session 1 - financial management in a global perspective.ppt

7/22/2019 SESSION 1 - FINANCIAL MANAGEMENT IN A GLOBAL PERSPECTIVE.ppt

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IN A GLOBALIN A GLOBAL

PERSPECTIVEPERSPECTIVE

MS. INDRAYANI

DEEKSHIT


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COVERAGECOVERAGE

Increasing interdependence in the

GlobalEconomy

Trends in Intl. Trade & Cross-BorderFinancial

Flows Recent Developments in GlobalFinancial

MarketsChallenges of Intl. Financial 2


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INTERNATIONALINTERNATIONAL

BUSINESSBUSINESSEncompasses our daily lives

- Beverages from USA

- Tea from Sri Lanka

- Mobile instrument from China

- TV from Japan

3


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BUSINESSBUSINESS 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 usin Brazilian medicines! 4


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BUSINESSBUSINESSAnd this is sent to you by a Filipino

using Bill

Gates' technology which isAmerican. And you are

probably reading this on one of theIBM clones

use Taiwanese-made chips, andKorean made

monitors, assembled byBangladeshi workers in a

Singapore plant, transported bylorries driven by

Pakistanis, hijacked by Indonesians5


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BUSINESSBUSINESS

Focus upon resources across theglobe

To seize global businessopportunities and address threats

In order to buy or sell goods or

services worldwide

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EVOLUTION OFEVOLUTION OF

INTERNATIONAL BUSINESSINTERNATIONAL BUSINESS

Began around 1870 and endedwith World War I driven by

industrial revolution in UK /Germany / USA

Trade barriers set and trade

sufferedBreakdown of Gold standard &

the need for international co-

operation in the post-World war II 7


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EVOLUTION OFEVOLUTION OF

INTERNATIONAL BUSINESSINTERNATIONAL BUSINESS

Post 1947, the GeneralisedAgreement on Trade & Tariffs

( GATT ) came into beingIn 1995, GATT was replaced by

WTO

Efforts of IMF, World Bank & WTOalongwith efforts of individualcountries led to globalisation asclosed economies needed too en u 8


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WTO - ImplicationsWTO - Implications

WTO set up to strengthen Worldeconomy, leading to more trade,investment , employment andincome growthIn the wake of WTO, tariffs were

reduced from over 30 40 % tobelow 5 %

Regional integrations play asignificant role NAFTA,ASEAN,SAARCDecline in Investment barriers to

promote and protect investment 9


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Recent developmentsRecent developments

Growth in FDI Investment inmanufacturing and in markets

FDI Inflows increased from USD 564 Bn in1980 to USD 2.8 Tn in 2008

82% came from advanced countriesEmerging economies received higher FDIUSA has been the largest provider of FDIBRICS now in focusInternet and Worldwide webOnline commerceReduced travel timeTechnological developments Internet,

Worldwide web, Online commerce

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Changing global trendsChanging global trends

GDP as % of World GDP

1963

2009USA 40.3

28.4

GERMANY 9.74.0

UK 6.53.1

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Changing global trendsChanging global trends

COUNTRY SHARE INWORLD GDPAS %

SHARE INWORLDEXPORTS AS%

USA 2..4 16

GERMENY 4.0 8.6

FRANCE 3.0 6.2

UK 3.1 3.8

JAPAN 6.0 4.3

CHINA 12.6 8.5INDIA 5.1 1.7

( WORLD ECONOMIC OUTLOOK 2010 )

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Growth of MultinationalGrowth of Multinational

CompaniesCompanies

The no. of companies that didbusiness in more than one

country grewOf the 500 top MNCs 139 were

from USA, 71 from Japan and 46

from China

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Managing Intl. business -Managing Intl. business -

FactorsFactors

Political

Social

Cultural

Economic

Higher cost / Lower cost countries

Higher quality-conscious countries

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Intl. business - FeaturesIntl. 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 -Intl. business -

DimensionsDimensionsBusines opportunitiesThreats

Customer preferences

Behaviour

Cultural aspects Namaaz(Middle east) / Family activities

(Fiji Islands)Employees

Business Environment16


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Intl. business -Intl. business -

DimensionsDimensions

HR Practices

Govt.Policies

Monetary System

National Security issues FATF /OFAC

Language

Nationalism and Business Policy

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Stages of InternationalisationStages of Internationalisation

of companiesof companies

Stage I Domestic companyStage II International company

domestic prdn. Off-loaded in fgn. Mkts.

Also branch in fgn. CountryStage III Branches work like domesticbranch in each country (polycentric).

These are multi-domestic companies(Philips of Netherlands)

Stage IV Global company has globalstrategy. Produces in home / singlecountry and markets globally ( Dr.Reddys Labs )

Stage V Transnational company produces, markets, invests and 18


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Transnational company -Transnational company -

featuresfeaturesIntegrated global enterprise

linking global resources to globalmarkets at profit

Geocentric orientation Thinkglobally and Act locally

Assets across the World

Knowledge and experience invarious markets is shared

Information relating to various

markets is collected and scanned 19


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Transnational company -Transnational company -

featuresfeaturesVision is GLOBALGeographic scope offers

opportunities

Operating style key operationsglobalisedAdaptation to markets

Extension of markets nochange in pdt.HRM Policies Top key positions

for home nationals. Best

practices 20


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Domestic vs Intl. BusinessDomestic vs Intl. Business

DomesticBusiness

InternationalBusiness

Approach Ethnocentric

Scope NationalOperating style

Domestic activities

Environment National

Quotas / Tariffs / Forexrates / Exim proceduresof other countries Nodirect impact

Culture / HR / Mk. &Customers - Local

Approach

PolycentricScope International

Operating style Global

Environment GlobalQuotas / Tariffs / Forex

rates / Eximprocedures of othercountries Direct

impactCulture / HR / Mk. &

Customers Global

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International BusinessInternational Business

approachesapproachesEthnocentric Same domestic

product is exported ( earlystage).

Polycentric Fgn. Subsidiary.Strategy of home country andkey personnel from home

country.Regiocentric Subsidiary exports

to countries in region. Strategy of

Region 22


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Mode of entry into Intl.Mode of entry into Intl.

businessbusinessDirect ExportIndirect ExportLicensing arrangements with fgn.

Cos.Franchising arrangements with fgn.

Cos.Contract manufacturingTurnkey projectsManagement contractsDirect InvestmentJoint Venture

Megers and Acquisitions 23


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Challenges of Intl.Challenges of Intl.

businessbusiness

Rate of Return Expansion / Excess production beyond demand

leading to ExportCompetition in Home country Political stability

Availability of Technology and PersonnelTransportation costs Proximity to Raw-material sourceCost of Human Resources LiberalisationMarket-share growthHigher rate of Economic developmentTariffs and Inport quota

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Challenges of Intl.Challenges of Intl.

businessbusinessPolitical factorsForex risks

Entry requirements and barriers

Tariffs / Quotas / Trade barriers

Corruption / Piracy / Bureaucracy

Quality maintenance

Higher costs

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Advantages of Intl.Advantages of Intl.

businessbusinessHigh living standardsIncreasing socio-economic

welfare

Wider marketLarge-scale economies ability

to expand

Reduced impact of economicconditions / political andcommercial risks

Growth of World economy 26


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Advantages of Intl.Advantages of Intl.

businessbusinessTransformationSpecialisationBargaining capacity

Economic portfolio allocationTaxation benefitsCost-efficiency of products /

servicesInnovation / Product

developmentSourcing at lower costs

material, people and technology 27


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THANKTHANK

YOUYOU

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session 1 - financial management in a global perspective.ppt

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