Table of Contents CHAPTER 1 EXECUTIVE SUMMARY 1 1 1 Purpose of the plan 1 1 2 Products its core value 1 1 3 Market opportunity 2 1 4 Management team 3 1 5 Funding requirements 4 CHAPTER 2 COMPANY DE.
Table of Contents CHAPTER 1: EXECUTIVE SUMMARY 1.1 Purpose of the plan .1 1.2 Products & its core value .1 1.3 Market opportunity 1.4 Management team 1.5 Funding requirements CHAPTER 2: COMPANY DESCRIPTION .5 2.1 Board of management 2.2 Products & services .6 Microsoft Modern Workplace Microsoft Business App .7 Microsoft Infrastructure .8 Microsoft Data & AI AI Benefits Every application .10 2.3 Long-term aim of business 11 2.4 Objectives .11 2.5 SWOT analysis 12 CHAPTER 3: MARKET ANALYSIS 14 3.1 Target market 14 3.2 Market outlook 14 A In Vietnam 14 B In South-East Asia .15 3.3 Market trends 15 3.4 LINUX 16 3.5 Alibaba 17 3.6.Cisco 17 CHAPTER 4: MARKETING/SALES STRATEGY .19 4.1 Segmentation .19 4.2 Targeting 20 4.3 Positioning 20 4.4 Product mix 21 4.5 Price mix 21 4.6 Place mix 22 4.7 Promotional mix 22 CHAPTER 5: RESEARCH & DEVELOPMENT 24 Research and Development 24 5.1.1 R&D contribution to competitive success .24 5.1.2 Research 25 5.1.3 Development 25 5.2 Technical partners of Microsoft 26 5.3 Intellectual Property 27 5.3.1 Patents 27 5.3.2 Trademarks 28 5.3.3 Copyrights 28 5.3.4 Licensing 28 5.3.5.Trade Secret 29 CHAPTER 6: STAFFING AND OPERATION 30 6.1 Management Organisation Charts .30 6.2 Staffing 32 6.3 Training 39 6.4 Operations 42 CHAPTER 7: FINANCIAL PROJECTION 45 Key Assumptions 45 Nature and Limitation of Projections .45 Income sources 45 Expenses 45 Number of employees 46 Break-even Analysis 46 Profit & loss account 47 Balance Sheet .49 Cash Flow 52 CHAPTER 8: FUNDING REQUIREMENTS 56 Profitability 56 Operating Profit Margin 56 Net Profit Margin .57 ROIC 58 Efficiency 59 Total asset turnover 59 Solvency .59 Debt ratio 59 Free cash flow .59 Capital structure of Microsoft Corporation 60 Funding schedule .61 Table of Figures Figure 1: Management structure of Microsoft Office 31 Figure 2: Operating Margin 56 Figure 3: ROIC 58 Table 1: Break-even Analysis 47 Table 2: Profit & loss account 49 Table 3: Balance Sheet 52 Table 4: Cash Flow 55 Table 5: Net Profit Margin 57 Table 6: Funding Schedule 61 Table 7: Sources of funding 62 CHAPTER 1: EXECUTIVE SUMMARY 1.1 Purpose of the plan This is the report for our business plan to make the Vietnam Microsoft branch become the second headquarter in the South-East Asia area, from which the products will be made and supplied for the South East Asian market Our aim is to explain why the Microsoft Corporation should seriously consider the possibility of making a profitable business in Vietnam and South East Asia and how we can this plan 1.2 Products & its core value Products: The Vietnamese government, businesses, and individuals are all familiar with Microsoft’s products and services, such as Windows, Office, Exchange, Sharepoint, Skype, OneDrive, among others The popularity of Microsoft’s technologies in Vietnam testifies to the firm relationship between the corporation and Vietnamese customers Therefore, there has been a big shift in Microsoft’s focus: remarkably increasing efficiency and productivity through Mobile First and Cloud First products, equipment, and services This focus helps Microsoft become the leader in the four prominent trends, namely mobile, cloud, social and big data-trends on which organisations’ survival is contingent Should a company fail to take advantage of these in order to grow and become more competitive, they will be left far behind Core values: Microsoft is an IT pioneer, delivering solutions, services, and devices to help businesses and clients gain value and produce results beyond expectation As a pioneer of information technology (IT) in Vietnam, we help build a strong and secure IT infrastructure for the government as well as businesses Equipped with our products, businesses can help employees, customers, and users develop and use cloud applications Next Microsoft aims to help small and medium businesses increase their competitiveness to be ready for bigger opportunities and challenges, as well as help Vietnam train a strong base of human resources in IT Cooperating with partners to create a diversified technological ecosystem, which is the most suitable for all users in the world, to support work and entertainment, connect users on a people-centered basis, and promote humanity’s potential in an optimum way 1.3 Market opportunity Benefits and opportunities is going to bring to local businesses ● Microsoft is the first and only company that offers customers and partners a full range of cloud capabilities and the flexibility to deploy these services wherever and however they wish—whether with Microsoft, a service provider, in a customer datacenter, or a combination of all three, Microsoft can offer the most proper solution ● Microsoft’s cloud services enable users and businesses to increase productivity, work more efficiently and intelligently, as well as reduce costs Whether small or big, organizations and businesses should deploy cloud computing in the near future ● Microsoft’s cloud services are under trustworthy management, offering individuals and organizations more security regarding their information In order to gain our customers’ trust and ensure that the system works smoothly, we have invested billions of VND in our data centers, which more than meet international and regional regulations as well as Microsoft’s privacy policy Potential market: ● Vietnam recently joined the ASEAN Economic Community (AEC), which means that skilled workforce will have improved mobility within the Community ● Vietnam is a market holding great growth potential with its young, proactive population that is numerous and talented When Vietnam joins the AEC, Vietnamese workers are going to have more opportunities abroad, but will also meet new challenges Programmes of vocational training, skill training, uncovering people’s capacities, and giving them knowledge are going to benefit Vietnamese workers the most Competition: Microsoft has been in very good condition of developing, there was no such company that could compare to it In nearly 30 years, Microsoft Vietnam has been closely collaborating with the local government, organizations, and businesses, transforming Vietnam to be ready for the digital era through three pillars: Build – Protect - Educate 1.4 Management team Management team includes both new competent managers and the existing staff of Microsoft in Vietnam We will be organized in five areas: ● Business Development Group: extends across different departments, including sales, marketing, project management, product management, and vendor management Networking, negotiations, partnerships, and cost-savings efforts are also involved ● Corporate, External, and Legal Affairs: pioneer new policies and solutions that will advance business goals, and benefit consumers, industry partners, and the communities ● Corporate Strategy and Planning: the coordinating body, developing and implementing strategies that satisfy the objectives of individual departments as well as promoting overall corporate goals ● Finance Group: enables profitability and long-term growth for the company by partnering company-wide with organizations to deliver financial expertise that drives high business impact, analyzing the economics of a product, conducting incountry performance management, and dives into technical accounting and tax intricacies ● HR Group 1.5 Funding requirements From chapter – Funding requirements, in the Funding schedule table, Total Required Funds is $157.006.000 Further detailed information and data will also be explained in chapter CHAPTER 2: COMPANY DESCRIPTION 2.1 Board of management Nguyen Quynh Tram General manager of Phan Tu Quyen Microsoft Marketing & Operation Lead Vietnam Phung Viet Thang Nguyen Thanh Thuy Sales Director Human Resources Lead SG&A Expense 39,974 43,978 45,940 Research & Development 16,876 19,269 20,716 Other SG&A 23,098 24,709 25,224 39,974 43,978 45,940 42,618 52,959 69,916 11,600 12,300 10,900 Depreciation 9,700 10,700 9,300 Amortization of Intangibles 1,900 1,600 1,600 597 123 1,044 2,686 2,591 2,346 14,883 15,014 14,290 397 - 135 357 2,762 2,680 2,131 43,688 53,036 71,102 4,448 8,755 9,831 Income Tax - Current Domestic 5,380 4,300 4,514 Income Tax - Current Foreign 5,531 4,444 5,467 - 6,657 52 - 179 Total Operating Expense Earnings Before Taxes and Interest (EBIT) Non Operating Expense Depreciation & Amortization Expense Unusual Expense Interest Expense Total Non Operating Expense Income Non Operating Income Non Operating Interest Income Pretax Income Income Tax Income Tax - Deferred Domestic 48 Income Tax - Deferred Foreign Net Income 194 - 41 29 39,240 44,281 61,271 Table 2: Profit & loss account Balance Sheet Fiscal year is July - June All values USD millions Year Year Year Cash & Short-term Investments 133.819 136.527 130.334 Accounts Receivable 29.524 32.011 38.043 Inventories 2.063 1.895 2.636 Other Current Assets 10.146 11.482 13.393 Total Current Assets 175.552 181.915 184.406 Net Property, Plant & Equipment 43.856 52.904 70.803 79.186 96.101 122.154 Buildings 26.288 33.995 43.928 Land & Improvements 1.540 1.823 3.660 ASSETS Property, Plant & Equipment - Gross 49 Computer Software & Equipment 33.823 41.261 51.250 Equipment 10.156 10.269 12.228 Accumulated Depreciation 35.330 43.197 51.351 2.649 2.977 6.027 2.649 2.977 6.027 Long-term Note Receivable 2.200 2.700 3.400 Intangible Assets 49.776 50.389 57.511 Other Assets 4.987 4.021 4.451 4.987 4.021 4.451 286.556 301.311 333.779 7.348 5.905 10.825 Other Property, Plant & Total Investments & Advances Other Long-term Investments Tangible Other Assets Total Assets LIABILITIES & EQUITY Liabilities Short-term Debt & Current Portion Long-term 50 Debt Short-term Debt 1.515 1.616 1.962 Current Portion of Long-term Debt 5.833 4.289 8.863 Accounts Payable 9.382 12.530 15.163 Income Tax Payable 5.665 2.130 2.174 Other Current Liabilities 47.025 51.745 60.495 Dividends Payable 3.516 3.861 4.211 Accrued Payroll 6.830 7.874 10.057 Miscellaneous Current Liabilities 36.679 40.010 46.227 Total Current Liabilities 69.420 72.310 88.657 Long-term Debt 79.107 76.205 71.453 Deferred Taxes -7.303 -6.201 -6.983 Deferred Taxes - Credit 233 204 198 Deferred Taxed - Debit 7.536 6.405 7.181 35.466 34.288 31.483 Other Liabilities 51 Total Liabilities 184.226 183.007 191.791 102.330 118.304 141.988 Common Stock Par/Carry Value 78.520 80.552 83.111 Retained Earnings 24.150 34.566 57.055 Securities 1.488 5.478 3.222 Other Appropriated Reserves -1.828 -2.292 -1.400 Total Shareholders' Equity 102.330 118.304 141.988 Total Equity 102.330 118.304 141.988 Total Liabilities & Equity 286.556 301.311 333.779 Equity Common Equity (Total) Unrealized Gain/Loss Marketable Table 3: Balance Sheet Cash Flow Fiscal year is July - June All values USD millions Year Cash Flows from Operating activities 52 Year Year Net Income 39.240 44.281 61.271 Depreciation, Depletion & Amortization 11.682 12.300 10.900 Depreciation & Depletion 9.700 10.700 9.300 Amortization of Intangible Assets 1.982 1.600 1.600 -6.463 11 -150 -6.463 11 -150 Other Funds 3.860 5.566 5.655 Funds from Operations 48.319 62.158 77.676 Changes in Working Capital 3.866 -1.483 -936 Receivables -2.812 -365 -6.481 Inventories 597 168 -737 Accounts Payable 232 3.018 2.798 Income Taxes 2.929 -3.631 2.309 Other Assets/Liabilities 2.920 -673 5.793 Net cash provided by Operating activities 52.185 60.675 76.740 Deferred Taxes & Investment Tax Credit Deferred Taxes 53 Cash Flows from Investing activities Capital Expenditures -13.925 -15.441 -20.622 Net Assets from Acquisitions -2.388 -2.521 -8.909 Purchase/Sale of Investments 540 6.980 2.876 Purchase of Investments -57.697 -77.190 -62.924 Sale/Maturity of Investments 58.237 84.170 65.800 -1.241 -922 -15.773 -12.223 -27.577 Cash Dividends Paid - Total -13.811 -15.137 -16.521 Common Dividends -13.811 -15.137 -16.521 -18.401 -21.625 -25.692 (Fixed Assets) Other Uses Net cash used by Investing activities Cash Flows from Financing activities Change in Capital Stock 54 Repurchase of Common & Preferred Stock -19.543 -22.968 -27.385 1.142 1.343 1.693 -4.000 -5.518 -3.750 0 -4.000 -5.518 -3.750 -675 -3.751 -2.523 -36.887 -46.031 -48.486 Exchange Rate Effect -115 -201 -29 Net Change in Cash -590 2.220 648 38.260 45.234 56.118 Sale of Common & Preferred Stock Issuance/Reduction of Debt, Net Change in Current Debt Change in Long-term Debt Other Uses Net cash used by Financing activities Free Cash Flow Table 4: Cash Flow 55 CHAPTER 8: FUNDING REQUIREMENTS Assessment of Microsoft’s financial position (Financial analysis): Profitability Figure 2: Operating Margin Operating Profit Margin Operating Profit Margin is a profitability or performance ratio that indicates the proportion of profit generated by a company's operations before taxes and interest costs are deducted It is determined as a percentage by dividing the operating profit by the total revenue As indicated in this figure the operating margin decreased greatly from over 35% in 2010 to under 20% in 2016 and up to approximately 45% in 2022 56 Net Profit Margin Asset Turnover and Profit Company 2018 2019 2020 2021 2022 Margin Asset Turnover Profit Margin Microsoft 0.43 0.5 0.5 0.53 0.6 Alibaba 0.41 0.45 0.45 0.48 0.5 Cisco 0.41 0.5 0.51 0.52 0.54 Microsoft 14.89% 28.58% 33.36% 35.02% 37.63% Alibaba 25.52% 23.25% 29.28% 20.95% 7.26% Cisco -2.61% 25.76% 21.32% 20.92% 23.28% Table 5: Net Profit Margin Table illustrates how Microsoft has been able to increase its profit margin to 37.63% in 2022 from 14.89% in 2018,with a consistent growth during the period of years On the other hand, Alibaba has had such a significantly lower profit margin, as Alibaba suffered from a loss of over 18% in 2022 This highlights Microsoft's success, particularly in comparison to its competitors following its turnover Furthermore, it is a substantial profit 57 margin regardless of industry, and it demonstrates Microsoft's ability to business successfully ROIC Figure 3: ROIC Return on invested capital (ROIC) is regarded as the best indicator of a corporation's success since it reflects how much of a return a given firm earns on their invested capital The graph clearly demonstrates that Microsoft has outperformed its competitors over the time, as its ROIC climbed steadily until 2010, before decreasing to 34.85% in 2022 Microsoft's WACC% is now 6.38% Microsoft's ROIC percentage is 30.69% (calculated using TTM income statement data) Microsoft earns more returns on investment than it costs the corporation to raise the needed capital It is making a great deal of return A company's value will rise as it expects to continue delivering positive surplus returns on fresh investments in the future 58 Efficiency Total asset turnover The total asset turnover ratio of Microsoft Corporation has a very small fluctuation during the period of time Microsoft Corp's asset turnover during the quarter ended June 30th, 2021 was 0.49 but slightly increased to 0.57 in 2022 Alibaba’s asset turnover ratio in 2022 was 0.45 and Cisco System’s was 0.55 Despite the small fluctuation, Microsoft still has a higher asset turnover ratio than their competitors so this tells us that the Microsoft Corporation generates a higher revenue compared to their competitors and also a higher return on investment capital than the other companies Therefore, Microsoft should first move into the South East Asia market to occupy a higher market share than their competitors Solvency Debt ratio According to the company disclosure, Microsoft Corpỏtion has gone from having a debt ratio of 1.139 in December 2017 to 0.29 in 2022 This is 99.2% lower than that of the Technology sector and significantly higher than that of the Software- Infrastructure industry The debt to equity for all United States stocks is 99.03% higher than that of the company Throughout the period the company has tried to continuously reduce its debt to make the company more solvent This improved solvency has significantly improved their financial risk and reduced their cost of debt Free cash flow Microsoft's annual free cash flow for 2022 was $65.149B, a 16.09% increase from 2021 Microsoft is spewing forth a ton of free cash flow (FCF) Last quarter alone it generated $20 billion in FCF on revenue of $49.36 billion That works out to an FCF margin of 40.6% This is even higher than its prior trailing 12 months (TTM) FCF margin of 33% 59 With the ability to have a powerful FCF, Microsoft Corporation has enough money to pay your operating expenses with some leftovers Conclusion: The financial analysis showed Microsoft Corporation has had strong sales growth, decreasing costs and thereby increasing profit margins, effectively showcasing the potential success of the new project in South East Asia Capital structure of Microsoft Corporation The company's capital structure relies more heavily on equity capital than debt for financing, though the debt has grown to play an increasingly large role As of April 29, 2020, Microsoft's quarterly shareholders' equity was approximately $114.5 billion, consisting of $79.8 billion of common stock and paid-in capital, and $32 billion in retained earnings The increase in Microsoft's shareholder equity value has been driven primarily by increased retained earnings Although Microsoft was generating positive net earnings over those years, significant amounts of capital were returned to shareholders in the form of cash dividends and share repurchases Generally, with the strength of having more equity than debt, Microsoft Corporation can reduce the pressure of going to bankrupt in the South East Asia market Besides, according to its annual report for the fiscal year 2018, the company had longterm debt of $31 billion at the end of the fiscal year 2018 and $32.5 billion at the end of the fiscal year 2019 Thus, the company can benefit from debt because of its tax advantages; interest payments made as a result of borrowing funds may be taxdeductible Debt also allows a company or business to retain ownership, unlike equity Additionally, in times of low-interest rates, debt is abundant and easy to access 60 Funding schedule Types of funding Amount Buildings 43.928 Land & Improvements 3.660 Assets Computer Software & Equipment 51.250 Other Property, Plant & Equipment 12.228 Total 111.066 Research & Development 20.716 Operating capital Other SG&A 25.224 Total operating capital 45.940 Total required funds 157.006.000 Table 6: Funding Schedule Sources of funding Sources of Percentage Totals funding Loan Term in Monthly rates month paymen t Equity 47% 73,792,820 61 Outside investors 0.00% Short-term debt 12% 18,840,720 6% 36 573,171 Long-term debt 41% 64,372,460 3% 240 357,008 Total Sources of 100.00% $157,006,00 $930,17 funding Table 7: Sources of funding 62 ... are partners of Microsoft Microsoft provides university students with services such as email, Microsoft Teams for online studying, Microsoft Office for presentation purposes, Microsoft Windows... distribution of the product Most of the sales of Microsoft is generated through its official website Users can download and purchase the Microsoft software from this website Microsoft also has... family possesses at least one piece of Microsoft gear or software Microsoft offers a diverse set of goods and services focused on meeting the needs of clients in the software business Furthermore,