ACC03043: Corporate Governance - ABC International Ltd. Case Study - Management Assignment Help

Assignment Task:

Case: ABC International Ltd. 

ABC International Ltd. was incorporated in 1968 as a manufacturer of electrical components and telephone equipment in Hong Kong. In 1979 ABC entered into a joint venture with an Australian group in the telecommunications field and opened a factory in Shenzhen to manufacture components. Subsequently rights were acquired to manufacture and sell a range of telecommunications equipment in Hong Kong and China. This proved to be a very successful arrangement and ABC grew substantially in turnover, profits and employees. 

The company was listed on the Hong Kong stock market in 1997. 

Business performance and prospects 

The company manufactures and markets a range of equipment for large telecommunication systems, a proprietary telecommunication system for smaller organisations, and a range of telecommunication devices for the office and home. These markets include government, military, and industrial customers, as well as retail outlets. Growth is expected in each of these markets in Hong Kong and China. A mail order facility through the internet is being designed for direct sales. The business also has the potential to expand geographical throughout Asia Pacific, but a covenant in their joint venture agreement with their Australian partner prevents growth elsewhere in the world. 

New products developments come from the Australian joint venture partner, who has also licensed various products, devices, and software from the United States. ABC is currently considering a strategy to develop a range of its own products and systems. 

Competition for the existing range of products is high, except in the military field where there are various restrictions. Moreover, there are a number of new technologies, including wireless communication, computer based systems, and telecommunication systems convergence, that could have strategic implications for ABC. New entrants into the market could include computer manufacturers, telephone companies, and media network providers. 

ABC imports some specialised electronic components from Australia, Japan, and the United States, manufactures other equipment and assembles the products and systems in its Shenzhen factory. 

In his annual report to shareholders, the chairman said that: 

“We expect the PRC to maintain its prudent approach to stable financial and monetary policies so as to strengthen and improve the effectiveness of its austerity measures. Your company will benefit from the growth of infra-structural investment at government and industry level and from the increasing spending power of consumers” 

A recent report in the financial press said that: 

“The shares of ABC International raced up yesterday with a bullish report from Salmon, Smith Barney. The company’s recent announcement, of its latest range of telecommunication products, supports this confidence. Growing optimism on consumer spending and booming sales in electronic products in both the office and home markets also fuelled the enthusiasm. The company’s earning prospects seem bright and it will also benefit from lower costs on imported products due to the weak Japanese yen and the economic slowdown in the US.” 

Financial position 

In the latest published accounts the chairman of the board reported that turnover in 2004 had exceeded expectations at $237,632,000, but that profits were lower than analysts’ expectations, at $6,693,000, due to one off write-offs of obsolete stocks. The company did not pay a dividend this year, ploughing back profits into product development and expanding production capacity. 

Employees 

ABC International reported 1,280 employees at end 2004: 370 in Hong Kong, 910 in Shenzhen. Labour productivity had steadily improved in recent years, partly due to investment in capitally intensive manufacturing and assembly methods.