Strategy and Global Finance Report: Electro-Tech's Investment Analysis

This report analyzes Electro-Tech, a telecommunications company, focusing on its global finance strategies and investment approaches. The report covers the impact of globalization, evaluates investment approaches like income and growth investing, and assesses the influence of global business environment factors such as economic and technological aspects. It then delves into Electro-Tech's potential investment decisions and strategies for its proposed Atlantic expansion project, critically evaluating the buy and hold strategy. Furthermore, the report explains the impact of strategic decisions, including NPV, IRR, and payback period, on Electro-Tech's operations, along with the financial consequences of these decisions. Finally, it identifies potential global risks, such as foreign exchange risk and government legislation, and proposes risk mitigation techniques like exchange-traded funds to safeguard Electro-Tech's investments.

Strategy and Global Finance

INTRODUCTION
Global finance is a system which helps an organization to successfully run its business in
their respective industry or sector. This process helps in investing globally for the business to
make improvement and to expand it as well.
Present report will study about Electro-Tech which was formed in 2008. It is a
telecommunication company and one of the world’s leading suppliers. Electro-Tech employs
21,000 people across 80 countries. Electro-Tech’s mission is to place world-wide
telecommunications to every business. This report will discuss about the concept of globalization
and investment approaches. It will also explain about the global issues which can affect their
business activity.
In the second part of this report, this study will explain about the appropriate finance for
an organization which can be use in investment appraisal techniques. It will also focus on
different aspects of financial risk management as well. Other factors, such as, techniques for risk
recording and monitoring and applied strategies and techniques to mitigate particular business
risks will also be discussed in this report. This assessment will describe the financial statements
which is being used in the identification of organization's financial viability receptively. Lastly it
is explaining the current financial status of company and also recommending suitable strategies
as well.
MAIN BODY
TASK 1
1(a) Concept of globalization is linked to investment approaches
Globalization has a huge impact on the business activity of any organization. This
process has helped in exchange of markets and products around the world. This process assist
investor to approach new investing opportunities and to evaluate fresh markets at a greater
distance which can be very useful for the organization (Lasserre, 2017). This process has
increased the rate of international investing as well. Globalization induce connected economies
in order to proceed to invest in their economic health and take new profits. For Electro-Tech and
other global companies, like, Verizon Communications Inc., Softbank Group Corporation, etc.
can have a huge benefit of globalization. This will help them in investing globally for their
business in order to increase their productivity and sales. Due to this investment, it will also
assist in them in getting new opportunities as well (Masciandaro, 2017).
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2(b) Evaluating different approaches to investment
There are various approaches which can be used by any organization in order to improve
their business activity, such as, income investing and growth investing. These approaches are
very beneficiary for Electro-Tech and other global company, for example, Verizon
Communications Inc. (Grishunin and Suloeva, 2015).
Income Investing Approach: This strategy helps in generating income from their investment for
organization in the form of dividends, interest or capital gains (Sassen, 2016). Income investing
can be cite to a scheme of buying shares in a company that pays dividends. The generated
income can be calculated by following formula:
Dividend Yield=Annual Dividends Per Share
Price Per Share
Income investing strategy aid to find top-grade companies with the highest dividend yield
which can be useful for Electro-Tech to invest for their business activity.
Growth Investing approach: This is another style or process of investment which can be used
by these organizations to invest for their business. In growth investing method. It mainly focuses
in increase in growth of an investor's capital (Sassen, 2018). This type of approach basically
invests in the growth shares whose income or earnings are expected to increase in market. This
process is very helpful in evaluating company's potential for growth and invest in markets. This
approach focuses on earning growth of companies in which they are investing their money which
helps in reducing the impact of loss.
TASK 2
1(a) Two contrasting global business environment factors
Global business environment factors are those component which can affect their
functionality externally. There are various global factors which can influence their business, such
as, legal, political, social, technological and economic. Analysing these component is very
essential for any enterprise to run it successfully in industry(Giddens, 2018). Two main factors
which has a huge impact are as follows:
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 Economic Factors: These constituent basically include all the economic element which
changes globally. There are various factors such as, rise in living standards which
ultimately increases the demand of products efficiently which helps in increasing their
productivity and sales (Sapolsky and et.al., 2018). Other factors include, increase in the
interest rate, wages, rise in inflation rate etc. all these can affect their overall business
activity.
 Technological factors: For any business technological factors plays an important role in
enhancing their performance. This aid the enterprise to cut down the costs and create
new products. Having new and improved technology can help an organization to provide
the best products and services to their customers which will ultimately increase their sales
and brand value as well (Grishunin and Suloeva, 2016). Technology helps enterprise to
increase competing benefit and is a major driver of globalization.
2(b) Evaluating the impact of each factor on Electro-Tech operations
Electro-Tech working in a telecommunication industry, it is very essential for them to
manage the impact of global business environment factors on their business activity effectively
(Scott and Zachariadis, 2017). Economic and technological factors have a huge impact on their
business, such as:
Economic Impact: In this factor, it is very crucial for Electro Tech to properly manage their
system according this. Increase in the interest rate can affect their overall business's sales and
productivity (Guo and et.al., 2018). Rise in living standards also affects them, such as, it
increases demand for their products and services, which thereby, provides them greater
opportunities for businesses to make profits.
Technological Impact: Working in a telecommunication industry it becomes evident for them to
have all the latest and new technology which can aid them in improving their existing services
and to bring some new products as well. With the advent of modern communication
technologies, technological factors have gained great impetus in the business arena (Ghezzi,
Cortimiglia and Frank, 2015).
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TASK 3
1(a) Explain the potential investment decisions and strategies available to Electro-Tech’s
proposed Atlantic expansion project
For Electro Tech it is very essential to maintain and plan a good decisions and strategies
which can be very helpful for them in making an investment of £150 million for their expansion
of business in Atlantic expansion project (Lee, Kwak and Lee, 2015). For this they can calculate
the overall profit rate from this investment by using method like, net present value (NPV) and
internal rate of return (IRR). There are various strategies which can be opted by Electro Tech,
such as, buy and hold strategy, momentum trading, long short strategy, etc.
2(b) Selecting and critically evaluate the optimum strategy
For Electro Tech, buy and hold strategy will be very beneficial for them. In this strategy,
company will buy their shares or funds and holding them for a long period to get better return.
This is basically a long term investment which can be made by organization to make a good
return which they can invest in their business to make significant improvement (Sharma,
Medudula and Patro, 2015). This can help in entering in market at low price and sell their
products at higher rate. This will aid in increasing their profitability rate.
TASK 4
1(a) Explaining the potential impact of strategic decision on Electro-Tech operations
Strategic decisions are those which helps an organization to plan and process strategies
which can aid Electro Tech to accomplish their mission, values, goals and objectives. The impact
of strategic decisions can also help in decision making which results in profitable consequences
for them (Faccio and Zingales, 2017). There are various decisions which can be used by them to
improve or increase their operation, such as,
 Net Present Value (NPV): It is that value which helps in identifying the variation
between the present value of currency inflows of an organization and its existing value of
currency outflows in a given time period (Petković and et.al., 2016). It can be calculated
by:
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Computation of NPV
Year Cash flows
PV factor @
10% Discounted cash inflow
1 80 0.909 72.73
2 185 0.826 152.89
3 210 0.751 157.78
4 210 0.683 143.43
5 210 0.621 130.39
6 210 0.564 118.54
7 210 0.513 107.76
8 210 0.467 97.97
9 210 0.424 89.06
Sum of discounted cash
flows 1070.55
Less: Initial Investment 150
Net present value (NPV) 920.55
From this method it will be easy for company to identify or evaluate the profit ration of
their investment. From the above table it is showing that, this NPV has a positive growth for
Electro Tech which will contribute in increasing their sales. Positive NPV will prove to be
profitable.
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 Internal Rate of Return (IRR): This process helps in evaluating the potential ration of
their investment which the have company made. If Internal Rate of Return overstep
below the needed rate of return project should be excepted and if its falls, it should be
rejected (Patrick and French, 2016).
Computation of IRR
Year Cash flows
0 -150
1 80
2 185
3 210
4 210
5 210
6 210
7 210
8 210
9 210
Internal rate of return (IRR) 93.6%
From the above report it can be observed that IRR of Electro Tech is positive and higher,
so it will be beneficial in investing in Atlantic expansion project. So they can opt for this project
to do their investment of £150 million.
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Payback period
It is that time period in which company will get return on its investment, which in this
case is 1 year and 4 months respectively.
Year Cash flows
Cumulative cash
flows
1 80 80
2 185 265
3 210 475
4 210 685
5 210 895
6 210 1105
7 210 1315
8 210 1525
9 210 1735
1 + (150 – 80) / 185
= 1.4 years
2(b) Evaluating the potential financial consequences of the strategic decision can have on the
organisation
The potential financial consequences of strategic decisions on Electro Tech can have a
huge impact in positive manner. Such as from both the process, i.e., Net Present Value and
Internal Rate of Return, it will be beneficiary for them in investing their £150 million in Atlantic
expansion project. These processes will be very helpful for them in increasing their profitability
ratio as well.
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TASK 5
1(a) Two global risks that Electro-Tech might be exposed to while implementing the Atlantic
Expansion project.
 Foreign exchange risk :- it is considered as a financial risk that occurs when company
runs internationally. Electro-Tech, might be affected by Foreign exchange risk whenever
it has contractual cash flow. Company might be exposed to this risk by having payables
& receivables influenced by currency exchange rates. Furthermore, it has been
discovered that if a value of currency changes between when the agreement is signed, it
could cause a loss for one of the parties (Epstein, 2018).
 Government legislation :- government based regulations has a greater impact on
telecommunication service industry in several ways. For example, Trade laws, the federal
minimum wage, & also the need for license might affect Electro-Tech. It has been further
revealed that, a policy can be applied by the government by which social behaviour in
the business environment can get influenced. Moreover, unstable conditions might
present challenges which can affect company in the future (Franks, Davis and Scurrah,
2014).
2(b) Two risk mitigation techniques that can be applied.
 Exchange – Traded funds :- for Electro-Tech to mitigate the risk of foreign exchange, it
can seek to have various types of exchange traded funds which pay attention on providing
short & long exposures to many different currencies. It has been suggested that, using
such a fund is considered the best mitigatory for vulnerability.
 Prepare Regulation based plans :- to mitigate the risk of government rules and
regulations, company must kept itself aware of upcoming changes in current legislation.
It is necessary for Electro-Tech to have a backup plan for future risk that might affect it.
Another important thing that need to be considered is that company must follow all
taxation rates, interest rates and other government laws to keep itself safe from other risks
(Oshri, Kotlarsky and Willcocks, 2015).

3(c) Suitability of two risk mitigation techniques.
Exchange Traded funds, refers to an investment fund traded on stock exchanges. It is best
suitable for the company because it provides the easy diversification, tac efficiency if index
funds, and fewer expense ratio. ETF is considered as a good mitigation techniques because it can
be economically acquired and inclined of shares as long term investment for assets. Other
advantages of it are, it creates low capital gains as the have low turnover of their securities,
ETF's can be bought and sold at present market prices during the day of trading, further it
provides an economical way of rebalance portfolio allotment. Secondly, having suitable plan of
action to mitigate government rules or following all laws will be best for Electro-Tech to reduce
its risk factor. As it has been determined that disobeying rules might adversely affect the
company (Morello, 2018). Following the legislation will make it easier for all to fulfil the goals
for an organisation.
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