Why ABB Bought Zamech and How the Company Can Link Zamech to its Overall Strategic Plan
Strategic planning is one of the main actions the company takes while operating. Strategic planning depicts the main objectives of the company compared with the working process and including the relationships with all the members of the business. Specifically, each company develops personal strategic plans paying attention to the social, economic, and political situation in the country it operates and with the particular reference to the industry and its peculiarities. Company plans must be included in the strategic plan of the organization, as these two notions are closely connected. Strategic plans depict the future action of the company, which explain the company goals (O’Connor 2010).
Mergers and acquisitions are connected, however, these are two different processes. Merger is explained as the union of two absolutely equal companies to create a stronger and more powerful corporation. While merger the corporate cultures, strategic plans, goals, and performances of two companies are reconsidered and an absolutely new culture is created with new strategic plans and objectives based on the previous two. The acquisition means that one company buys another one and the latter stops existing. The previously existed and bought company while acquisition adopts all the rules and norm of the company, which has bought it. Acquisition differs from merger in the way how the companies continue their actions after the procedure. The domination of one company over another is a characteristic feature of an acquisition, while the union of two similar companies is a main feature of merger.
There are a lot of different reasons for merger and acquisitions. The increase of the competitiveness and the power of the company is one of the main reasons for making such a step. Constantly searching for benefits and trying to overcome the competitors, the companies are ready on various actions. Merger with another company of acquisition of one company by another one may give way to new markets and shares. The company benefits from the increased number of customers, gets privileges by using the strategies of both companies and may even enlarge the number of industries it operates into. Mergers and acquisitions have become very frequent affairs (Kamal 2013). The companies understand that in the conditions of globalization and high competition, it is impossible to remain competitive if one does not have high assets, and millions turn over. Small companies are unable to enter the international market and in the modern conditions, it is one of the main ways to have high income. Profit is one of the mains objectives of the companies. Mergers and acquisitions are aimed at increasing the companies’ profits as the number of released products increases and the cost of the raw materials may be reduced, depending on the type of the companies, which are involved in the merger of acquisition (Mavhiki 2013). There are both successful and failure acquisitions and mergers. Thus, for example, Disney – Pixar merger was a very successful affair. In 1968, two rivals New York Central and Pennsylvania Railroad decided to merge with the purpose to become one of the largest corporations in the industry. However, the companies failed to agree their actions and remained rivals in one company having failed to be successful (Devine 2002).
Focusing on the acquisition of Zamech by ABB, it is possible to assume the following. ABB is a large international company, which started the strategy of acquiring smaller companies since 1987. This strategy is a part of the company plan aimed at increasing the impact all over the world. This particular strategy is a winning one in the conditions of globalization. The companies, which have presentations in many countries get much benefit from this particular action. Speaking of ABB, this company has representations in many countries and acquisition of Zamech has opened its way to Poland. The main strategy of ABB is to operate as a national company in the country, rather than being an international one. This is one of the main reasons of acquisition. The national companies have a number of benefits, as they are a part of the national economics. ABB has become the one in Poland. Pursing the goal to become a part of the international society, ABB has developed a very powerful strategy. Becoming a part of the national economy, the company starts operating on the new better conditions. People all over the world still continue trusting national producers more. ABB’s strategic plan is to become national internationally and it implements this plan in reality pursuing the objectives of acquiring smaller companies in different part of the world.
Assess How ABB Addresses the Issues of Globalization and National Responsiveness
Globalization is the main tendency of the modern world. It is not easy to explain this notion as depending on the idea one wants to deliver, globalization may be expressed in many ways. One of the main characteristics of globalization is the possibility to use the same products all over the world, the possibility to speak the same language and to be understood all over the world. The concept of globalization became possible with the creation of the international market and giving the possibility for companies to enter this market. People use the products from other countries with pleasure. Some companies operate as international ones, others prefer to use globalization to become national (Ivanov & Webster 2013). There are many drivers of globalization and competition remains the main one. Entering international markets remains the greatest opportunity for the company, as in this case the income and turnover increases dramatically. Globalization helps the companies sell their products in many countries of the world. Having tried one particular product, people continue to use it, increasing the demand. Therefore, it is possible to say that demand is another driver of globalization (Lane & Milesi-Ferretti 2008). Modern people cannot imagine their lives isolated from the world. That is why, one more driver of globalization is the very fact of its existence. Globalization drives globalization, therefore, the increased temps and speed cannot be stopped anymore.
There are many ways of addressing the issue of globalization and ABB uses the national strategy. As it has already been mentioned, the main strategic plan of ABB company is to acquire smaller companies related to its business in different parts of the world and trying to reorganize the newly bought company in such a way that the company becomes a new one, but it still remains the national, the one people trusted. For example, having acquired Zamech, ABB starts reorganizing the company business to make it closer to its transportation business and its needs. At the same time, the company does all possible to leave the corporate culture and the company general policies and traditions as they are. This is one of the main techniques of making international ABB business national in each country where it has representations. Standardizing the company priorities and making sure that it operates on the benefit of its goals and strategic plan, ABB still adapts its business in each country to national rules and norms. It is being global by means of nationalization.
The national and global strategies of the company are depicted in the following. Having acquired a new company in a foreign country, Zamech in this case, ABB does everything possible to speak to the staff on their language. It means that the company does not impose its rules, it adapts to the existing ones. At the same time, the business is reorganized and the company changes its direction to assure that its products are recognizable and are sold all over the world. ABB is the company which operates in the transportation industry, producing subway cars and trains, trolleys, locomotives and other electrical systems to support these products. Having acquired Zamech, the company assured the production of the raw materials and supportive equipment as Zamech is specialized on metal casting, transmission gears and marine equipment. The reorganization of the company will still take place to assure that company still meets the national interests, but it should produce the goods necessary for supporting ABB’s strategic plan and general goals. That is why, it is possible to say that ABB thinks locally when tries to adapt to the national culture and acts global, as all the products manufactured at each part of the world are sold globally. Notably, many manufacturing leaders support the same strategy. Sony Corporation also operates on the basis of a particular statement, when following national culture it still produces goods for international use (Witcher & Chau 2008).
Critically Evaluate the Extent to Which MNE’s Planning May Be Affected by Each of the Following Dispositions: Ethnocentric, Polycentric, Regiocentric, and Geocentric
The development of the company strategies starts with setting the goals of the organization and choosing the direction according to which the company is going to operate. The multinational enterprise should pay attention to many aspects and include the following issues in the planning. The environment is important in this case and ethnocentric, polycentric, regiocentric, and geocentric dispositions must be considered while conducting strategic planning. Company ethnocentric disposition means that the company is domestically directed and requires domestic consumers. The main advantages of such companies are the simplicity in the organization operations and better communication and control. However, such companies lack flexibility and control (Johnson & Turner 2010). McDonalds is one of the best examples of such disposition. Operating internationally, it still refers to domestic issues. Polycentric disposition of the multinational company is focused more on foreign markets, seeking for less centralized ones. The main advantage of such disposition is the use of local resources, but at the same time the main disadvantage is an ineffective use of home-country experience (Johnson & Turner 2010). One of the best examples of polycentric disposition is Philips Company.
Regiocentric disposition is characterized by the location of organizations in different regions, making those dependent on the head office. The regiocentric disposition advantages from using the human resources from both local and international sources. Still, the main disadvantage remains the risk that local and foreign employees may fail to cope together and work effectively for the benefit of the company growth (Johnson & Turner 2010). The main advantage of multinational company with regiocentric disposition is the possibility to use the national resources and refer to the brand name of the corporation. The products are delivered to one particular place and used on the benefit of the company. However, the regional goods may be of lower quality than those used in the central parts of the region. One of the examples of the regiocentric disposition is the Wal Mart Company.
Geocentric disposition is characterized by the viewpoint of business from the global value chain perspective. The company activities go globally through local markets. Geocentric dispositions advantage from global outlook, higher quality of products and services, local management and the use of the best resources delivered from all over the world (Johnson & Turner 2010). One of the examples of multinational company with geocentric disposition is the Coca Cola Company. It is possible to see that each of the dispositions has a number of advantages, but it also has numerous disadvantages. Each company should think beforehand while choosing one or another disposition as this is going to affect the company strategic plan greatly. The development of a strategic plan is based on the company objectives and goes further to the discussion of the main processes and disposition affects the way how the business is going to run practically. Affecting the strategic planning, the company disposition choice predicts the way how the business is going to run. The objectives of the company are defined and the whole data may be used for strategic planning as it is (Aswathappa 2010).
Critically Analyze the Impact of Information Systems on the Way Businesses Operate Internationally
There are many different ways of running international business. Having entered the international market, it is important to remain competitive and different companies choose their own ways of doing it. Some companies prefer to be aggressive, other choose the strategy of selecting a more moderate style of performance. However, the competitiveness of the organizations and its ability to remain on the leading positions is a characteristic feature of its selected strategy (Daniels, Radebaugh, & Sullivan 2008). The use of the information technologies has made the business running procedure easier. Globalization became possible with the emergence of the information technologies and international business is run much easier with its help. The companies now have a number of priorities, as running business in different parts of the world, the main information may still be centered in one particular place (Wilson 2006). The use servers and various types of information security remains the main objective way to act globally with the reference to information use and protection. Modern companies strive for information in the competition, and those who get the information faster have many priorities. Keeping the information on servers, the companies still have to share it, and the electronic data interchange is one of the best ways. The computer to computer information should be secured, that is why the extranet and intranet services are used along with the utilization of the Internet. The benefits of electronic data interchange are that the information is delivered immediately without delivering it to the third parties (Schneider 2013). Many financial operations are done on the basis of the Electronic Fund Transfer. The main idea of this transfer is that the money is delivered without any paper checks. Electronic signals are only used. The main advantage of such strategy is that the procedure is simplified significantly (Emerson 2004).
Returning to the issue of extranet and intranet, it is possible to state that the importance of the intranet is that it gives a limited access to the particular files for a limited number of people. Significantly, working in the company, there are a lot of files, which must be secured from all people, but at the same time available for some of them. That is why the importance of the intranet may not be overestimated. The extranet is a much more extended version of the intranet. If intranet operates in the frames of one particular company, the extra net may be used by the corporation having the representations in many countries of the world (Bidgoli 2004). WAN and LAN differ greatly. The main difference is in the spread of influence. LAN is a local and WAN is a wide network for information sharing. Both networks are used for information sharing in the companies. However, depending on the distance and the importance of the information, different networks are referred to. LAN is used on the small distances to share the information within one geographical location with the higher speed. WAN is used on the great locations (including different countries) but on the lower speeds.