FINANCIAL MANAGEMENT IN A GLOBAL PERSPECTIVE

MS. INDRAYANI DEEKSHIT

COVERAGE
Increasing interdependence in the Global Economy Trends in Intl. Trade & Cross-Border Financial Flows Recent Developments in Global Financial Markets Challenges of Intl. Financial

INTERNATIONAL BUSINESS
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Encompasses our daily lives Beverages from USA Tea from Sri Lanka Mobile instrument from China TV from Japan

INTERNATIONAL BUSINESS

An English princess with an Egyptian boyfriend crashes in a French tunnel driving a German car with a Dutch engine driven by a Belgian who was high on Scottish whiskey followed closely by Italian Paparazzi on Japanese motorcycles treated by an American doctor using Brazilian medicines!

INTERNATIONAL BUSINESS

And this is sent to you by a Filipino using Bill Gates' technology which is American. And you are probably reading this on one of the IBM clones use Taiwanese-made chips, and Korean made monitors, assembled by Bangladeshi workers in a Singapore plant, transported by lorries driven by Pakistanis, hijacked by Indonesians5

INTERNATIONAL BUSINESS
Focus

upon resources across the

globe To seize global business opportunities and address threats In order to buy or sell goods or services worldwide

EVOLUTION OF INTERNATIONAL BUSINESS

Began

around 1870 and ended with World War I driven by industrial revolution in UK / Germany / USA Trade barriers set and trade suffered Breakdown of Gold standard & the need for international cooperation in the post-World war II

EVOLUTION OF INTERNATIONAL BUSINESS

Post

1947, the Generalised Agreement on Trade & Tariffs ( GATT ) came into being In 1995, GATT was replaced by WTO Efforts of IMF, World Bank & WTO alongwith efforts of individual countries led to globalisation as closed economies needed to open up

WTO - Implications
WTO

set up to strengthen World economy, leading to more trade, investment , employment and income growth In the wake of WTO, tariffs were reduced from over 30 40 % to below 5 % Regional integrations play a significant role NAFTA, ASEAN,SAARC Decline in Investment barriers to promote and protect investment

Recent developments
Growth

in FDI Investment in manufacturing and in markets FDI Inflows increased from USD 564 Bn in 1980 to USD 2.8 Tn in 2008 82% came from advanced countries Emerging economies received higher FDI USA has been the largest provider of FDI BRICS now in focus Internet and Worldwide web Online commerce Reduced travel time Technological developments Internet, Worldwide web, Online commerce
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Changing global trends

GDP as % of World GDP 1963 40.3 9.7 6.5
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2009 USA 28.4 GERMANY 4.0 UK 3.1

Changing global trends

COUNTRY SHARE IN WORLD GDP AS % USA GERMENY FRANCE UK JAPAN CHINA INDIA 2..4 4.0 3.0 3.1 6.0 12.6 5.1 SHARE IN WORLD EXPORTS AS % 16 8.6 6.2 3.8 4.3 8.5 1.7

( WORLD ECONOMIC OUTLOOK 2010 )

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Growth of Multinational Companies

The

no. of companies that did business in more than one country grew Of the 500 top MNCs 139 were from USA, 71 from Japan and 46 from China

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Managing Intl. business Factors

Political Social Cultural Economic

Higher cost / Lower cost countries Higher quality-conscious countries

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Intl. business - Features

Accuracy

of information needed Timely information required Business size needs to be large Markets need to be segmented

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Intl. business Dimensions

Busines Threats Customer Behaviour Cultural

opportunities preferences

aspects Namaaz (Middle east) / Family activities (Fiji Islands) Employees Business Environment
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Intl. business Dimensions

HR

Practices Govt.Policies Monetary System National Security issues FATF / OFAC Language Nationalism and Business Policy
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Stages of Internationalisation of companies

Stage Stage

I Domestic company II International company domestic prdn. Off-loaded in fgn. Mkts. Also branch in fgn. Country Stage III Branches work like domestic branch in each country (polycentric). These are multi-domestic companies (Philips of Netherlands) Stage IV Global company has global strategy. Produces in home / single country and markets globally ( Dr. Reddys Labs ) Stage V Transnational company 18 produces, markets, invests and

Transnational company features

Integrated

global enterprise linking global resources to global markets at profit Geocentric orientation Think globally and Act locally Assets across the World Knowledge and experience in various markets is shared Information relating to various markets is collected and scanned

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Transnational company features

Vision

is GLOBAL Geographic scope offers opportunities Operating style key operations globalised Adaptation to markets Extension of markets no change in pdt. HRM Policies Top key positions for home nationals. Best practices

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Domestic Business
Scope Operating

Approach Ethnocentric National style Domestic activities National / Tariffs / Forex rates / Exim procedures of other countries No direct impact / HR / Mk. & Customers - Local

International Business

Environment Quotas

Culture

Domestic vs Intl. Business

Approach Polycentric Scope International Operating style Global Environment Global Quotas / Tariffs / Forex rates / Exim procedures of other countries Direct impact Culture / HR / Mk. & Customers Global

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International Business approaches

Ethnocentric

Same domestic product is exported ( early stage). Polycentric Fgn. Subsidiary. Strategy of home country and key personnel from home country. Regiocentric Subsidiary exports to countries in region. Strategy of Region
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Mode of entry into Intl. business

Direct Export Indirect Export Licensing arrangements

Cos. Franchising arrangements with fgn. Cos. Contract manufacturing Turnkey projects Management contracts Direct Investment Joint Venture Megers and Acquisitions

with fgn.

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Challenges of Intl. business

Rate of Return Expansion / Excess production beyond demand leading to Export Competition in Home country Political stability Availability of Technology and Personnel Transportation costs Proximity to Raw-material source Cost of Human Resources Liberalisation Market-share growth Higher rate of Economic development Tariffs and Inport quota

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Challenges of Intl. business

Political

factors Forex risks Entry requirements and barriers Tariffs / Quotas / Trade barriers Corruption / Piracy / Bureaucracy Quality maintenance Higher costs

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Advantages of Intl. business

High

living standards Increasing socio-economic welfare Wider market Large-scale economies ability to expand Reduced impact of economic conditions / political and commercial risks Growth of World economy

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Advantages of Intl. business

Transformation Specialisation Bargaining

capacity Economic portfolio allocation Taxation benefits Cost-efficiency of products / services Innovation / Product development Sourcing at lower costs material, people and technology

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YOU

THANK

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