Introduction
Microsoft Corporation is an American based multinational corporation. Founded by Paul Allen and Bill Gates in April 1975, Microsoft Corporation was initially based in Albuquerque, New Mexico, the United States of America. Currently, Microsoft Corporation is headquartered at Redmond, in the Washingtonian state of the United States of America. Microsoft Corporation has had tremendous growth in the last four decades since its inception. Satya Nadella, the current chief executive officer of Microsoft Corporation since February 2014 says that the company is one of the largest in the world by revenue. That has been attributed to the efforts that the stakeholders have invested in the company's operations. The stakeholders of Microsoft Corporation that is the employees, the investors and the customers have been involved in the company's affairs thereby increasing the opportunities for its expansion into the various countries across the world. The support has also led to the introduction of more products and services of Microsoft Corporation into the market (Microsoft, 2018).
Recording almost 90 billion dollars in 2017, Microsoft Corporation was among the best financially performing information technology institutions not only in the United States of America but also in the whole world. Microsoft fame can be attributed to the unique products and services with which they have been providing their customers. The products include mobile phones and personal computers, among others. Most of the corporation's services are centered on the licensure and manufacture of computer software for the worldwide consumers. Microsoft Corporation's success has also been associated with the elaborate marketing strategies invested in by the company. Specifically, the social media presence of Microsoft Corporation has made avenues for it to reach the target consumers belonging to the digital age. Lately, Microsoft Corporation has transformed its marketing trends by increasing the personalization and customer experiences being prioritized. That means that the company has sought to fulfill what every individual consumer wants at the company (Microsoft, 2018).
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Microsoft Corporation has associated its growth to the organic growth models in the company. Organic growth of a business refers to the conventional growth and expansion of a business venture without the input of another business venture (Mack, 2012). Organic growth is laborious and may depend on some factors. One of the factors affecting the organic growth of a company is the marketing that the company strategizes to put its products and services into the limelight and attract the potential consumers. While there is pride in the nurturing of business until the market stabilizes and it expands rapidly, most entrepreneurs may find that organic growth takes a long time before the industry can mature enough and evolve to bring in the expected returns. The other con of the organic growth of a company is that it becomes hard for a business owner to move his or her venture that has grown organically to another location. The fear of the loss of clients makes the entrepreneurs of such businesses avoid moving them to other locations. That would also apply to Microsoft Corporation (Mack, 2012).
Microsoft Corporation has also associated its growth with mergers and acquisitions with other businesses in the United States of America and the rest of the world. Comparatively, the growth through mergers and acquisitions has enabled Microsoft to realize its growth goals faster than in the organic growth approach in the company. The growth through strategic acquisition in the companies such as Microsoft Corporation has been far much cheaper than the organic growth model. Nonetheless, growth through mergers and acquisitions for Microsoft Corporation can lead to some challenges. One of the significant challenges facing strategic acquisitions is that the speed of adapting to the external atmosphere of Microsoft Corporation has not always been the same as the internal speed. That has come up with management issues where the leaders have to speedily ensure that the processes in the company are in line with the rate at which the mergers and acquisitions are being effected.
Explanation and Analysis of Assumptions and Results of eVal Projections for Organic Growth Strategy
One of the most recommended strategies for ensuring that the organic growth strategy is a success is by expanding the market of Microsoft Corporation in the United States of America and the other countries across the world. That can be achieved by efforts such as the opening of new branches of the company, and coming up with successful and strategic marketing approaches for the company's products and services. Microsoft Corporation has had to have a diversified approach to maintaining its organic growth sector. One of the methods in the multiple approaches strategy is to create new products, business models, and services. The creation of the products, services, and models has been fueled by the desire of the company's management to propel the company's performance. One of the challenges to that strategy is the growing competition from the competitors of Microsoft Corporation from within and without the United States of America. That has led to the derailment of the creativity levels that gas made the company come up with new commodities for its vast market (Mack, 2012).
The other strategy that the company has made use of in the organic growth strategy is to make the corporation focused on the results of the processes within the company. Microsoft Corporation, just like its competitors, has been at the forefront of pursuing a mixed approach method to the organic growth efforts by the multinational. The leadership of the company has been trained to focus on the results to identify the strengths and the weaknesses of the company and thus determine the areas that the company needs to improve. The integration of the multiple strategies of the organic growth approach by Microsoft Corporation has helped the company in the facilitation of processes such as investing and has tremendously boosted the company's financial performance over time (Mack, 2012).
Microsoft Corporation has come up with investment plans to boost its financial performance and edge its industrial competitors. Informally known as the Microsoft Redmond campus, the headquarters of Microsoft Corporation has been on the schedule for expansion by the company starting the year 2017 and spanning a couple of years. While the increase is going to cost Microsoft Corporation many billions of United States dollars, the company has demonstrated its financial prowess in expanding the headquarters. This I going to be the most extensive renovation that Microsoft has undertaken since its inception (Lerman, 2018). Contrary to the public expectations of fear and instability in the company in the planning of the expansion, the global leader in information technology has proved many people wrong and is set to build eighteen more buildings in its Redmond campus. The company will do so over the next five to seven years and will add the buildings to the existing 80 on its suburban and currently forested technology center (Austin, 2017).
The expansion of the Redmond campus by Microsoft Corporation is a perfect example of the company's organic growth strategies, which have been continuously reiterated by the company's officials. One of the spheres targeted by Microsoft Corporation is the employees' segment. The company has aimed at improving the handling of the employees just like its competitors such as Amazon and Google, both located in the United States of America. Once the renovation is done, Microsoft Corporation will have room for 8000 more employees to add its current 47000 employees in the Redmond campus (Lerman, 2018. That will expand the business models of the company in a significant way. Also, the company will have satisfied its quest for a technological approach in its worldwide operations. The tech headquarters will be an essential step in drawing in more sales of technological gadgets and services in the US and elsewhere across the globe. Microsoft has allegedly agreed with Sound Transit, worth $33.3 billion, to build a pedestrian bridge and light rail services. That will facilitate the Redmond expansion. The whole project is set to cost $250 million (Austin, 2017).
Explanation and Analysis of Assumptions and Results of eVal Projections for Merger or Acquisition Growth Strategy
The mergers and acquisition at Microsoft Corporation have been channeled to offer growth and expansion opportunities for the company around the world. The first acquisition completed by Microsoft Corporation was the acquisition of Forethought Inc., an American based computer software manufacturer in 1987. The purchase cost Microsoft $14 million. The addition of Forethought Inc. was a stepping-stone for the other mergers and acquisitions that Microsoft Corporation has effected in the recent past. Microsoft Corporation has been involved in more than two hundred acquisition deals. The acquisitions have consistently drummed up business for the global software and hardware provider and stabilized its financial performance. In September 2013, Microsoft Corporation publicly made known its intention to acquire the hardware division of Nokia, a mobile phone manufacturer based in the greater Helsinki area in Finland. The opportunity that drove Microsoft into the acquisition was that the company needed to expand its international presence and more so make sure that the software it has designed and manufactured has reached its target market. Mobile phones by Nokia were also in demand in many countries across the world (Kovach, 2014).
The acquisition of Nokia had implications on the financial reporting of Microsoft Corporation in the fiscal year 2014. To begin with, the net sales of the company rose from $77.8 billion to $86.8 billion. Such tremendous growth in the sales of the company was related to the acquisition of the mobile phone manufacturing division of Nokia. The consumers of both Nokia and Microsoft increased their consumption of the phones with the Microsoft software. An example of a famous model from Nokia that was because of the merger was the Nokia Lumia, which reached the global market in a significant way (Kovach, 2014). The gross profit of Microsoft Corporation grew from $57.6 billion in 2013 to $59.9 in 2014 (SEC, 2018). The growth of the gross profit was attributed to the increase in the sales of the Microsoft software, which was included in the mobile phones that belonged to the Nokia brand. With time, the number of the worldwide consumers of the Nokia mobile phones grew boosting the financial increase of Microsoft Corporation. The software developed by Microsoft Corporation also enabled the Nokia mobile phones to have a facelift thus appealing to more consumers in the different countries across the world.
The acquisition of Nokia by Microsoft to come up with the windows phones cost Microsoft $ 7.2 billion. The financial analysts at the company researched on offer and found out that it was a viable offer that would exponentially increase the growth of Microsoft Corporation in its financial sector. The acquisition of Nokia by Microsoft was also expected to increase the total assets of the company by a considerable margin. The forecast was proved right when Microsoft announced that its 2014 total assets were valued at $ 172.4 million up from $ 142.4 million in 2013 (SEC, 2018). Such an increase in the assets of the company indicated that the merger and acquisition of Nokia was an opportunity for Microsoft Corporation to expand its global market.
The acquisition of Nokia by Microsoft increase the latter's cost of production for its products and services. That had an impact on the liabilities of the company, according to the financial experts. Therefore, the current ratio at Microsoft Corporation fell across the year 2013 towards 2014 in the financial report. The current ratio in the company was 2.712 in 2013 and fell to 2.504 in 2014. That suggested that the current liabilities in Microsoft Corporation were increasing more than the current assets of the company. Supposedly, more costs were being invested in the production of the Nokia mobile phone with the Microsoft software. Microsoft had to look for ways to change the financial situation it was facing; otherwise, it would become costly for them to maintain the acquisition of Nokia.
Examination and Discussion of Comparison of Results of the Growth Strategies
For Microsoft Corporation, both the organic growth strategy and the strategic acquisition were instrumental in its growth efforts and leadership. The following are the financial projections and forecasts for Microsoft Corporation until 2025.
| (in thousands) | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| Net sales | $ 70,739 | $ 65,137 | $ 60,768 | $ 57,430 | $ 54,972 | $ 53,287 | $ 52,299 | $ 51,965 | $ 52,263 | $ 53,196 | $ 54,792 | $ 56,436 |
| Total assets | $ 129,423 | $ 119,173 | $ 111,181 | $ 105,073 | $ 100,576 | $ 97,492 | $ 95,696 | $ 95,073 | $ 95,618 | $ 97,327 | $ 100,247 | $ 103,254 |
| Current ratio | 2.712 | 2.712 | 2.712 | 2.712 | 2.712 | 2.712 | 2.712 | 2.712 | 2.712 | 2.712 | 2.712 | 2.712 |
The following is the graphical representation of the forecast in net sales for Microsoft Corporation from 2014 to 2025.
The forecasted net sales at Microsoft Corporation are an unstable one and keep changing from time to time. The net sales keep dropping from 2014 up to 2021 where it starts to rise again. According to the organic growth at Microsoft, the company has decided to renovate the Redmond headquarters by building more and more. The project has cost the corporation many million dollars and therefore the net sales of the company have been affected. The expansion of the campus has caused an undesirable impact on the net sales since it has been indicated to reduce in the long term. The projected increase in the net sales of the company is discovered when the project has advanced and is almost complete.
Looking at the merger between Microsoft Corporation and Nokia in 2013, there was an increase in the net sales of Microsoft in the financial year 2014. Nonetheless, the business analysts found out that the merger later became more of a liability to Microsoft than it was expected. Therefore, the merger had to be reconsidered by Microsoft to avoid it causing a loss to the company. The mergers and acquisitions performed by Microsoft, later on, have also made the company overconsume in the production and give in fewer sales instead. All the same, the mergers and acquisitions will be an avenue for growth come 2021.
The following is the graphical representation of the forecasted total assets at Microsoft Corporation from 2014 to 2025.
The total assets of Microsoft Corporation have been changing in the forecast developed by the financial analysts of the company. The total assets are expected to keep reducing until 2021 from where they will start increasing until 2025. In the organic growth approach of the company, it is expected that the company will have almost completed the Redmond campus expansion project. The project is expected to consume a large portion of the assets of the company and therefore will have an effect on the company’s assets by reducing the growth until the project nears completion since the money invested will keep reducing with time.
According to the strategic acquisition approach in the growth of Microsoft Corporation, it is expected that the assets keep reducing due to the numerous acquisitions that Microsoft has engaged in over time. The acquisitions have constantly become costly for the company thus destabilized its asset-based performance. The financial year 2021 will be a turnaround year for the assets of Microsoft Corporation. The year is expected to be the year where the company will have dealt with its mergers and acquisitions, and expansion projects nearing completion.
The current ratio at Microsoft Corporation is expected to remain constant from 2014 to 2025. The financial analysts expect that the company will have the ability to service its current liabilities with its current assets throughout the period. The financial experts also assume that the current assets of the company will be enough to cater to the production requirements of the corporation.
Recommendation and Justification of Most Appropriate Growth Strategy
Microsoft Corporation needs to come up with the most appropriate strategy to ensure that it has stable growth. The mergers and acquisitions growth strategy is the most suitable for the growth of Microsoft Corporation. Indubitably, the organic growth strategy at Microsoft Corporation has been associated with the growth of the company regarding the expansion of the company and the attraction of more customers to the company. The employee base will also grow and fulfill the company's aspirations regarding increasing the consumer base. On the other hand, the organic growth strategy contributes too little growth over a span of several years. Such growth speed may not be suitable for the growth of Microsoft Corporation. The organic growth strategy also leads to the embracement of traditional models of leadership that lead to confusion and derailment of the plan in the contemporary business world. Therefore, the organic growth strategy is not suitable for use by Microsoft Corporation (Hakutizwi, 2017).
Thus, the most appropriate growth strategy for Microsoft Corporation is the mergers and acquisitions growth strategy. To begin with, mergers and acquisitions at Microsoft have been realized since the organization was still new to the market. Having completed its first merger, Microsoft Corporation has been motivated to merge with various companies and acquire several others to work on its business goals. The mergers and acquisitions have enabled Microsoft Corporation to access new markets than it would have had initially. For instance, the purchase of the mobile phone manufacturing branch of Finland based Nokia enabled Microsoft corporation to reach its target market on the smartphone industry. The move allowed the company to appeal to mobile phone users and especially the consumers of Nokia across the globe who have been increasing each year gradually. The acquisition also gave an opportunity to Microsoft Corporation to design mobile phone using software and target the global market.
The mergers and acquisitions growth strategy is faster in growth compared to the organic growth strategy. The speed of the mergers and acquisitions in contributing to growth is attributed to the fastness in the realization of financial performance in a company. For instance, after Microsoft Corporation acquired the mobile phone branch of Nokia in 2013, a business performance recorded a notable change in the fiscal year 2014 financial report with an increase of 11.6% in net sales. Growth in the acquisition also leads to the rise in the customers to a company with a more substantial margin than the organic growth. The acquisition of a branch of Nokia by Microsoft in September 2013 led to the targeting of the mobile phone users around the world and the increase in the sales of the Nokia handsets. Lastly, the growth through mergers and acquisition leads to the advancement of technology. The growth of Microsoft due to the various mergers and acquisitions that the company organizes leads to the use of the latest technology in the manufacturing, marketing and sales of the products and services of Microsoft.
References
Hakutizwi, B. (2017, March 2). Organic business growth vs. growth through acquisitions . Retrieved from https://www.business.com/articles/growth-through-acquisition/
Kovach, S. (2014, April 25). Microsoft Closes Its $7.2 Billion Purchase Of Nokia. Business Insider . Retrieved from https://www.businessinsider.com/microsoft-closes-Nokia-acquisition-2014-4?IR=T
Lerman, R. (2018, June 12). Microsoft plans multibillion-dollar expansion, renovation of Redmond campus. The Seattle Times . Retrieved from https://www.seattletimes.com/business/microsoft/microsoft-plans-multibillion-dollar-expansion-renovation-of-redmond-campus/
Mack, S. (2012, October 25). What is organic growth strategy ? Retrieved from http://smallbusiness.chron.com/organic-growth-strategy-57130.html
Microsoft. (2018). Company Profile. Retrieved from https://www.microsoft.com/en-us/about/company
SEC. (2018). Microsoft Corp . Retrieved from https://www.sec.gov/cgi-bin/browse-edgar?type=10-K&action=getcompany&CIK=MSFT
