Question

Describe why the market’s long term expected growth rate is different between the two companies.

Cummins growth rate: 4.47%

Microsoft growth rate: 8.02%

Answer 1

Well, cummins and microsoft are working in two different verticals. One is in power and engine sector and other is in IT sector.

The reason for different growth rates is obvious that is,

Microsoft has a huge customer base and reach of microsoft is worldwide and has millions of users use this software to run the systems. however, the scienario is different in case of cummins because it has a heavy competitive market compared to microsoft because there are lots of other companies which manufatures related products like engine parts, defense systems, rail system etc. so, eventhough cummins has its own market place growth would be normal.

If we look at the competitors of microsoft they have only few like apple, morzilla etc and moreover the future of IT sector looks more bright because of the introduction of artificial intelligence in all sectors, which microsoft will obviously have its own role to play and growth will be high.

These are some of the reasons why microsoft has high expected growth rate and cummins has low growth rate.