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MCR008 Corporate Strategy Assignment

Assessment 2

Task Brief:

a) Identify a company that has undergone some major changes in its operations
(for example, a major restructuring or takeover).

b) Evaluate the nature of these changes and how effectively the organization
has responded or is responding to these changes in the short and long term.

c) Determine what important lessons can be learned from this experience.

d) Students will have to demonstrate an in-depth knowledge and practical
applications of the business models covered during the course.

NOTE: This assessment must be in an essay format and 2,500 words(approx. in length).

Answer

ESSAY

Introduction

The report is an analysis of the acquisition of Activision Blizzard by Microsoft company in the year 2022, which has evolved the position of Microsoft in the gaming industry and made it expand its position in new segments. The focus of the study will begin to make the introduction of both companies individually and then accessing the change in the working operations of the company. the event will be discussed in detail along with the amount, the strategies, and the position on which the event took place and how the company went into this position. The report will also study the outcomes of the vent along with the additional recommendations that the company Microsoft could have adopted to make the position of the acquisition, more successful (Xu, 2022). The report is entirely focusing on the acquisition of the company and how did it go throughout.

Background of the company

Activision Blizzard is a global company that is connecting and engaging the world with its epic entertainment. The products of the company are helpful in building the community and creating social media platforms that bring the work together at a common level. The company got its operations on board in the year 2008 that is based in Santa Monica, California. The company is having additional subsidies for its operating globally. The company in 2022, has a network of 13,000 employees working throughout its dynamics and making it a lead company in the gaming industry (Xiong, 2022). Microsoft on the other hand is an American multinational company that has its headquarters in Washington. Microsoft being the giant in its industry made the announcement in January 2022 for making the acquisition of Activision Blizzard for an amount of $68.7 billion. This acquisition was planned by Microsoft as this acquired company will be making the division of Microsoft gaming in the company which will turn the company into the third largest in the industry gaming segment. With the increased competition in the market and the growth dynamics grow exponentially (Pales, 2022).

Activision Blizzard is the parent company of a number of well-known game developers, including Blizzard Entertainment (creator of World of Warcraft, Diablo, and Overwatch), Treyarch and Infinity Ward (developers of the Call of Duty series), and King Digital Entertainment (creator of Candy Crush) (Xu, 2022). With this acquisition, Microsoft will gain access to a vast portfolio of popular gaming franchises and intellectual property, which it can use to bolster its Xbox gaming platform.

The acquisition will also give Microsoft a significant presence in the mobile gaming market, as King Digital Entertainment is one of the world’s largest mobile game developers. This move is part of Microsoft’s broader strategy to expand its presence in the gaming industry, which has been a major focus for the company in recent years (Xiong, 2022 ).

The acquisition is subject to regulatory approval and is expected to close in the second half of 2023. It remains to be seen how this acquisition will impact the gaming industry as a whole, as well as the future of Microsoft’s gaming platform.

Merger and Acquisition of Activision Blizzard by Microsoft

To understand the significance of this acquisition, it is important to first examine the two companies involved. Microsoft is one of the world’s largest technology companies, known primarily for its Windows operating system, its Office productivity suite, and its Xbox gaming platform (Stenmark, 2012). The company has been investing heavily in its gaming division in recent years, with a focus on expanding its presence in the industry and developing new technologies to improve the gaming experience for players.

Activision Blizzard, on the other hand, is a major player in the video game industry, with a portfolio of some of the most popular gaming franchises in the world. The company is the parent company of several well-known game developers, including Blizzard Entertainment, and King Digital Entertainment (Zhang, 2020). Activision Blizzard has a strong presence in the console gaming market, as well as in the mobile gaming market, where its King Digital Entertainment subsidiary is one of the largest mobile game developers in the world.

Given the strengths of both companies, it is easy to see why the acquisition makes sense for Microsoft. By acquiring Activision Blizzard, Microsoft gains access to a vast portfolio of popular gaming franchises and intellectual property, which it can use to bolster its Xbox gaming platform (Pales, 2022). This move is part of Microsoft’s broader strategy to expand its presence in the gaming industry, which has been a major focus for the company in recent years. Microsoft has been investing heavily in its gaming division, and this acquisition represents a significant step forward in that effort.

The acquisition will also give Microsoft a significant presence in the mobile gaming market, where it has struggled to gain traction in the past. King Digital Entertainment, Activision Blizzard’s mobile game development subsidiary, is one of the world’s largest mobile game developers, and its games are played by millions of people around the world (Martins, 2010). By acquiring King Digital Entertainment, Microsoft gains a foothold in this lucrative market and can leverage the subsidiary’s expertise in mobile game development to create new, innovative gaming experiences for players.

Of course, the acquisition is not without its challenges. For one, it is a massive undertaking, and integrating two companies of this size and complexity is no easy task. Microsoft will need to navigate regulatory hurdles and work to ensure a smooth transition for Activision Blizzard’s employees and stakeholders (Li, et. al., 2022). Additionally, there are concerns about how the acquisition will impact the gaming industry as a whole, particularly in terms of competition and innovation.

One concern is that the acquisition will result in a consolidation of power in the gaming industry, with Microsoft becoming an even more dominant player. This could stifle competition and innovation, as smaller game developers struggle to compete with the resources and scale of a company like Microsoft (Li, et. al., 2022). However, Microsoft has stated that it plans to continue investing in its existing game studios, as well as in Activision Blizzard’s studios, in order to create new and innovative gaming experiences for players.

Another concern is that the acquisition could lead to a decline in the quality of Activision Blizzard’s games. There are fears that Microsoft’s focus on profitability and efficiency could result in cost-cutting measures that could impact the quality of the company’s games (Stenmark, 2012). However, Microsoft has stated that it plans to give Activision Blizzard’s studios the resources and autonomy they need to continue developing high end games and entertainment

Company strategies for Acquisition

First, it is important to understand the motivation behind Microsoft’s acquisition of Activision Blizzard. As we discussed in the previous section, Microsoft’s primary goal with the acquisition was to bolster its presence in the gaming industry. The company has been investing heavily in its gaming division in recent years, and acquiring Activision Blizzard was seen as a way to accelerate that growth and gain access to a vast portfolio of popular gaming franchises and intellectual property (Becker, 2021). With that in mind, let’s take a look at some of the key strategies that Microsoft used to acquire Activision Blizzard.

  1. Building relationships with Activision Blizzard’s leadership

One of the first strategies that Microsoft employed was to build relationships with Activision Blizzard’s leadership. This involved a number of high-level meetings and negotiations between Microsoft’s CEO, Satya Nadella, and Activision Blizzard’s CEO, Bobby Kotick, as well as other members of Activision Blizzard’s board of directors (Becker, 2021). These meetings allowed Microsoft to present its vision for the future of gaming and to demonstrate its commitment to investing in the gaming industry. By building a rapport with Activision Blizzard’s leadership, Microsoft was able to lay the groundwork for a successful acquisition.

  • Conducting due diligence

Another key strategy that Microsoft employed was to conduct extensive due diligence on Activision Blizzard. This involved a thorough examination of Activision Blizzard’s financials, operations, and intellectual property portfolio, as well as an assessment of the company’s strengths and weaknesses (Hatami, et. al., 2023). By conducting this due diligence, Microsoft was able to identify areas of opportunity and potential risks associated with the acquisition and develop a plan for integrating Activision Blizzard into its existing operations.

  • Securing financing

The acquisition of Activision Blizzard was a massive undertaking and one that required significant financial resources. To finance the acquisition, Microsoft had to secure financing from a number of different sources, including banks, private equity firms, and other investors (Hatami, 2023). This involved a complex negotiation process, with Microsoft working to secure the best possible terms and minimize its exposure to risk.

  • Navigating regulatory hurdles

Perhaps the most challenging aspect of the acquisition was navigating the regulatory hurdles associated with a deal of this size and complexity. The acquisition was subject to review by a number of regulatory bodies, including the Federal Trade Commission and the European Commission, and Microsoft had to work closely with these bodies to ensure that the acquisition complied with all relevant regulations. This involved extensive negotiations and concessions, as Microsoft worked to address any concerns raised by the regulatory bodies.

  • Communicating with stakeholders

Finally, Microsoft employed a strategy of clear and transparent communication with stakeholders throughout the acquisition process. This involved regular updates to investors, employees, and other stakeholders, as well as a commitment to transparency and openness in all dealings related to the acquisition (Li, et. al., 2022). By communicating openly and honestly with stakeholders, Microsoft was able to build trust and confidence and ensure a smooth transition for all parties involved.

Outcomes of the merger and acquisition

In this section, the report will examine some of the potential outcomes of the merger and what they mean for the future of gaming.

  1. Increased market dominance for Microsoft

One of the most immediate outcomes of the merger is that it will increase Microsoft’s market dominance in the gaming industry. Activision Blizzard is one of the largest and most successful video game companies in the world, with a vast portfolio of popular franchises like Call of Duty, World of Warcraft, and Candy Crush. By acquiring Activision Blizzard, Microsoft gains access to these valuable intellectual properties and a massive audience of gamers who are already invested in these franchises (Pales, 2022). This will allow Microsoft to compete more effectively with other major players in the gaming industry, like Sony and Nintendo.

  • Expanded reach for Activision Blizzard

While Microsoft has undoubtedly benefited from the acquisition of Activision Blizzard, the merger is also expected to be beneficial for Activision Blizzard. By joining forces with Microsoft, Activision Blizzard gains access to a larger and more diverse audience of gamers. This includes gamers who play on Xbox consoles and PC, as well as those who use Microsoft’s cloud gaming platform, Xbox Game Pass (Pales, 2022). This expanded reach will give Activision Blizzard greater opportunities to monetize its intellectual property and develop new games and franchises that appeal to a wider audience.

  • Increased investment in gaming

The merger between Microsoft and Activision Blizzard is also expected to lead to increased investment in the gaming industry as a whole. Microsoft has been investing heavily in gaming in recent years, with initiatives like Xbox Game Pass and the acquisition of game development studios like Bethesda (Xiong, 2022). With the addition of Activision Blizzard, Microsoft will have even more resources to invest in gaming and to develop new and innovative gaming experiences. This increased investment is expected to benefit gamers and the industry as a whole, as it will lead to more high-quality games and better gaming experiences.

  • More exclusive content for Xbox

Another potential outcome of the merger is that it could lead to more exclusive content for Xbox consoles and PC. Microsoft has already been working to develop exclusive content for its gaming platforms, and the addition of Activision Blizzard’s intellectual property could give it even more opportunities to do so. This could be a major selling point for Xbox consoles and could help Microsoft to compete more effectively with Sony’s PlayStation and other gaming platforms.

  • Changes to the gaming industry

Finally, the merger between Microsoft and Activision Blizzard is expected to bring about significant changes to the gaming industry as a whole. The gaming industry is already undergoing rapid transformation, with the rise of cloud gaming, mobile gaming, and virtual reality gaming (Xu, 2022). The addition of Microsoft and Activision Blizzard’s resources and expertise to this mix is likely to accelerate these changes and to lead to new and innovative gaming experiences that society can’t even imagine yet. This could include new ways to play games, like virtual reality, augmented reality, and cloud gaming, as well as new genres of games and new ways to monetize gaming experiences.

Recommendations

  1. Strategic Fit: Microsoft should ensure that the acquisition of Activision Blizzard fits well with its overall strategic goals and complements its existing gaming portfolio. Microsoft should evaluate how the acquisition can add value to its gaming business and provide a competitive advantage in the industry (Zhang, 2020).
  2. Integration Plan: Microsoft should develop a clear integration plan for Activision Blizzard, outlining how the two companies will work together and how Microsoft will leverage Activision Blizzard’s assets and capabilities (Xu, 2022). Microsoft should also ensure that the integration plan includes a clear communication strategy with stakeholders, including employees, customers, and regulators.
  3. Regulatory Approval: Microsoft should be prepared to navigate regulatory hurdles and gain approval from relevant regulatory authorities, such as antitrust agencies, before completing the acquisition (Hatami, 2023). Microsoft should be transparent and cooperative throughout the regulatory approval process and be prepared to address any concerns raised by regulators.
  4. Cultural Fit: Microsoft should evaluate the cultural fit between the two companies and how the acquisition could impact the culture and values of both companies. Microsoft should ensure that it maintains the unique culture of Activision Blizzard and its subsidiaries while integrating them into Microsoft’s corporate culture (Hatami, 2023).

Conclusion

In conclusion, Microsoft’s acquisition of Activision Blizzard was a massive undertaking and one that required a number of different strategies and tactics to successfully complete. By building relationships with Activision Blizzard’s leadership, conducting due diligence, securing financing, navigating regulatory hurdles, and communicating with stakeholders, Microsoft was able to acquire one of the world’s largest video game companies and bolster its presence in the gaming industry. The merger is expected to increase Microsoft’s market dominance in gaming, expand Activision Blizzard’s reach, increase investment in gaming, lead to more exclusive content for Xbox, and bring about significant changes to the gaming industry. While the full extent of these outcomes is still unclear, it is clear that the merger between Microsoft and Activision Blizzard will have a profound impact on the gaming industry and on the way society plays games in the years to come.

References

Becker, P. L. G. (2021). Equity Valuation Activision Blizzard (Doctoral dissertation, Universidade Catolica Portugesa (Portugal)).

Hatami, H., Hazan, E., Khan, H., & Rants, K. (2023). A CEO’s guide to the metaverse. The McKinsey Quarterly.

Li, L., Li, R., & Wang, R. (2022, December). The Performances of Different Strategies Based on Time Series Analysis. In 2022 International Conference on mathematical statistics and economic analysis (MSEA 2022) (pp. 647-652). Atlantis Press.

Martins, R. T. D. (2010). Activision Blizzard: consolidation movements in a maturing videogame industry and value creation (Doctoral dissertation, ISCTE-Instituto Universitario de Lisboa (Portugal)).

Pales, E. (2022). Microsoft and Activision-Blizzard: Examining the largest tech acquisition of all time. Available at SSRN 4106912.

Stenmark, R. V. L. (2012). Mergers and Acquisitions: The Case of Microsoft Corporation and Activision Blizzard Inc (Doctoral dissertation, Universidade Catolica Portugesa (Portugal)).

Xiong, M. (2022). An Acquisition Deal in the Gaming World. Highlights in Business, Economics and Management2, 452-456.

Xu, S. (2022, December). The Impact of Microsoft’s Acquisition of Activision Blizzard. In 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022) (pp. 903-910). Atlantis Press.

Zhang, J. (2020). Analysis on the Share Price and Forecasting Calculation Data of Activision Blizzard, Inc. Based on SWOT-Model. In E3S Web of Conferences (Vol. 214, p. 02015). EDP Sciences.

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