Business administration Behaviors of businesses in the globalization era the DELL EMC MA Case study

Business administration group 2 kt47c1 mid term paper behaviors of businesses in the globalization era the dell emc merger and acquisition case study. Introduction: In recent decades, globalization has grown tremendously and become an inevitable trend. This trend strengthens the international connections, and creates links, effects, and interdependence among countries and regions. There are many ways to explain the meaning of globalization, but there is a comprehensive one: “Globalization is a process that minimizes burdens among countries and encourages the interdependence in economy, politics and society”. This process happens in every aspect such as: economy, culture, politics, society, environment and economy is a very crucial part. Economic globalization enhances international activities without borders and promotes the interaction and interdependence among countries. There are some characteristics of globalization. Firstly, globalization enhances the commercial activities among countries. International trade helps countries achieve their economic benefits because in this environment, these countries have to eliminate commercial and tax burdens, unfair discrimination. Some nontariff measures like quotas, import licenses, regulations about quality, originality, sanitation were also mentioned in this round and the WTO implemented some policies to eliminate these measures, leading to a fair competition and more commercial trades. Secondly, globalization facilitates the new financial and commercial organizations in the world. In terms of world organizations, the IMF (international monetary fund) enhances economic development and aids financial support. The WB (world bank) provides loan programs to developing countries to promote economic development. The WTO (world trade organization) creates a transparent, equal and free commercial market for more than 160 countries around the world. In terms of regions, the EU is the most outstanding organization that includes 27 members and considered to be an economic, political group having a deep connection with each other. Thirdly, multinational companies and transnational corporations have developed dramatically and had an important role in promoting globalization. Not only do these affect the world economy but they also have a great impact on regional development, international trade and investment, technology transfer and labor force. Thanks to the greater power, multinational companies and transnational corporations have been expanding their influence and control in some sectors like: finance, technology, service and labor. Overall, this system of companies has developed the world manufacturing process, and strengthened the interdependence among countries tightly.

DIPLOMATIC ACADEMY OF VIETNAM FACULTY OF INTERNATIONAL ECONOMICS



-MID-TERM PAPER

MODULE: BUSINESS ADMINISTRATION Topic: Behaviors of businesses in the globalization era

& The Dell – EMC merger and acquisition case study

Advisor: Assoc Prof Đặng Hoàng Linh

Student: Group 2 – KT47C1

1) Nguyễn Nhật Anh _ CT47C1 – 0005 2) Đỗ Ánh Dương _ KT47C1 – 0156 3) Nguyễn Thị Ngọc Quỳnh _ KT47C1 –

0165

Hanoi, March, 20th 2023

TABLE OF CONTENT

I Globalization and companies in globalization 1

1.1 Globalization 1

1.1.1 The definition of globalization 1

1.1.2 Globalization’s effects 2

1 2 Companies in globalization 3

1.2.1 Manufacturing factors 3

1.2.2 Technological factors 3

II Site Selection (Investment Environment) 3

2.1 Socio-economic environment and the stability of macro environment 3

2.2 Natural factors 3

2.3 Labor force 4

2.4 Infrastructure 4

2.5 Legal environment and investment attract policies 4

III Types of foreign capital investment 5

3.1 Joint venture 5

3.2 Enterprises with 100% foreign capital 5

3.3 Business Cooperation Contract 6

3.4 BOT - BTO - BT contract form 6

3.5 Export Processing zone, Industrial Zone and High -Tech Zone 7

3.6 Mergers and Acquisitions – M&A 7

IV Dell & EMC Corporation Merger and Acquisition Case Study 8

4.1 The Overview of Dell & EMC Corporation M&A Deal 8

4.2 Analysis and evaluation of the M&A deal between Dell and EMC 12

REFERENCES 19

I Globalization and companies in globalization

1.1 Globalization

1.1.1 The definition of globalization

In recent decades, globalization has grown tremendously and become aninevitable trend This trend strengthens the international connections, and creates links,effects, and interdependence among countries and regions There are many ways toexplain the meaning of globalization, but there is a comprehensive one: “Globalization

is a process that minimizes burdens among countries and encourages theinterdependence in economy, politics and society” This process happens in everyaspect such as: economy, culture, politics, society, environment and economy is a verycrucial part Economic globalization enhances international activities without bordersand promotes the interaction and interdependence among countries

There are some characteristics of globalization Firstly, globalization enhancesthe commercial activities among countries International trade helps countries achievetheir economic benefits because in this environment, these countries have to eliminatecommercial and tax burdens, unfair discrimination Some non-tariff measures likequotas, import licenses, regulations about quality, originality, sanitation were alsomentioned in this round and the WTO implemented some policies to eliminate thesemeasures, leading to a fair competition and more commercial trades

Secondly, globalization facilitates the new financial and commercialorganizations in the world In terms of world organizations, the IMF (internationalmonetary fund) enhances economic development and aids financial support The WB(world bank) provides loan programs to developing countries to promote economicdevelopment The WTO (world trade organization) creates a transparent, equal andfree commercial market for more than 160 countries around the world In terms ofregions, the EU is the most outstanding organization that includes 27 members andconsidered to be an economic, political group having a deep connection with eachother

Thirdly, multinational companies and transnational corporations have developeddramatically and had an important role in promoting globalization Not only do theseaffect the world economy but they also have a great impact on regional development,international trade and investment, technology transfer and labor force Thanks to thegreater power, multinational companies and transnational corporations have beenexpanding their influence and control in some sectors like: finance, technology,service and labor Overall, this system of companies has developed the worldmanufacturing process, and strengthened the interdependence among countries tightly

1.1.2 Globalization’s effects

1.1.2.1 Positive effects

Firstly, the competitiveness among companies, economies will be enhancedsignificantly When national corporations join the global market, they will competewith others fiercely so in order to advance the competitive ability, these companieshave to oblige international manufacturing standards, improve productivity and quality

of products to meet the global customers’ demands As a result, customers are likely tobuy high quality products with reasonable prices Secondly, more investments willcreate more jobs for laborers Globalization helps developing countries receiveinternational investments by various ways such as FDI, FII or ODA The amount ofmoney invested has risen tremendously year after year, especially the developingcountries that attracted nearly half of the total international capital by more than 700billion dollars, which was much higher than developed ones Lastly, countries havemore opportunities to access up-to-date technology Globalization positively affectstechnological innovations thanks to transferring activities, then narrowing thetechnological gap between the developing and developed countries Accessing moderninventions ensures the manufacturing development, the quality of products, andmanagement skills

1.1.2.2 Negative effects

In spite of having some benefits, globalization also has some drawbacks as well.Firstly, the rich and poor gap will widen among countries This process has beenproved to bring economic advantages for every country, but these do not allocateequally The bigger the countries are, the more benefits they gain because they havegreat fundamentals in many sectors, which the poor ones do not have Recently, thedeveloped countries are reported to occupy only nearly 20% of the world population,but own 71% of the assets and international trade, 58% of the total foreign directinvestment and 91% internet users Secondly, unemployment, bankruptcy, socialconflict due to tough competition will result in some undesirable consequences to theeconomies The growth of globalization means higher unemployment rate indeveloped countries because the labor force in developing countries have someadvantages like: low salary, low labor welfare This consequence will raise socialwelfare for the unemployed, which decreases the state budget and becomes a burdenfor the economic development in rich countries In addition, interdependence is adouble-edged sword that every country has to concern The more a country relies onoutsiders, the more fragile they will face in crises This reliance shows in 2 maincriteria which are the proportion of commercial per GDP and international investmentper total investment If a country’s economic development depends heavily on these 2

criteria, it will be vulnerable when facing unexpected situations like: disease, supplychain disruption, economic crisis.

1 2 Companies in globalization

Nowadays, investors have been seeking new markets and destinations to not onlyexpand their businesses but also maximize their profit A market that has attractiveinvesting opportunities, good security will be the priority To find this appealingmarket, they need to understand clearly about manufacturing factors, and technology

1.2.1 Manufacturing factors

Labor cost is not always the most important factor for a potential market becauselow labor cost means low productivity, backward technology For that reason, ifcompanies want to invest in developing countries, the businesses are often suitable forlow-skilled workers For example, some very appealing destinations attractinternational investors like Vietnam, which has a young and cheap labor force.Moreover, natural resources are also a great concern because by exploiting themeffectively, investors decrease the price of input materials That’s why some richnatural resources countries like Vietnam or Myanmar become very potentialdestinations for foreign investments

1.2.2 Technological factors

Advancements in technology have considerably facilitated globalization In facttechnological progress has been one of the main forces driving globalization.Technological breakthroughs compel business enterprises to become global byincreasing the economies of scale and the market size needed to break even.Technological advancements reduce costs of transportation and communication acrossnations and thereby facilitate global sourcing of raw materials and other inputs.Patented technology encourages globalization as the firm owning the patent canexploit foreign markets without much competition

II Site Selection (Investment Environment)

2.1 Socio-economic environment and the stability of macro environment

The stability of the socio-economic environment plays an important role in using and allocating the capital effectively Politics and economy have a strict connection with each other, so foreign enterprises pay a lot of attention to policies benefiting them A country having social conflicts, wars, terrorism will have difficulty in

attracting foreign investments For that reason, a stable macroeconomic environment isthe first priority for investors because their aim is to make profit in the long run with the least risk that they have to take

2.2 Natural factors

Natural factors are available factors in each country, and they are also one of thedevelopment resources that attract foreign investment capital Natural factors includegeographical location and natural resources

Convenient geographical location allows for easy concentration of productionfacilities, expansion into surrounding markets, reduction of transportation costs, andutilization of other resources

Natural resources are a strategic factor in policy development and economicsector structural construction Foreign investors are always drawn to countries withabundant natural resources Investors want to maximize benefits and productionefficiency by effectively utilizing natural resources appropriate to the industry inwhich they invest

2.3 Labor force

Labor force is the key factor in an enterprise's business activities, contributing toits success or failure Foreign investors when making investment decisions will payattention to the quantity, quality and cost of the labor source they intend to use Well-trained, qualified employees with job-specific skills and the ability to collaborate withcapable managers will result in increased productivity and efficiency

2.4 Infrastructure

The initial basis for attracting foreign investment is infrastructure, which is afactor in promoting foreign investment activities to take place quickly and has adecisive influence on enterprise production and business efficiency Karma Manyinvestors believe that this is the most important factor to consider when choosing aninvestment location

Furthermore, the technical infrastructure includes support services such asbanking, auditing, financial consulting, business, and so on These factors act ascatalysts, assisting in the investment implementation process; without them, theinvestment environment would suffer greatly

2.5 Legal environment and investment attract policies

Legal environment and investment attract polices are the most concerningfactors, including:

Firstly, there are the legal environments and policies attracting foreign

investment, including: a healthy competitive environment, and private propertyownership is legally guaranteed

Secondly, administrative procedures must be transparent.

Thirdly, Profit division regulations and the right to "repatriate" profits for specific

forms of foreign capital mobilization.monetary policy

Finally, the legal system must demonstrate the basic content of the principle:

respect for sovereignty, independence, equality, mutual benefit, and compliance withinternational practices At the same time, legal institutions must be established andimproved to instill confidence in foreign investors

III Types of foreign capital investment

In the globalization environment, businesses not only strengthen domesticproduction and business activities but also conduct many forms of cooperation withforeign businesses such as joint ventures, 100% foreign-capital enterprises,cooperation contracts, BTO-BOT-BT contracts, acquisition and merger (M&A),

3.1 Joint venture

Joint venture enterprises are formed when two or more foreign investorscontribute a portion of their assets, rights, obligations, and legitimate interests to localbusinesses in order to form a new business

Joint ventures are an appealing form of investment that many businesses arepursuing in the current integration trend A joint venture enterprise is a type ofbusiness that offers numerous benefits to both domestic and foreign investors:

Firstly, businesses can access advanced technologies to improve product quality,

innovate products, and increase domestic production capacity

Secondly, domestic investors have the opportunity to learn and gain advanced

management experiences

Thirdly, domestic investors can benefit from both foreign investment capital and

domestic advantages such as natural resources The strong development ofinternational joint venture cooperation is a bridge between the domestic market and theglobal market, a driving force for the national economy's expansion and development

3.2 Enterprises with 100% foreign capital

In terms of definition, enterprises with 100% foreign capital is a company owned

by foreign investors, established by foreign investors in the host country, has legalstatus according to the law of that country, self -management reasoning and operatingbusinesses and self -responsibility for business results Here are some typical features:

Firstly, foreign investors invest in Vietnam for the first time to have projects and

carry out procedures to be granted investment certificates

Secondly, enterprises with 100% foreign capital may be established by one or

more organizations and individuals and have legal status according to Vietnamese law.Enterprises must comply with the laws of the country and equality with enterprises ofall economic sectors

Thirdly, 100% foreign capital enterprises are responsible for their business

results

This is a popular form of foreign investors because they can access the domesticmarket and completely control and manage businesses

3.3 Business Cooperation Contract

In terms of definition, a business cooperation contract is a document signedbetween domestic investors and foreign investors, stipulating responsibilities forcontract performance and dividing business results for each party to conduct businessinvestment in a country that does not establish a new legal entity

In the course of business, the parties of the contract are allowed to agree to set up

a coordinating board to monitor and supervise the contract performance

When establishing a business contract in Vietnam, the Vietnamese party is underthe regulation of Vietnamese law under the newly promulgated enterprise law

Business cooperation contracts help promote production capacity, create jobopportunities and learn for workers However, this form only receives averagetechnique, mainly investors exploiting abundant labor resources in the host country

3.4 BOT - BTO - BT contract form

3.4.1 Build - Operate - Transfer Contract (BOT)

According to the provisions of the 2005 Law on Investment, Build Operate Transfer contract (BOT) is a document signed between Vietnamese competent stateagencies and foreign investors to build public business The technical infrastructureprocess for a certain period of time

-In this form, investors are responsible for conducting construction and businessfor a period of time to recover enough capital and reasonable profits After the projectends, the entire project will be transferred to the host country without collecting anymoney

3.4.2 Build - Transfer - Operate Contract

Build - Transfer - Operate Contract (BTO) is a form of investment signedbetween competent state agencies and investors to build infrastructure works; Afterconstruction is completed, investors transfer that work to the State of Vietnam; TheGovernment has for investors of such works business rights for a certain period of time

to recover investment and profits

With this form, after the construction is completed, the investor will transfer theproject to the host country, and the investor will be able to do business for a while atthat project to recover enough capital and suitable profit

3.4.3 Build – Transfer Contract (BT)

Build – Transfer Contract (BT) is a form of investment signed betweencompetent state agencies and investors to build infrastructure works; After theconstruction is completed, the investor transfers that project to the State of Vietnam

With this form, after the construction is completed, the investor will transfer thework to the host country Investors will be facilitated to implement other projects torecover enough investment capital or be paid under the contract.

In summary, according to the forms of investment under this contract, investorsare responsible for the value of use and safety for their works for a period of timeprescribed by the contract after transfer

3.5 Export Processing zone, Industrial Zone and High -Tech Zone

Export processing zone, Industrial zone and High -Tech zone As a concentrationarea, enterprises specializing in manufacturing industrial products, products used forexport, high -tech products and service activities for production activities of thesebusinesses

3.6 Mergers and Acquisitions – M&A

Merging enterprises is the two or more businesses transferring all their legitimateassets, rights, obligations and interests to another enterprise to have a larger value andscale After the merger, the merged enterprise ended its existence

Buying is the form of a company that buys part of the property or all the assets ofanother company The purchased company can terminate the operation or exist as adependent company

M&A classification is based on the relationship between businesses thatimplement M&A, the M&A includes forms of horizontal merger, vertical merger,market expansion, product expansion, and corporate merger

With this form, investors can quickly participate in the domestic market withoutspending time and capital to build infrastructure This is a reasonable choice forinvestors when the new investment in the host country is difficult However, theacquisition or merger of the enterprise requires a large capital source and a highlymanagement team

There are three main categories of mergers:

Horizontal merger: A merger between companies that are in direct competition

with each other in terms of product lines and markets

Vertical merger: A merger between companies that are along the same supply

chain

Concentric Mergers: Occur between companies within an industry that serve the

same customers but don't offer them the same products or services

IV Dell & EMC Corporation Merger and Acquisition Case Study

4.1 The Overview of Dell & EMC Corporation M&A Deal

4.1.1 The context before the M&A deal

The Dell-EMC merger has been one of the largest acquisitions in the technologyindustry In addition to its size, this merger was more complicated than the simplepurchase of one company because an acquisition of EMC meant purchasing all of thesubsidiary companies During October 2015 to September 2016, there were manyannouncements discussing everything from merger financing and predicted decisions

of antitrust agencies, to projected dates of close Finally, on September 7, 2016, DellInc completed the merger and became the biggest tech deal in history

4.1.1.1 Companies Before The M&A Deal

Computer technology giant Dell Inc: was an American private computer

technology company situated in Texas, United States About 70 percent of Dell’sbusiness related to its core business which was personal computers In 2014 it was thethird largest PC seller in the world, and then in 2015, Dell showed 12.6 percent year-over-year growth and revenue of $2.3 billion which ranked the second in this industrywith 18 percent market share Dell had not released earnings numbers since it wentprivate in 2013, but back then its EBITDA was $4.5 billion and Dell’s cash flow hasslipped since then

EMC Corporation was an American multinational company which was a global

leader in enabling businesses and service providers to transform their operations anddeliver information technology as a service EMC was the world’s largest data storagesystems’ provider based on market share In the first quarter of 2015, EMC finished inthe top position within the worldwide enterprise storage system market, holding amarket share of 17.4% and a total revenue of $1,531Million EMC reported anincrease in the 2 quarter 2015 by 1.99% year on year, while most of its competitorshave experienced contraction in revenues by -4.36%1 In addition, they also facedtough competition from small enterprises specializing in cloud computing EMC wasconfronted with a risk of massive threat as rivals offered up-to-date drive solutions andtechnologies that affected profitability The competitors enhanced their technologiesaccessible through the cloud, reducing the market share of EMC’s high-end storagesystems

1 Antonio Conte, Head of M&A, Thea Wrobbel, M&A Associate TMT, Riccardo Pizzino, Head of Treasury & Legal, DELL & EMC - The Path to be Giants- M&A Reports

https://financescp.net/2016/01/17/dell-emc-deal-ma-reports/, accessed on 16/3/2023

Picture 4.1.1: Emc Organization Structure Before M&A

Source: Wall Street Research

4.1.1.2 Reasons why Dell bought EMC

First, Dell would gradually dominate a part of the software industry and expand

its business to hold a significant position in the data storage market Dell had to offermore up-to-date technologies through the infrastructure and client solutions group, andSecureWorks Corp,VMware Inc, Pivotal Software Inc Information security, andBoomi The M&A was the combination of the top providers of the significant storagedevices and the leading personal computer developers

Second, Dell’s hardware development did not have advantage in the information

technology industry, while the production rates in the software sector were high withremarkable profit margins The M&A was a good investment because Dell wouldbenefit from EMC’s centralized portfolios and have more impact on the cloud-computing industry This could be seen from the M&A’s new contracts like reaching

an agreement with General Electric, becoming its major IT infrastructure developer.Hence, the acquisition provided considerable l product lines from hybrid computersystems Merging with EMC facilitated Dell to remain the dominant supplier for retailcustomers Consequently, the new combination named Dell Technologies became theworld’s leading seller of storage devices, the second in developing servers, and thethird company in providing personal computers

Third, Dell Technologies aimed to diversify Dell’s technology portfolio

including hybrid cloud, software-defined data center, converged infrastructure,cybersecurity, data analytics, and mobility Dell/EMC has developed a variousportfolio with more than 20000 applications and patents, resulting in a vast andprivately controlled technology company Besides that, Dell wanted to merge with