Short Case 1
Organizations that trade internationally are vulnerable to fluctuating currencies and exchange rates. It can be therefore difficult for such companies to predict their income. Everest Company may face a lot of challenges dealing with foreign currencies such as cash flow, assets, profit and financial structure of the company. The primary source of risk for Everest Company is the translation risk. Translation of gain and loss may have a significant impact on the profitability of the company. Assets and liabilities are translated at exchange rates which impacts operational activities like sales and profits. Foreign currency translation may result in a considerable loss or benefit for the company which in turn affects sales and profit margins. Everest Company may also face a challenge in the sales forecast. Fluctuating currencies result in gains and losses for a company depending on how the exchange rate moves, making it difficult to predict the cash flow. The fluctuation of exchange rates will also affect the Everest Company's Balance sheet. When creating or submitting financial documents, the firm's balance sheet may be subjected to server re-measurements or adjustments if the value of their asset and liabilities change due to fluctuating exchange rates (Adekola & Sergi, 2016). It is impossible to predict currency exchange rates, but if necessary precautions are taken, the impact can be limited.
Short Case 2
Foreign Distributors are like the employees and customers. They represent the company and sell products on their behalf. It is therefore essential to choose the best distributors and maintain a stable relationship with them. The first approach that I would use to find international distributors would be attending trade shows. Attending international trade shows is one of the ideal places to find agents and distributors especially for new exports. The second strategy is to create an online presence for the product. An online presence is helpful in identifying and establishing stable relationships with international distributors. An online presence can also help proactive energetic and motivated distributors to find you. Antenna Communication Technologies, Inc. can create an online presence by putting up a visible website in the target export markets for distributors to see them. The most effective way of building a lasting relationship with international distributors is keeping communication open. An open line of communication is vital in establishing credibility and communicating the organization's visions, missions, and long-term objectives. The best payment methods that this firm could use is the pull payment methods through bank transfers. This an effective and popular method of payment that allows the firm to pull money from the distributors account through a secure network connecting on a recurring basis.
Short Case 3
As a business grows, there is the constant need for capital to introduce new products and service or expand into new markets. By operating in foreign markets, a firm may have numerous advantages such as better tax regimes and brand strengthening.
One of the ways that Marite Perez can use is applying for a commercial loan. Many banks are willing to lend firms money because they will pay with an interest rate. The process is quite easy, especially when the company is profitable. Commercial bank loans are advantageous because they offer the lowest interest rates enabling companies to access crucial funding while maintaining low overhead costs. Also, the investments are long-term often between 3-10 years allowing the company to pay back the money over an extended period as they continue to expand. However, the application process is lengthy and exhaustive as a thorough assessment is done on projected revenues. Bank loans also provide less autonomy where more substantial amounts often require detailed information on how funds will be spent.
Another best method to raise capital is through Public Issue. To raise money using a Public Issue, a firm is required to make a formal request to the Securities Exchange Commission with details of the company's financial status, target, and long-term objectives. The benefit of going public is that the firm can get enough capital to fund research and expansion. Public Issue generates publicity and introduces products to consumers who may not otherwise be aware of them. This will eventually lead to increase market share and profits in the long run. However, the costs of complying with Security Exchange rules are regulations are high. Market pressure to generate profit from investors also force companies to focus on short-term goals instead of long-term growth (Vinturella & Erickson, 2013).
Adekola, A., & Sergi, B. (2016). Global Business Management. Florence: Taylor and Francis.
Vinturella, J., & Erickson, S. (2013). Raising entrepreneurial capital. London: Elsevier.
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