Read the Mini Case An International Strategy Powers ABB\'s Future on page 266 an

Question

Read the Mini Case An International Strategy Powers ABB's Future on page 266 and 267.

Answer questions 1 and 4 on page 267

Respond to question 1: What is the dominant reasons for ABB to enter into the international market?

Respond to question 4: What are the main political and economic risks that ABB must deal with given that it has a strong focus on entering emerging economies?

Mini-Case An International Strategy Powers ABB's Future ABB, headquartered in Zurich, Switzerland, is a major automation. It operates in eight major regions: (a) Northern competitor in the power and automation technologies Europe, (2) Central Europe, (3) the Mediterranean, industries across the major markets globally. It has 140,000 (4) North America, (5) South America, (6) India, the employees operating in almost 100 countries. In fact, it has Middle East, and Africa, 7) North Asia, and (8) South Asia. five major businesses-power products, power systems, Over time, ABB has been a successful company using its discrete automation, low voltage products, and process geographic diversification across the globe to its advantage.

Explanation / Answer

Q1) One main reason for ABB to enter international market is to create a brand name in the international market.Another reason is that due to economic depression,there has been financial fluctuations in many regions .So ABB should find out the glabal opportunities and invest accordingly.Again ,ABB has a lot of experience and reputation in local markets and so it should explore international markets.Profit being the objective of all companies,ABB should make use of its brand value and good reputation and enter international markets to make profits.

Q4) There are number of risks that ABB should take care before investing in emerging economies-

a)Foreign exchange rate riskwhich means converting local currency into domestic currency which in turn has its impact on return from investment that companies make.

b)Emerging markets are subject to changes and so it becomes difficult to use available information and make inferences about investment and return.

c)Even though there are strict laws to control trade in emerging economies, the laws have not proved to be very effective. Rather they have been advantageous for those people who are privileged tohave more information and as a result prices are manipulated .

d) Less liquidity of emerging markets as compared to developed economies lead to higher price uncertainty which makes investment risky.

e)The banking system are not developed and thus will stop ABB from proper financing which is very much needed for business.

f) In emerging economies, the management and government have more power than shareholders.Moreover poor audit system increases the chance of corporate bankruptcy.

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