Analyzing the Impact of M&A on Microsoft's Global Growth

Desklib provides solved assignments and past papers to help students succeed.

“Evaluating the influence of mergers and acquisition on the business expansion of international
business organizations - a case study of Microsoft”

ABSTRACT
The international business organisations are continuously approaching new ways to gain
and maintain the competitiveness of the business in the global market. In order to fight with
the existing and new businesses, the companies are increasingly using mergers and
acquisitions as a strategic tool. This research study emphasises on evaluating the influence
of mergers and acquisitions on the business growth and expansion of the international
business organisations in the context of the Microsoft. The conceptual framework has been
developed to identify the significance and impact of mergers and acquisition on the business
growth and expansion of the company. An interview has been performed among the senior
level managers of Microsoft to analyse the key mergers and acquisitions and their
advantages and disadvantages to the organisation. The study has revealed that the M&A
has supported the company in maintaining its competitiveness and growth in the current
competitive market. Although, some failed acquisitions has also been identified that has
affected the profitability and value of the brand in the market. The overall research clearly
presented an overview of the influence of mergers and acquisitions on the business growth
and expansion of Microsoft.
2

Table of Contents
ABSTRACT.................................................................................................................................2
SECTION 1: INTRODUCTION..................................................................................................... 4
1.1 INTRODUCTION TO THE TOPIC.......................................................................................4
1.2 SITUATION ANALYSIS......................................................................................................4
1.3 PROBLEM STATEMENT...................................................................................................5
1.4 RESEARCH QUESTIONS...................................................................................................6
1.5 OBJECTIVES OF THE STUDY.............................................................................................6
1.6 LIMITATIONS OF THE STUDY..........................................................................................6
1.7 SCOPE OF THE STUDY.....................................................................................................6
1.8 HYPOTHESES...................................................................................................................6
1.9 ORGANISATION OF THESIS.............................................................................................7
SECTION 2: LITERATURE REVIEW..............................................................................................8
2.1 REVIEWS......................................................................................................................... 8
2.2 GAP ANALYSIS.................................................................................................................9
2.3 CONCEPTUAL MODEL.....................................................................................................9
SECTION 3: RESEARCH METHODOLOGY.................................................................................12
3.1 RESEARCH ONION.........................................................................................................12
3.2 RESEARCH PROCESS..................................................................................................... 12
3.3 ACCESSIBILITY ISSUES...................................................................................................15
3.4 ETHICAL ISSUES............................................................................................................ 16
SECTION 4: RESULTS AND DISCUSSION..................................................................................17
SECTION 5: CONCLUSION AND RECOMMENDATIONS............................................................22
SECTION 6: REFERENCES........................................................................................................ 24
APPENDICES........................................................................................................................... 26
3

INTERVIEW QUESTIONS......................................................................................................26
SECTION 1: INTRODUCTION
1.1 INTRODUCTION TO THE TOPIC
The international business organisations are continuously emphasising on extending its
presence in the global market by adopting different strategies and techniques. Among all
the different international business expansion strategies, mergers and acquisitions are the
most sorts after strategies that have been adopted by several large international
organisations. The business organisations are increasingly emphasising on gaining the
advantage of growth opportunities created due to globalisation (Zahid and Shah, 2014).
Microsoft has also followed the merger & acquisition strategy to enhance its global
presence and competitiveness in the international market. Microsoft is an American
multinational organisation that is established in the year 1975. It offers a wide range of
computing-related products and services through its several product divisions. The company
has subsequently acquired 219 companies and since its first acquisition, it has acquired an
average of six companies per year. Over the past decade, the company has acquired several
big brands such as aQuantive (2007), Fast Search & transfer (2008), Skype (2011), Yammer
(2012), Nokia mobile and devices division (2013), Mojang (2014), LinkedIn (2016) and
GitHub in (2018) (Microsoft, 2019). Therefore, this research study focuses on analysing the
implications of these mergers and acquisition of the international business expansion
strategies of Microsoft.
1.2 SITUATION ANALYSIS
The organisational mission of Microsoft is to empower every person and every organisation
to achieve more. The business strategy of Microsoft is focused on building best-in-class
platforms and productivity services. In present, the company is leading the operating system
market with around 88.69% market share. The company has a wide range of computing
products such as Bing, Office, MSN, Windows, Windows Phone, Visual Studio, Xbox and
Skype. Apple, Oracle, Alphabet and IBM are some of the key competitors of Microsoft that
may hinder the growth and expansion of the organisation in the international market
4

(Burch, 2015). The brand positioning of the company relies on its ability to provide access to
the software and computing products to various market from businesses to consumers. The
SWOT analysis would present a clear overview of the current market situation of Microsoft
in the international market.
STRENGTHS WEAKNESSES
•Brand Reputation
•Brand Loyalty
•Advanced technological system
•Robust financial performance
•Strong intellectual property
•Comprehensive product portfolio (Bhasin,
2019)
•Poor investments
•Declining innovating capacity
•Unresolved legal proceedings
•Dependency on hardware makers
OPPORTUNITY THREATS
•Increasing demand in the Mobile device
industry
•Continued acquisition and strategic
alliances
•Cloud-based platforms
•Intense competition
•Potential legal cases
•Changing consumer behaviour
•Maturing computing market (Bhasin, 2019))
The above-presented SWOT analysis has clearly defined the current market situation of
Microsoft in the international market. Through this, it is clear that Microsoft holds a great
position in the market with its strong brand reputation, market value, product portfolio and
robust financial performance. The company has great value in the market that supports its
business growth and expansion across the world (Bhasin, 2019). However, there are certain
weaknesses that may affect its business such as declining innovation capabilities and
unresolved legal proceedings are affecting the performance of the company in the
international market. The company can outperform by taking advantage of the identified
business opportunities.
1.3 PROBLEM STATEMENT
The large business organisations are continuously focusing on developing new strategies
and techniques to successfully expand into the international market. Microsoft is facing
intense competition from the new and innovative products and services of its competitors.
The maturing computing market creates a great threat to Microsoft in the international
5

market. The company needs to formulate effective strategies to deal with the rapidly
changing technological market. Through acquiring new businesses, Microsoft could gain
competitiveness in the international market.
1.4 RESEARCH QUESTIONS
1. What are the key mergers and acquisition of Microsoft?
2. What are the advantages and disadvantages of M&A to Microsoft?
3. How does mergers and acquisition impact on the business growth and expansion of
Microsoft?
1.5 OBJECTIVES OF THE STUDY
 To identify the key mergers and acquisitions of Microsoft
 To determine the advantages and disadvantages of mergers and acquisition to the
international business organisations
 To assess the impact of mergers and acquisition on the business growth and
expansion of the Microsoft
1.6 LIMITATIONS OF THE STUDY
This research study only focuses on the mergers and acquisition strategies of Microsoft and
does not consider the other factor of business growth in the international market. The study
concentrates on Microsoft and the computing industry. thus, the research findings and
analysis may not be applicable to international organisations based in other industries.
1.7 SCOPE OF THE STUDY
This research study would enable to understand the implication of mergers and acquisitions
on the business growth and expansion of Microsoft. The study would facilitate the
organisation in identifying the advantages and disadvantages of acquisitions to the company
as well as analysing the potential impact of several mergers and acquisitions on the
company’s growth and expansion.
1.8 HYPOTHESES
H1 - The mergers and acquisition strategies have a significant positive impact on the
business expansion of Microsoft
6

H0 - The mergers and acquisition does not have any significant impact on the business
expansion of Microsoft
1.9 ORGANISATION OF THESIS
The first section of this thesis introduces the research topic and background of the research.
This section contains the situation analysis of Microsoft to identify the current market
position and strategic capabilities of the company in the market. This has supported in
identifying the key gaps and problem affecting the company and its influence on the growth
and expansion of the organisation. The limitations and scope of the research are also
discussed in this chapter along with the formulation of the research questions, objectives
and hypothesis.
Section 2 contains an overview of the key concepts and theories to provide some
background and platform to the research by reviewing different literature sources related to
the research. This section would present a gap analysis and conceptual model for the
research.
Section 3 will explain the methodology or research process applied in this research. This
section determines the philosophy and approaches applied in this project along with the
method of collecting research data and sampling procedure. The issues related to
accessibility and ethics are also identified in this section.
Section 4 of the research provides a logical presentation of the research data and findings
with the use of tables, graphs and diagrams. It also presents the analytical and critical
discussion of the findings to address the research objectives and answer the stated research
question.
The last section 5 showcase the conclusions and recommendations from the research
findings along with the identification of the limitations to the applied research methods an
data collection procedure.
7

SECTION 2: LITERATURE REVIEW
2.1 REVIEWS
Mergers and acquisitions are important tools for growth and development of a business. It
has become a strategic tool for achieving growth for multinational organisations and have a
significant impact on the performance level of the organisation (Finkelstein, 2012).
Acquisition or Purchasing of existing business could be proved as a profitable strategy for
international business organisations.
According to Yetton, et al., (2013) the key reason to enter into mergers and acquisition is to
become bigger in the market through increasing business size and value. Mergers and
acquisitions provide an immediate strategic tool to grow and expand the business as
compared to organic business growth. The increasing competition in the global marketplace
creates a great motivation for the businesses to snap up with the attractive product and
assets portfolio before the competitors. As per the views of Coffey, et al., (2012) Mergers
and acquisitions are done to take advantage of synergies and economies of scale through
acquiring resources and strengths of the other organisation. When two business of similar
nature combines, the synergies in the business process and functions created as the
companies can consolidate duplicate resources. This supports boosting the quality of the
products and services along with increased earning capacity of the company. Companies
engage in mergers and acquisitions to dominate the sector. The acquisition and merger of
two organisations with a potential monopoly can create domination in the market and
provide great profits to the company (Cooper and Finkelstein, 2014).
The mergers and acquisitions also come with great risks that may precipitate the failure of
an M&A. In most of the cases, the integration of the business operations of the two
organisations proves to be a more complex and difficult task for the acquiring organisation
(Schmidt, 2015). This may result in the inability of the organisation in complying with the
targets in terms of savings of cost from synergies and economies of scale. According to
Weber, (2013) Overpayment is also one of the key reasons for the failure of acquisitions.
The companies may fail to correctly analyse the prospect of another company and may offer
a substantial premium that may turn out to be a loss or failure for the acquiring company.
8

This may create a major loss on the financial performance of the company. DePamphilis,
(2010) has stated that the actual work of combining two companies are most often defined
by confusion and complexity. A Harvard business review report has suggested that between
70 to 90% of acquisitions and mergers deals fail untimely.
According to Schief, et al. (2013) M&A can have a favourable or unfavourable reaction in the
market. In the majority of the cases, the share of the targeted company immediately rises to
a level close to the acquiring company. The M&A transactions have a long-lasting effect on
the acquisitive companies.
2.2 GAP ANALYSIS
Mergers and acquisitions are the most common phenomenon in international business. A
number of literature sources have been studied to analyse the influence of mergers and
acquisitions on the business growth and expansion of the international business
organisation. Most of the studied has suggested that the acquisitions and mergers have a
great impact on business growth as it serves as a strategy of achieving immediate growth.
The changes in the current business environment and continuously evolving technological
development have affected the scenario for M&A in the computing and tech industry. There
is a need for better understanding of the factors that drives tech companies to go for
acquisitions and mergers.
The existing studies are limited to analysing the advantages and disadvantages of mergers
and acquisitions and there is no studies have been found that clearly discusses the influence
of mergers and acquisition on the business growth and expansion. Thus, by identifying this
gap this research study would focus on analysing the impact of M&A on the business growth
and expansion of the international business organisation in the context of Microsoft
Corporation.
2.3 CONCEPTUAL MODEL
Several pieces of research evidence on the motives and positive outcomes of mergers and
acquisition. The empirical study provides sufficient knowledge of the reasons and motives of
M&A as well as on the disadvantages and limitations of acquisitions to the business
organisations.
9

Mergers and acquisition Business Expansion
According to Nelson (2018), Mergers and acquisitions serve as a great strategy to grow a
business without having to wait for years. It is one of the best options to achieve immediate
growth for the business organisation. The primary goal of every business organisation
behind mergers and acquisition is to secure an opportunity to achieve higher growth and to
have an area of expansion to enter into business market or product/service line. Yıldırım
and Birinci, (2013) have stated that the motivation behind M&A is to combine strengths
and resources to remain competitive in the market. Corporate mergers and acquisitions can
have a profound effect on the growth prospect and long-term outlook of the company. An
acquisition can transform the acquiring company but there a significant degree of risks is
also involved in the mergers and acquisitions, as there are only 50% chances success is
estimated in overall M&A transactions.
Based on the above literature review, a conceptual framework is developed for
understanding the impact of mergers and acquisitions on business growth and expansion.
The framework depicts the structure of the hypothesis to be tested in the study.
Figure 1: Conceptual Framework
[Source: Author’s Work, 2019]
KEY MERGERS AND ACQUISITIONS OF MICROSOFT
Microsoft and LinkedIn
LinkedIn is a social media website that provides a platform for finding job candidates,
building business relationship and networking. Microsoft has announced to acquire LinkedIn
in the year 2016 for $26.2 billion. The company is ranked at the 28th most popular website
on the internet last year. The acquisition of LinkedIn is the largest acquisition of Microsoft.
The company has gone on to combine LinkedIn data with its applications such as Office365
(Frésard, et al., 2015). The acquisition of LinkedIn has provided a great opportunity to use
10

the data from over 500 million registered users of LinkedIn to boost the efficiency of
Microsoft’s products and services on many other platforms.
Microsoft and Skype Technologies
Skype was launched as a file-sharing software and it allows its registered users to talk and
video conference for free. Microsoft has acquired Skype for $8.65 billion. With its
acquisition with Skype, Microsoft has integrated its video chat services across its business
and consumer app portfolio.
Microsoft and Github
The GitHub is the largest host of open source code in the world. Microsoft has acquired
GitHub is 2018, since then, the company has a big plan to integrate the popular code-
sharing platform and developer community into its cloud ecosystem. GitHub and Microsoft,
both enjoy a bit of monopoly in the market (Shen, 2018). With the acquisition with GitHub,
the company has an opportunity to develop new positioning in the market at the heart of
open source development.
Microsoft and Yammer
Yammer was designed as the social networking tool that could be used for private
communications in business. Yammer claims to provide its services to around 85% of the
Fortune 500 companies (Frésard, et al., 2015). Microsoft has acquired Yammer in 2012 for
$1.2 billion and integrated it into their office 365 team and it has become a vital part of the
program suite’s ecosystem of Microsoft.
Despite these profitable acquisitions, Microsoft has also faced drastic failures due to the
inability of identifying the potential risk of acquiring the company. The acquisition of
Microsoft with the Nokia is considered as the biggest acquisition failure in Microsoft history.
One of the worst deal of Microsoft is the acquisition of aQuantive that has chalked up a
massive loss to the company.
11

SECTION 3: RESEARCH METHODOLOGY
3.1 RESEARCH ONION
Saunders et al., (2007) develop the research onion model, it illustrates the different stages
to develop a comprehensive research methodology (Saunders, 2011). Each layer of
research onion defines detailed stages of the research process.
Figure 2: Research Onion Model
[Source: Saunders, 2011]
3.2 RESEARCH PROCESS
The research onion model describes the different stages through which the researcher
passes while selecting an effective methodology. The different stages of this research study
are discussed below:
3.2.1 RESEARCH PHILOSOPHY
Research philosophy refers to the set of belief to analyse the nature of reality that being
investigated in the research. The two main ontological frameworks inform the research
12