National Institute of Technology 2009-1st Sem M.B.A International Business IV Sem - - Question Paper

B. societal marketing orientation:
Companies realize that successful international marketing requires serious consideration of potential environment health, social and work related issues that may arise when selling or making their products abroad.

Q: five (A) How do International businesses seek to minimize foreign exchange risks?

Ans:

Global cash management strategy focuses on the flow of money for specific operation objectives. a different important objective of an MNC’S is financial strategy is to protect against the foreign exchange risks of investing abroad. The strategies that on MNC adopt to do this mean the internal movement of funds as well as the use of 1 or more of foreign exchange instruments, such as choices and forward contracts.
If all exchange rates were fixed in relation to 1 another, there would be no foreign exchange risk. However rates are not fixed and currency values change frequently. Instead of infrequent 1 way changes, currencies fluctuate often and both up and+ down.

A change in the exchange rate can outcome in three various exposures for a company:

1. Translation exposure:
Foreign currency financial statements are translated into the reporting currency of the parent company so that they can be combined with financial statements of other companies in the corporate group to form the consolidated financial statements. Exposed a/c’s those translated at the balance sheet rate are current exchange rate either gain or lose value in dollars when the exchange rate modifications.
2. Translation Exposure:
Denominating the transaction in a foreign currency represents foreign exchange risks because the company has a/c’s receivable or payable in foreign currency that must be settled eventually.
3. Economic exposure:
It is also known as operating exposure which is the potential for change in expected cash flows. It arises from the pricing of products, the sourcing and costs of I/P’s and the location of Investments.


Q: five (B). What is FDI? Why is it preferable to other routs of International business?

Ans:

FDI (foreign Direct Investment), it is an investment that provide the investor a controlling interest in a foreign company. FDI is a way to fulfill any 1 of the 3 major operating objectives that may lead companies to engage in international business:

1. To expand their sales.
2. To acquire resources.
3. To minimize competitive risk.

In addition govts may own FDI or influence their home based companies to establish FDI because of political motives. Companies can pursue operating modes other than FDI such as exporting, Importing from a different company, or collaborating with a different company to handle operations on its behalf. These modes are less risky than FDI because a company has to expose fever resources in a foreign country where it has a liability of foreigners. Thus, companies must posses a few advantage to company’s are for the liability so why should a company risk operating in an environment less familiar than the 1 at home.

Earning:   Approval pending.