Thus it is absolutely important that the companies take precautionary measures to minimize the risks (Bonaccorsi and Daraio, 2009). The present research study elucidates the benefits and costs and advantages that a company can enjoy if it is listed in more than one exchange. British Petroleum is used as an example to show how it finances its long term capital needs. Apart from that effort is also made to present the transaction risk faced by the company. Reasons for which a company cross lists itself A multinational company is spread all across the globe. Due to this reason such a company is involved in multiple numbers of trading relationships across multiple time zones and more importantly in multiple currencies. The company must be listed on the domestic exchange apart from the other foreign exchanges (Chiefele, 2012). The domestic exchange most of the time performs the job for currency exchange. If the operational base of the company is spread in more than 5 to 6 different international countries, then using the domestic exchange as the basis for all transactional requirements becomes complex and cumbersome (Garrick, 2011). The transactions which are settled in different foreign currencies may have different consequences on the company if they are settled through a foreign exchange rather than a domestic exchange. For example the exchange rate between two different currencies can be slightly different between a foreign exchange and a domestic exchange. Multinational companies can use this price difference for their own advantages. The difference in price is due to the information asymmetry. The financial system is connected by very complex network where any new information generated at one corner gets dispersed to other corners easily (Gulbrandsen and Smeby, 2008). The stock exchanges around the world are connected by vast system of networks. The networks carry large amount of information in a matter of seconds. Thus any lag in information between two time zones is almost negligible. Still the negligible difference when multiplied by transactions worth billions of dollars the resultant is completely different (Hakim, 2010). This entails the arbitraging concept. This kind of arbitraging has been reduced significantly due to superfast information dissemination and sharing. Despite that there are many deficiencies in the systems which are sometimes misused by multinational companies. One of the most important reasons for cross-listing is reducing the cost of equity. Finding sources of finance is a matter of perennial concern for any company. The difficulty becomes multiplied if it is a multinational company. If the multinational company is listed in a more than one exchanges then the probability of raising the capital increases. The company can use various modes of financing both debt and equity. Thus the dependency on one economy or the modes of finance decreases considerably. This in turn eases the rate of return that a company has to offer to the investors to raise the capital (Harvey, Smith and Wilkinson, 2007). This is
International Financial Strategy Table of Contents Table of Contents 2 Answer1 3 Reasons for which a company cross lists itself 3 Benefits associated with cross listing 5 Costs associated with cross listing 6 Answer 2 7 Identification and explanation of sources of long term finance 7 Identification of the possible rationale for the particular capital structure 9 Calculation of the cost of capital 10 Answer 3 11 Demonstration of the impact of exchange rate volatility 11 Explanation of the mechanism of the money market hedge and forward market hedge 12 Hedging using money market hedge and forward contract 13 Reference List 15 Appendix 17 Answer1 Any company that has operational base in various …
For instance, the countries also negotiate to reduce trade barriers for mutual benefits. The global economy has recorded tremendous growth primarily because of WTO, NAFTA etc. Business enterprises and consumers benefit from this expansion since new opportunities are created and new products are launched respectively.
A firm's value added is not solely associated with management's ability to manage cost centres: Other factors such as transparency, accounting for systemic risk, reliability, intangible assets and other factors must be considered in the post-meltdown market.
However, in order to achieve a balance between the risk and return profile of a firm, it is important that firm must develop and construct strategies which can allow it to generate the kind of value which can balance both the risk and return.( Arnold, 2007), Risk therefore can affect organizations in different manners and as such the overall development of the enterprise wide strategies, making of investment decisions, calculations of hurdle rates as well as the mergers and acquisitions decisions are almost all made based on the firm’s effort to balance its risk and return.
The institutions therefore have different governments and other international organization as the main shareholders. The most popular international financial institutions have multinationals shareholders although bilateral financial institutions are also classified as international financial institutions.
In this context, the present report focuses on the evaluation of financial strategy of Unilever. The stage of the organization is firstly decided using the organizational life cycle. The current position of Unilever suggests that it is operating in the matured position and is aiming towards sustainable growth in its business.
This makes a company rise to the level of becoming an international company. Different international companies have different kinds of structures which can be broadly classified into two main types; the centralized
that are fascinated by foreign products and brand names, as well as the middle class, who have demonstrated an increasing willingness to consume new products and services (Lister, 2014).
In the initial stages – within the first 4 years – acquisition will focus on direct
An international business strategy is part of doing business no matter where the business is located globally. Organizations that operate nationally normally face competition and the reason why organizations formulate business strategies is to be