MiniCase_PPTsC14MiniCaseNovo课件.pptVIP

Novo Industri A/S (Novo) Novo Industri Novo is a Danish multinational firm which produces industrial enzymes and pharmaceuticals (mostly insulin). In 1977, Novo’s management decided to “internationalize” its capital structure and sources of funds. This decision was based on the observation that the Danish securities market was both illiquid and segmented from other capital markets. In particular, the lack of availability and high cost of equity capital in Denmark resulted in Novo having a higher cost of capital than its main multinational competitors. Novo Industri: Case Questions Why did Novo believe that its cost of capital was too high compared to its competitors? Why did Novo’s relatively high cost of capital create a competitive disadvantage? Novo believed that the Danish capital market was segmented from world capital markets. Explain the six characteristics of the Danish equity market that were responsible for its segmentation. What was Novo’s strategy to internationalize its cost of capital? What is the evidence that Novo’s strategy succeeded? Novo Industri: Case Questions Why did Novo believe that its cost of capital was too high compared to its competitors? Why did Novo’s relatively high cost of capital create a competitive disadvantage? Novo observed that its price/earnings ratio was only 5 compared to 15 and higher for its competitors. Novo was also told by its bankers that they could not borrow much more and the domestic equity market was saturated with respect to Novo’s stock. Novo’s high cost and low availability of capital in Denmark would prevent it from fully exploiting its competitive advantage in research on insulin and industrial enzymes. Novo Industri: Case Questions Novo believed that the Danish capital market was segmented from world capital markets. Explain the six characteristics of the Danish equity market that were responsible for its segmentation. At least six characteristics of the Danish equity market were responsible for mar