadowed by these positive factors.
Also, analysis of economic factors indicates towards the fact that there is greater rate of growth in different developing nations and the firm Microsoft has the opportunity to boost sales figure in developing countries and develop worldwide sales figure.
-Identification of trends or else predetermined components:
The business of Microsoft can be considered to be dynamic as well as highly competitive with frequent alteration in both technologies along with business models. There is an industry shift and that can be considered to be an opportunity for conceiving novel products, novel technologies that can again transform the business as well as the entire industry (Dzhandzhugazova et al. 2015). The firm Microsoft also pushed boundaries and this is made possible by means of wide range of research as well as development actions that want to recognize and address altering demands of clients, trends of industry along with competitive forces.
Based on analysis of important technology trends and wide concentration on research as well as development of long term of novel products as well as services, management of the company witnesses opportunities to develop future growth. The company Microsoft participate in investing research as well as development resources in novel products as well as services in specific areas (Lipman 2015). The capabilities along with accessibility of personal computers, phones, different devices along such as televisions, phones along with different devices that are powered by software platforms together with applications. Taking into account this specific trend, it can be hereby believed that complete potential of software can be observed and felt in the way people utilize these kinds of devices and the related services at work along with their personal lives.
Analysis of Microsoft’s business helps in understanding important uncertainties that surround the company. In essence, the future of Microsoft particularly in the smart phone segment can be said to be uncertain. This helps in explaining the reason behind why the company has struggled to develop a sustainable mobile instrument business. Also, the company Microsoft was late to the entire game. It can be hereby said that the chief executive officer Microsoft failed to respond and react promptly to the massive transformation to different mobile devices as well as applications (Horkoff et al. 2014). Whilst Apple as well as Google started to gear up their efforts, Microsoft was to a large extent in a specific holding form and by the time they reacted, they were far behind to effectually confront and defy the lead that particularly Apple as well as Google has attained.
In addition to this, the decision of the management of the company Microsoft to acquire the mobile phone business of Nokia for approximately $7.2 billion can also be deemed to be one of the biggest blunders. After the company failed to acquire adequate value out of the resources of Nokia, Microsoft was compelled to write down roughly $7.5 billion associated to the business transactions and reduce 7800 jobs (Kew and Stredwick 2017).
The company was got into an uncertain position when Google made a strong start. It can be said that Google followed a specific strategy of Microsoft and took a particular page out of the book of Microsoft with mainly Android. In place of developing own devices like the firm Apple, Google in its place delivered an effective mobile operating system to different device makers to aid lessen overall costs of entering into the smart phone market (Joyce and Paquin 2016). As such, this can be considered as the same move that made Microsoft successful in the arena of personal computers and in the end assisted Android attain a leading position in the entire mobile market.
Analysis of business dealings of the company reveals the fact that Microsoft along with its hardware partners has over the years delivered certain good looking instruments, but they failed to capture the attention of purchasers of smart phone in a way Apple has. It can be seem that Microsoft attempted to spend billions to create a market momentum although failed to move the needle (Toro-Jarrín et al. 2016). Also, software design can be extensively marked as one of the primary causes for the company Microsoft’s efforts in the mobile business.
The company Microsoft has the need to win support of device makers. There remains a staggering variation in the total number of producers manufacturing Android compared to the ones making Windows smart phones. The company Google has executed out a fine job of attracting an increasing number of firms to develop Android devices. Whilst there are certain big names upholding the firm Microsoft, the best devices are mainly Android based. This can be considered to be an issue or in other words an uncertainty that the company Microsoft has the need to address n case if it desires to turn around things (Aversa et al. 2015). Furthermore, Microsoft was left behind on specific apps for long. Apps can be considered to be primary drivers of mainly adoption of smart phone in the earlier period.
Two important uncertainties that can be considered to have affected business potential of the company include acquirement of Nokia and sustainable mobile phone business segment (Amanullah et al. 2015).
Internal consistency along with feasibility of the projects (decisions of investments-R&D investments and decisions of acquirements among many others) can be evaluated by using methods of preparation of specific consolidated financial assertions and associated information. Internal consistency can be considered to be a typical dimension founded on correlations between diverse items on similar items. As suggested by Nidagundi and Novickis (2017), internal consistency enumerated with Cronbach’s Alpha is essentially a statistic enumerated from correlations between identified items considering the current case. Also, management of the firm can utilize the feasibility study that refers to analysis of overall practicality of proposed projects. Analysis is founded on an outline design of different system requirements, to ascertain whether the business concern has the technical expertise to manage completion of the entire project (Bull et al. 2016). This comprises of description of the company to evaluate more probable factors that can affect the entire study, examine the business, different human as well as economic factors along with probable solutions to the issue.
Conclusion and Recommendation
The above mentioned study helps in gaining deep insight regarding the event of failure of the firm and underlying reasons of failure of the firm Microsoft. Also, this study at hand helps in elucidating in detail about the Strategic Framework of Microsoft using Business Canvas Model. The company aids in understanding business strategy of the corporation using specific methods of analysis (that is to say, SWOT analysis, PESTEL analysis, Five Forces Analysis and Scenario Planning). Results of the analysis help in ascertaining appropriateness of business strategies of the company.
Keeping in mind the key points of strategic analysis, strategic recommendations can be generated for the upcoming period. Scenario analysis reveals the issue of high level of competition and late response and reaction of chief executive officers to market forces and stimulation. Level of competition can be addressed by way of adoption of differentiation strategy and expansion of markets for the products of the company. Also, scenario planning reflects that there is wrong decision on the part of the company regarding acquirements. Therefore, it can be supposed that study of feasibility can be used for addressing the recognized issue. Also, SWOT analysis helps in identifying the fact that company gets entangled in diverse legal proceedings associated to product designs. The legal issues of the company can be addressed by development of laws for operations, reporting of legal proceedings, regular consultation with legal advisor for prevention, control along with abatement of the identified legal issues.
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