International Business and Finance: Impact on MNC Values and Exchange Rates

This report discusses the impact of international business and finance on MNC values and exchange rates. It includes a background of DHL, its key business activities, and the effect of international trade on MNC values. It also covers the effect of exchange rate movements on MNCs and the role of international financial markets in managing finances.

International Business and Finance

INTRODUCTION
International business is considered as the trade of products, services, capital, technology or
understandings all over national borders and at an international or transactional scale. Moreover,
this incorporates cross border transactions of items and services among two or more countries.
Additionally, international finance is also known as global macroeconomics and is study of
financial interactions among two or more nations that concentrates upon areas like foreign direct
investment as well as currency exchange rates (Backus, Kehoe and Kydtand, 2021). This is vital
tool to determine the exchange rates, compare inflation rates, obtain an idea regarding investing
into global debt securities, which ascertains the economic level of other countries as well as
judge the global markets. For this report, the undertaken organisation is DHL, which is a leading
global leader into logistics industry. This is an international GmbH is a global courier, package
delivery as well as express mail facilities that is a division of German logistics entity Deutsche
post. Its headquarters is in Bonn, Germany. Its history includes that from initial beginnings into
year 1969 of most worldwide coordinated factors network today, organization exchange paths
right now reach over 220 nations and regions across the world, Also, they are returning a hope to
recognize how far the planned operations area has come just as additionally clarify what future
confronting arrangement could be upon the horizon. The topics which are going to be discussed
in this report are company’s background, its brief history, its key business activities and impacts
of international trade upon MNC values. Moreover, effect of exchange rates movements on
MNC and role of international financial markets into company’s finance management. Apart
from this, perform PESTLE analysis for company’s industry is also discussed in this report.
MAIN BODY
PART A
Provide a background of the company and a brief history of how it emerged as global firm
starting from its formation.
Background of the company
DHL is a leading global leader into logistics industry. This is an international GmbH is a global
courier, package delivery as well as express mail facilities that is a division of German logistics
entity Deutsche post. Its headquarters is in Bonn, Germany. Moreover, it was founded in year
1969 by Adrian Dalsey, Larry Hillblom and Robert Lynn. Additionally, they did not understand
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it would revolutionise the world of logistics. Currently, respective organisations have around
400,000 individuals into over 220 nations as well as territories perform daily to assists them
cross borders and reaches to new markets and develop its business. In addition to this, it’s some
of the divisions are DHL express, global forwarding, freight, supply chain and parcel (About
DHL, 2021)
Brief history of DHL
Innovation:
This is crucial DHL’s DNA part. From year 1969 with an ideas of moving delivery reports from
San Francisco to Honolulu through arrangement that empowers customs leeway of comparing
transport freight to start before ships precisely showed up, the DHL's worldwide express
administrations creation was starting point for longer tradition of fundamental operations
achievements..
Adaption
Adaption is at their center. Besides, with world truly adjusting and at speed, Respective firm is
consistently reshaping to fit, take on and convey (Cesa-Bianchi, Imbs and Saleheen, 2019).
Moreover, From 1980 to 1989 changes included coordinating the world's most recent innovation,
fax machine and advancing from express messenger offices to bundle conveyance and creating
flying armada towards venture networks into Europe and US.
Breaking through barriers
Breaking down barriers from year 1990 to 1999, DHL is considered as initial logistics firms with
mindset “thinking international but acting local”.
Digital immersion
Within a world, in which quick improvement of online business met inside worldwide exchange,
DHL have upset how it pass on with customers just as how they perform business; moving as
different methods online as could be expected and inspiring paperless exchange.
Sustainability
As they seek towards manageability drives are principle to entire DHL activities. In addition,
manageability measures have been incorporated in the core of DHL's corporate technique.
Additionally, it motivates an innovative ideas wealth such as Street Scooter: it developed e-
vehicle, e-cargo bikes and introduction of green fleet with new e-vans. Such as it assists their
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firm’s wide initiatives towards improve carbon effectiveness (50 Years; a brief history of DHL
logistics and how we pioneered international express delivery, 2021).
Its key business activities and the countries in which its international activities are based.
DHL provides various activities but the key activities that they provide an unparalleled
arrangement of operations products and arrangements going from public and worldwide package
conveyance to overall express, air, street and sea cargo to start to finish inventory network the
executives (Collinson, 2020). Moreover, it operates into 220 countries that are Belgium,
Germany, China, Europe and many others where their global activities are based on.
Discuss how International Trade impacts the value of the MNC.
The values of DHL are towards their cultures as well as regular life at respective firm are
described through the values they share. Moreover, these values have a vital role to play into
continued success of its business. Additionally, it assists them to make DHL such a motivating as
well as rewarding place for build their career. In addition to this, International trade is considered
as the exchange of capital, products, and services all over the global borders or territories as there
is a requirement or desires of products or facilities (Gil-Alana and Claudio-Quiroga, 2020). So,
International trade impacts the value of DHL as its global trade barometer determined volume
trends into 10 industry sector that identify outperforming as well as reducing industry within
international trade so its business may benefits. Also, it is unique early indicators of present and
upcoming state of international trade, facilitating in depth insights within macroeconomics
factors which impact it. through determining, the global supply chain by huge amounts
worldwide supply chain by large amounts of logistics information’s, trends into industry sectors
may be evaluated and insights thereafter facilitated into those which are upon rise or fall.
Moreover, international trade encourages the growth of economy along with the individual as
well which also creates large wealth and opportunities as well. There are positive impact of
international trade such as it renders the comparable products and services at low expensive
prices. International sourcing leads to the higher profit margins in order to render the
organization the valuable resources for better added development and growth. Additionally,
international trade helps country to expand their chain in the market place which supports in
wide access of goods and services which can be difficult to avail such products in a domestic
manner. This positive impact create the advantages of international trade for the countries as well
as for the MNC's also. Such as it aids in raising the living standards of an individual by providing
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employment and also by rendering the large variety of goods and services to the customer.
International trade assist in increasing the revenues of the MNC's as the international market has
a wider reach to different cultures and various countries. It leads to the larger sales and increased
revenues and profits. Decreased competition is also one of the positive impact of international
trade to the value of MNC. Moreover, longer product life span and easier cash flow management
along with the better risk management and benefitting from currency exchange which is
followed by the access to the export financing and disposal of surplus goods are also the
international trade impacts to the value of MNC's. Enhanced reputation and opportunities to
specialise are also considered as the good impact on the MNC.
Discuss the effect of exchange rates movements on the MNC.
Exchange rate is considered as the prices of single currency in respect of other one.
Moreover, this is the rate at which one currency may be exchanged for other among countries or
economical zones. Additionally, this is utilised to ascertain the different currencies value in
relations to one others and is crucial to determine trade and capital flow dynamics. In addition to
this, The exchange rates movements is essential aspects for various entities mainly multinational
firms like DHL. There are various ways to deal with those fluctuations that all of them have the
similar intent to minimise foreign exchanges losses and decrease the cash flow instability
(Kassouri and Altıntaş, 2020). It may be broken down in two kinds that are anticipated changes
and unexpected modifications. generally firms have the competencies to reacts towards an
anticipated exchange rate but this comes with more difficulties when it comes to unexpected
modifications.
Furthermore, the unexpected movements into exchange rate is to measure the optimistic
effect of this change upon MNCs such as DHL while anticipated fluctuation measures the
pessimistic affects upon business. This would also impact the cash flow of particular business by
transactional, translation and economic exposure risks. These three different forms of currency
fluctuation risks are described below:
Translation risk is undertaken as those outcomes form the modifications performed
towards financial statements of MNCs such as DHL. This with currency exchange rate
movements can drives towards losses or gain into translation of respective firm annual accounts.
For this cause, various multinational companies can seeks towards having balanced balance
sheet. Moreover, the key risk source for much of the entities is the translation risk; its profit or
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loss have a larger affects upon firm’s profitability that have much harmful impact than those
caused through operative activities such as profitability margins and sales (Kottaridi, Louloud
and Karkalakos, 2019). Additionally, Foreign currency translation from a bookkeeping
individual: The liabilities just as resources are deciphered at pace of trade at asset report while
productivity or misfortune is deciphered at normal rate for by and large financial year or at
shutting year; but the capital of offer is interpreted at verifiable swapping scale that is the rate
when this was introductory issues. These results are portrayed into pay proclamation of DHL to
addresses the alterations into resources and liabilities.
The other risk is known as transaction risk that is cash flow risk which is produced from
currencies of region. Moreover, it is simpler than translation for measuring as well as reducing it
since multination entities always hedge norms against transaction risk but it hardly ever perform
for monetary record and interpretation hazard. Also, there are fundamentally two purposes
behind MNCs not really for supporting against interpretation. The underlying one is that
minimisation and flattening into one nations would impact their branches within other countries.
Second one is that into longer term the net value of entity would not be affected through
exchange rate movements as exchange rate is impacted by firm’s productivity. It is much easy
and simple that is specialised kinds of exchange rate risk (Ndlovu and Toerien, 2020). Also, third
forms of exchange risk are economic exposure risk that is the particular modifications into
monetary performance of entity as an outcome of fluctuation into exchange rate. So, MNCs
generally face the issues to manage economic risks that are the effect of exchange rate upon net
cash flow.
Importance of hedging as a technique to mitigate against exchange rate fluctuations to
effect of exchange rate movement on the MNC are such that it provides traders and investors to
minimise the risk of market and volatility. It also mitigates the risk of large losses. It also
protects from the interest rate changes and inflation and currency rate changes which ultimately
helps in increasing the profitability of the business.
Discuss the role of the international financial markets in managing the company’s finances if
they face financial challenge.
International financial market is considered as the place in which the monetary wealth is
traded among individuals or countries. Moreover, this may be seen as a board set of norms as
well as institutions in which assets are traded among agents into surplus as well as agents into
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deficit and where it lay down the rules (Puck and Filatotchev, 2020). Additionally, international
finance is undertaken as vital tools to identify the rate of exchange in comparison to inflation
rates, also obtain an ideas regarding investing into global debt securities, determine the economic
status of another nations and judging the worldwide markets. This is also helpful for several
countries to obey similar kind of reporting system. In respect to DHL, there are various reasons
for going internationalisation.
Increment Sales and Profitability
Creating overall business sectors will undoubtedly fabricate as a rule pay arrangements
and diminishing practical costs, through attracting a greater customer base. Additionally, through
the help of advances and the commotion of the web, overall exchange has become altogether
really charming, for more unobtrusive associations. Through getting the opportunity to
reexamine, they can diminish costs and further foster their business the board and practical
capability.
A More significant Economies of Scale
Some associations may have to develop their business things, as they will undoubtedly be
recognized all around the planet. In various ventures, expansion through internationalization may
help associations, through achieving better economies of scale. This is especially the
circumstance for associations working in more unassuming more national business areas.
Moreover, internationalization may similarly fill in as an opportunity to separate or make the
most of another thing development, organization, or brand (Qiu, 2021).
Enter new Markets and Spread the Risk
The pervasiveness of internationalization is moreover a direct result of countries opening up
trade deterrents and cutting down demands across the world. Internationalization licenses
associations to expand their associations and have the choice to work with the risk of
decelerating demand, across different countries. Working in various countries moreover offers
associations the opportunity to place assets into progression and encourage different assortments
of their things and organizations, which may in like manner shield them from declining interest
in a particular thing or organization.
Attracting new Talents
Going worldwide enables associations to move toward a more broad capacity pool. Agents that
convey in different lingos and are familiar with different social orders can upgrade relationship
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with a more broad customer base. Furthermore, it grants associations to make overall work
gatherings, that have expertise in adjacent business areas and that can exploit public market
resources and regular substances, through communicating with neighborhood suppliers.
Immersion of Home Market and Competitors' Move
Offset of home market is moreover a clarification with respect to the motivation behind why
associations decide to expand from one side of the world to the other, similarly as first mover
advantage, as this avoids close by conflict and could provoke uncommon critical yields on
contributed capital.
Moreover, role of international finance market in managing finance challenges are such that the
financial markets which are globally connected helps in fostering the global growth of the
economy in both the ways by by facilitating trade flows which is a direct way and by increasing
the wealth of the single investors in an indirect way. It also ensues the low cost of transactions
and information. It also provides security in dealings with financial assets.
PART B
Conduct a PESTLE analysis for the company’s industry.
PESTLE Analysis of DHL determines the brands upon their business strategies. Moreover, it
evaluates the several external factors such as political, economic, social, technological (PEST)
that affects their business addition to legal and environmental factors. Additionally, this
represents the various external situations that affect the brand of business (Ratten, 2020)
Furthermore, PESTLE analysis is undertaken as the framework that is imperative for firms like
DHL, as this assists to acknowledge the dynamics of markets & develops their ventures
regularly. This includes factors which are described below:
Political factors:
Originated into Germany, but then explored across the world, DHL have to keep into view
political situations of regions in which they perform in. Additionally, the Europe’s political
structure is generally estabilised with very simple trade norms so it’s simple for firms to obtain
market. However, in case this is about performing into region in which there are unstable
political situations, it would impacts the business of DHL as well as could outcomes into much
costs and lesser sales. While others, this also has to follow with export as well as import
restrictions, trade policies and tariffs.
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Economic factors:
In case there are economic crisis internationally, this would have an adverse impacts upon
business of DHL, reducing its business as well as causing them monetary losses. Moreover if
specific country is performing through inflation, the consumers would have lesser purchasing
power as well as it could minimise sales for DHL. While one other hand, if particular country is
boosting in respect of their development rate, it would enhance their business. Also, while
performing internationally, the exchange rates may either cause respective firm to suffers with
large costs or can aids them in gaining profitability.
Socio-cultural factors:
The attitudes and perceptions of individuals towards firm may impacts the DHL’s sales. for this,
in case people of particular country considers products based upon its nation of origin or
undertakes utilising its local facilities, particular perception can cause large lossess for them
(Rugman, 2019). Additionally, In case particular nations is developing level as well as most of
the populations belongs towards societal classes that considers lower cost goods & services
where as DHL is higher end brands, thereafter they would not be that success into those country
as majority of individuals would not have authority to afford its facilities.
Technological factors:
Technology is one of the most vital factors when this comes to logistics business as DHL have
based their brand upon speed and reliability basis. Therefore, for meeting with technological
trends is much crucial for their business as this assists them in maintaining its brand reputation
and also outcomes into high profitability, although this can come with high costs at times. So,
facilitating convenience towards consumers comes up with large costs in utilising technology but
this also provides them a competitive advantages.
Environmental factors:
The transportation or logistics sector incorporates utilisation of vehicles; it contributes towards
air pollution those damages to environment and firm’s image. Because of it, they could loses its
consumers in case they formulate this conceptions related to DHL. Moreover, they may recover
from these losses through investing on corporate social responsibilities activities as they are
presently included into waste management solution as well as recycling & executing these
solutions into whole its supply chains. It would obtain customers faith and also profits.
Legal factors:
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With DHL exploring towards several countries, they have to comply with legal needs of various
countries. Additionally, these incorporate copyrights, patents and customer protection regulation.
Few of these legal situations may be advantageous for respective entity into some nations, but
may also outcomes into greater costs for them within other countries (Umar, 2021). Also,
accomplishing whole these legal needs assists them in maintaining its brand name as well as save
them from potential law suits in upcoming times.
CONCLUSION
According to the above report, it has been inferred that International business and money
since this consolidates cross boundary exchanges of things and administrations among at least
two nations. Additionally, international finance is also known as global macroeconomics and is
study of financial interactions among two or more nations that concentrates upon areas like FDI
just as money trade rates. This is fundamental instrument to decide the trade rates, look at
expansion rates, get a thought in regards to putting into worldwide obligation protections, which
discovers the financial degree of different nations just as judge the worldwide business sectors.
global money is undertaken as vital tools to identify the rate of exchange in comparison to
inflation rates, also obtain an ideas regarding investing into global debt securities, determine the
economic status of another nations and judging the worldwide markets. Apart from this,
PESTLE analysis is helpful to acknowledge the dynamics of markets & develops their ventures
regularly.
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REFERENCES
Books & Journals
Backus, D.K., Kehoe, P.J. and Kydtand, F.E., 2021. 11 International Business Cycles: Theory
and Evidence (pp. 331-356). Princeton University Press.
Cesa-Bianchi, A., Imbs, J. and Saleheen, J., 2019. Finance and synchronization. Journal of
International Economics, 116, pp.74-87.
Collinson, S., Narula, R., Qamar, A. and Rugman, A.M., 2020. International business. Pearson
UK.
Gil-Alana, L.A. and Claudio-Quiroga, G., 2020. The COVID-19 impact on the Asian stock
markets. Asian Economics Letters, 1(2), pp.1-5.
Kassouri, Y. and Altıntaş, H., Research in International Business and Finance.
Kottaridi, C., Louloudi, K. and Karkalakos, S., 2019. Human capital, skills and competencies:
Varying effects on inward FDI in the EU context. International Business Review, 28(2),
pp.375-390.
Ndlovu, G. and Toerien, F., 2020. The distributional impact of access to finance on poverty:
evidence from selected countries in Sub-Saharan Africa. Research in International
Business and Finance, 52, p.101190.
Puck, J. and Filatotchev, I., 2020. Finance and the multinational company: Building bridges
between finance and global strategy research. Global Strategy Journal, 10(4), pp.655-
675.
Qiu, L., Li, T., He, Q. and Zhao, D., 2021. Policy Uncertainty and Overseas Property Purchases:
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Ratten, V., 2020. Coronavirus and international business: An entrepreneurial ecosystem
perspective. Thunderbird International Business Review, 62(5), pp.629-634.
Rugman, A.M., 2019. From globalisation to regionalism: The foreign direct investment
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Umar, Z., Gubareva, M., Tran, D.K. and Teplova, T., 2021. Impact of the Covid-19 induced
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Online
About DHL. 2021. [Online]. Available through:< https://www.dhl.com/gb-en/home/about-
us.html>.
50 Years; a brief history of DHL logistics and how we pioneered international express delivery.
2021. [Online]. Available through:< https://dhlguide.co.uk/50-years-a-brief-history-of-dhl-
logistics/>.
https://www.dhl.com/discover/en-global/business/market-intelligence/dhl-global-trade-barometer
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