Accounting Financial Analysis Report

This report examines the effects of growth strategies on overall financial performance of corporations. It studies the factors that influence the choice between both organic as well as acquisitive strategy of growth concentrating on illustrating the variations in growth as well as profitability of firms.

Running head: ACCOUNTING FINANCIAL ANALYSIS REPORT
Accounting Financial Analysis Report
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Authors’ Note

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Abstract
Business concerns are employing diverse stratagems to attain growth and to attain
competitive advantage among others players in the market. One of the most important
stratagems that firms employ for attainment and sustaining of competitive advantage is the
business expansion. Factors affecting growth and consequently business expansion that in
turn affects performance of firms are taken into consideration. The concentrated global
competition has directed towards an increase of mergers as well as acquisitions in several
industries. It is compulsory for a firm to merge, acquire or else partner if the same has the
intention to remain in the contest. Another alternative is to develop internally. The study
hereby intends to examine the facets (organic and acquisitive growth strategy) that affect the
overall firm performance. The current research study therefore intends to establish the
association between strategies of growth and performance of firms. It can be said that the
primary purpose of the study at hand is to ascertain if there exists an association between both
growth strategies and firm performance.

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Table of Contents
Introduction................................................................................................................................2
Problem Statement.....................................................................................................................3
Research questions:....................................................................................................................5
Research Objectives:..................................................................................................................5
Proposed Research Framework..................................................................................................5
Research Methodology...............................................................................................................7
Research Gap.............................................................................................................................8
References................................................................................................................................10

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Introduction
The dynamic environment of business demands continuous alteration in business
exercises, hence, business concerns select to adopt diverse manners to reflect alterations and
one of the stratagems is escalating to enhance the share of the market. Expansion is
undertaken by diverse business concerns to make certain that it attempts to attain higher
growth in comparison to past attainments. Business concerns are becoming more competitive
and their concentration is on stratagems that can amplify revenues. Mergers as well as
acquisitions (M&As) is considered to be a significant way for firms to attain growth. Also, it
can hereby be observed that concentrated worldwide competition has directed to an increase
in cooperative association, mergers/acquisitions along with alternative strategy of developing
internally (organically).
The current study at hand hereby intends to examine the effects of growth strategies
on overall financial performance of corporations. Also, the study at hand intends to examine
the factors that influence the choice between both organic as well as acquisitive strategy of
growth concentrating on illustrating the variations in growth as well as profitability of firms
(both organic as well as acquisitive firms).
Problem Statement
The conventional stratagems undertaken in the area of stratagems are focussed on
firms performance as well as performance of industry as important determinants of business
concerns. The concentration has been to ascertain different sources, reasons behind
attainment of growth along with impact of different strategic variables on firms’ performance
(Bamiatzi & Kirchmaier, 2014). Of late, the focus is shifting towards different intermediate
results of growth stratagems on performance of corporations. In this case, the most important

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strategic decision in adoption of expansion stratagem remains a matter of concern. For this, it
is important for management of firms to understand the effects of the expansion strategies of
business on overall performance of firms. An assessment of research studies reflect that
majority of firms have concentrated on performance founded on innovation of
products/service supposing that heterogeneity across different firms operating on a macro-
level. In this regard, it can be said that there has low or no focus on different strategies of
expansion of firms and their impact on performance of corporations (Chan et al., 2017).
There is a growing body of empirical literature that concentrate on evaluating
different determinants of growth of firms. For instance, there are many studies that have
concentrated on exploring nature of correlation between growth of firms and size as well as
age of corporations. In essence, it can be said that roles of different financial variables are
analysed in varied recent studies (Coad et al., 2016). The association between different
characteristics of firms as well as types of strategies of growth of firms are comprehensively
studied by prior scholars. Also, detailed synthesis of studies on essentially corporate strategy
of diversification is also carried out.
However, the primary problem with different empirical studies studied is that there
subsist no well-developed themes and theories of research determinants regarding expansion
strategies of firms and the degree and extent of their effect on performance of business
concerns. Associated theoretical view by means of which corporate growth is evaluated is
necessarily the resource based view (abbreviated as RBV) and necessarily the approach of
transaction cost economies (Cruz-González et al., 2015). It is observed that excessiveness of
firm’s resources drives the corporations to develop more organically in comparison to
strategies of acquisitions. Again, it can be seen that corporations grow effectively by means
of acquirements as they purchase the complementary resources from others when they
themselves lack in the resources. As per the extant literature it can be said that both organic

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as well as acquisitive strategies of growth can be connected to diversification strategies of
firms. Essentially, this is mainly because the corporations diversifying are more likely to
understand the associated markets than different unrelated markets. Therefore, firms can use
their knowledge resources more effectively (Kowalkowski et al., 2017). In addition to this,
risk associated to expansion in different unrelated markets is higher than expansions in
various related markets. Unrelated diversification related to acquisitive rate of growth might
perhaps stem from excessive resources that are necessarily flexible. Thus, it can be seen that
the central arguments of prior studies is growth strategies, sources of growth and preferences
and selection of firms for attainment of growth. There are prior studies that have reflected a
positive correlation particularly between growth of firms and age that has directed towards
innovative output of activities of corporations (Larrañeta et al., 2014). Also, there are also
other factors that exert influence on performance of business corporations; however, the
influence of different macroeconomic variables remains inconclusive at the level of
significance at 5%.
Also, there are several studies undertaken that show the factors affecting the choice of
adoption of organic as well as acquisitive strategies of growth. It can be observed from prior
studies that there can be barriers to entry on different market indicating legal as well as
regulative restrictions, thus, companies might perhaps be compelled to acquire their own
way. Therefore, in these cases acquisition is preferable. On the other hand, the approach of
horizontal acquisitions is also used to control competitive pressures and corporations attempt
to buy out their rivals for the purpose of achieving economies of scale (Lechner &
Gudmundsson, 2014). Furthermore, previous scholarly works also suggest that corporations
prefer internal sourcing in place of trading potency at the time when business transactions are
extremely pricey. Therefore, in a bid to contain transaction cost at a low level, firms carry out
internal transactions. Thus, prior studies indicate the fact that firms having higher intensity of

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research & development tend to prefer organic growth while larger firms have the inclination
towards acquisitions. However, there exists no well-organized theory that substantiates the
effect of selection between organic and acquisitive strategy on profitability of firms.
Therefore, the study at hand intends to fill the identified gap and undertake comparative
evaluation of variations in growth and profitability of organic and acquisitive firms.
Rothaermel (2015) observed that strategy framework configuration exerts influence on share
of the market as well as diverse non-financial dimensions, however, it does not exert
immense on return on assets of firms. Soto-Acosta et al. (2016) witnessed that corporations
had a considerable influence on firm’s profitability, whilst none of the facets of the market
had a considerable influence. Therefore, this study intends to fill the gap of the research by
answering questions regarding the association between strategies of growth and performance
of firms.
Research questions:
-What is the effect of firms’ growth strategies (particularly acquisitive strategies) on
performance of firms?
- What are the factors that exert impact on selection of organic as well as acquisitive strategy
of growth that explain variations in growth as well as profitability of organic as well as
acquisitive firms?
Research Objectives:
- To critically examine the effect of firms’ growth strategies (acquisitive and organic
strategies) on performance of firms
- To study factors that exerts influence of organic and acquisitive strategies of growth
explaining variations in profitability of both organic and acquisitive firms

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Organic Growth
Acquisitive Strategy
Growth factors Profitability
due due
toand
Number of
acquisitions
Total Value of
acquirements
Target Location
Target Associations
Acquisitive
behaviour
Profitability due
to acquisitive
behaviours
Proposed Research Framework
The research framework states about factors of growth on firm’s growth as well as
profitability. There are six independent variables that are taken into consideration for the
current study. There are in all six independent variable chosen for the study. The independent
variable include the strategy of organic growth, strategy of acquisitive growth, total number
of acquisitions, value of acquisitions, target location and target associations (Stam et al.,
2014). There are two intermediating variable namely the growth factors namely the growth
factors and acquisitive behaviours that determine profitability attained from selection of
strategy and profitability due to acquisitive behaviours. The dependent variable for this study
is profitability of firms (indicating performance of firms). Thus, the study at hand intends to
examine the effect of selected growth strategies and associated acquisitive behaviours on
overall performance of firms.
Effect of growth strategy on firm’s growth as well as profitability

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Figure: Research Framework
(Source: Created by author)
Research Methodology
The main purpose of this section is to provide an outline of the research methods used
and procedures employed to collect and analyze data. Hence, it includes pilot study, sample
structure, reliability of the study and the statistical analysis.
Research Method
The learner of the study intends to examine the study using both qualitative as well as
quantitative mechanisms. This refers to the fact that the learner intends to employ mixed
research methodology for the current study for covering both quantitative and qualitative
facets (Bamiatzi & Kirchmaier, 2014).
Data
The learner aims to undertake primary data for the current study and intends to
acquire primary data directly from the field of study. Essentially, the learner has the intention
to distribute questionnaire containing pertinent questions through mail to targeted
respondents of the study. In this case, the researcher of the current study intends to select 60
participants (64% men, 36% women with mean age 35 years). The researcher intends to form
a sample comprising of individuals with diverse investment experiences in the specific
region. In this study, the selected population for the study are not only professionals who
have technical know-how but also different employees, students learning in universities as
well as retired individuals. Specifically, the target participants are the managers of different

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firms operating in the nation as strategic decisions regarding growth are spearheaded by
senior management (Coad et al., 2016). The primary data will be acquired by means of online
questionnaires. Questionnaires are preferred as they are easier to distribute and there is
maintenance of confidentiality as the respondents have no need to write their names.
Also, the researcher intends to obtain secondary data from declared financial
statements of firms together with other external sources of publication. Information regarding
the growth strategy will be acquired for further analysis. The firm following the organic
growth strategy will be coded as 0 and the firm following acquisitive strategy will be coded
as 1. The net sales of firms shall represent the size of firms and (net sales of 0-4 billion USD
shall be regarded as small enterprise, 4-8 billion will be regarded as medium sized firm and
over and above 8 billion shall be considered as large sized firm. For acquisitive strategy,
information will be collected regarding the continents where different acquirers are located
and the locations will be treated as dummy variables. In this case, five different continents
will be chosen namely (Europe, Africa, Asia, America and Australia). Therefore, the learner
will acquire information regarding the total number of acquisitions that a firm has carried out
in different continents, profitability of the firm, and value of acquirements (calculated by
multiplying median of business transactions by overall number of acquisitions) (Lechner &
Gudmundsson, 2014). The net sales (indicating performance) of organic and acquisitive firms
will analysed for comparative analysis of variations in net sales of two types of strategies
obtained by firms. Percentages will be sued for indicating total number of organic and
acquisitive firms. Regression model will be used for analysing effect of organic strategy and
acquisitive strategy on sales.
For the purpose of the present study, the learner has the aim to examine both
reliability as well as validity of test (collected data for the study). Also, the study has the
intention to analyse influence of growth strategies selected by the firm on overall firm

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performance (Bamiatzi & Kirchmaier, 2014). Therefore, the chief statistical mechanism
implemented is presented in the current segment. Essentially, there are individual ratings on
questionnaire that were utilized for analysis of data.
Analysis of Data
The learner intends to code, tabulate and analyse the data using SPSS software and
excel software. Essentially, descriptive statistics namely frequency distribution along with
percentages will be used for analysing data on demographics. Also, graphs as well as tables
will be used for presenting responses obtained from different respondents. A regression
model will be used for examining the association between different variables. Growth
stratagems constituting the independent variable and performance as dependent variable will
be studied.

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References
Bamiatzi, V. C., & Kirchmaier, T. (2014). Strategies for superior performance under adverse
conditions: A focus on small and medium-sized high-growth firms. International
Small Business Journal, 32(3), 259-284.
Chan, A. T., Ngai, E. W., & Moon, K. K. (2017). The effects of strategic and manufacturing
flexibilities and supply chain agility on firm performance in the fashion
industry. European Journal of Operational Research, 259(2), 486-499.
Coad, A., Segarra, A., & Teruel, M. (2016). Innovation and firm growth: Does firm age play
a role?. Research Policy, 45(2), 387-400.
Cruz-González, J., López-Sáez, P., Navas-López, J. E., & Delgado-Verde, M. (2015). Open
search strategies and firm performance: The different moderating role of
technological environmental dynamism. Technovation, 35, 32-45.
Kowalkowski, C., Gebauer, H., & Oliva, R. (2017). Service growth in product firms: Past,
present, and future. Industrial marketing management, 60, 82-88.
Larrañeta, B., Zahra, S. A., & Galán González, J. L. (2014). Strategic repertoire variety and
new venture growth: The moderating effects of origin and industry
dynamism. Strategic Management Journal, 35(5), 761-772.
Lechner, C., & Gudmundsson, S. V. (2014). Entrepreneurial orientation, firm strategy and
small firm performance. International Small Business Journal, 32(1), 36-60.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.

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Soto-Acosta, P., Popa, S., & Palacios-Marqués, D. (2016). E-business, organizational
innovation and firm performance in manufacturing SMEs: an empirical study in
Spain. Technological and Economic Development of Economy, 22(6), 885-904.
Stam, W., Arzlanian, S., & Elfring, T. (2014). Social capital of entrepreneurs and small firm
performance: A meta-analysis of contextual and methodological moderators. Journal
of Business Venturing, 29(1), 152-173.