International Finance

Asst. Prof. Vishal Kumar

INDIRA GANDHI UNIVERSITY, MEERPUR

International Finance
An Overview

Chapte
r
1

Explain the nature and scope of IFM

Describes the factors responsible for fast growth in international
financial functions
Makes broad comparison between the domestic financial management
and IFM

Contents
Why International Finance?
International Business & its Modes
Multinational Corporations
The key Participants in International Financial Functions

Nature of International Financial Functions

and the Scope of IFM
Factors Leading to Fast Strides in
International Financial Functions
IFM and Domestic Financial Management

Why International
Finance?
In finance courses, you have been taught about
general finance concepts that apply to domestic
or local settings. But we live in an international
world.
Companies (and individuals) can raise funds,
invest money, buy inputs, produce goods and
sell products and services overseas.
With

these

increased

opportunities

comes

additional risks. We need to know how to

International Business
& Its Modes
Modes of IB
Internatio
nal Trade

Contractual
Entry
Modes

Foreign
Investmen
t

Modes of IB
International
Trade
Export

Import

Direct
Indirect

Modes of IB
Foreign
Investment
FPI

FDI
1. Greenfiel
d
2. Merger &
Acquisitio
n
3. Brownfiel
d

Foreign Investment
FDI
1. Greenfield
Investment
Opening a New
Branch

Financial
Collaboration

Wholly Owned
Affiliate
Subsidiary
subsidiary

Foreign Investment
FDI
2. Merger &
Acquisition
Outright
Horizontal
Friendly
Purchase

Conglomerate
VerticalAmalgamation
Hostile

Foreign Investment
FDI
Greenfield
Investment

Merger &
Acquisiton

3. Brownfield
Investment

Modes of IB
Contractual
Entry Modes
Franchisin
g

Manageme
nt
Contracts

Licensing

Turn-key
Project

Multinational
Corporations
A MNC is a business which owns or
controls
production
or
service
facilities outside the country in which
it is based.
This means that they do not just
export their products, but make
them abroad.
Usually have interests in at least
4 countries, but most operate in
more than this

Some MNCs
Example
Ford
British American
Tobacco
Volkswagen
Matsui
Unilever

The Biggest

Wal-Mart Stores
Exxon Mobil
Chevron
ConocoPhillips
Fannie Mae

Note :- These
companies have a
turnover in excess of
the GNPs of most
countries

Types of MNCs
On the Bases of Strategic Features
1
2
3

Ethnocentric
Polycentric
Geocentric

Nature & Scope of IFM

Foreign Exchange Market

Exchange Rate Exposure
IMF(International Monetary Fund)
Balance of Payments Analysis
Investment Decision (Including both FDI & FPI)
International Financial Market
MNCs Working Capital Management
International Accounting & Taxation Strategy
International Indebtedness and its management

Factors Leading to Growth in

International Financial Functions
Growth in International Trade
Growth in Foreign Investment
Structural Change in the International

Financial Market
Adoption of floating Exchange Rate Regime
Fast Development in Information Technology

16

What is different about

IFM?

Home Assignment

Prepare
a
presentation
anyone biggest MNCs in
world.

on
the