International Business Assignment
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Added on 2020-04-21
International Business Assignment
Added on 2020-04-21
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Running head: INTERNATIONAL BUSINESSInternational BusinessName of the Student:Name of the University:Author’s Note:
1INTERNATIONAL BUSINESSExecutive SummaryInternational financial management assists the international organizations in managing thefinancial positions in international market through dealing with different foreign currencies,political environment and market imperfections. The study has discussed the internationalfinancial management of Dantata, which is going to construct its new automobile manufacturingplants in India. Moreover, the study has discussed and evaluated different available businessfinance options for raising adequate capital needed for operating new manufacturing plant inIndia. These available business fiancé options are like IPO, equity finance, public deposit,private finance, bank loans and Eurobond. The study has also critically analyzed the possiblerisks for the organization in execution of the project in terms of sensitivities, foreign currencyand political risk. Furthermore, the study has also provided some suitable recommendationsthrough SMART objectives towards raising adequate capital for executing new manufacturingplant in India.
2INTERNATIONAL BUSINESSTable of Contents1.0 Introduction................................................................................................................................42.0 Business Finance Options..........................................................................................................62.1 Banking Option......................................................................................................................62.1.1 Drivers of Banking Options............................................................................................62.1.2 Advantage and Disadvantage of Banking Option..........................................................72.1.3 Process for Involved in Banking Option........................................................................82.2 Share Stock............................................................................................................................82.2.1 Drivers for Share Stock..................................................................................................82.2.2 Advantage and Disadvantage of Share and Stock........................................................102.2.3 Process of Share Stock..................................................................................................102.3 Private Finance....................................................................................................................112.3.1 Drivers for Private Finance...........................................................................................112.3.2 Advantage and Disadvantage of Private Finance.........................................................112.3.3 Process Involved in Private Finance.............................................................................122.4 Public Deposit......................................................................................................................122.4.1 Drivers or Public Deposit.............................................................................................122.4.2 Advantage and Disadvantage of Public Deposit..........................................................132.4.3 Process Involved in Public Deposit..............................................................................132.5 Initial Public Offering (IPO)................................................................................................14
3INTERNATIONAL BUSINESS2.5.1 Driver of Initial Public Offering...................................................................................142.5.2 Advantage and Disadvantage.......................................................................................152.5.3 Process of IPO..............................................................................................................162.6 Merger and Acquisition.......................................................................................................162.6.1 Driver of Merger and Acquisition................................................................................162.6.2 Advantage and Disadvantage of Merger and Acquisition............................................172.6.3 Process of Merger and Acquisition...............................................................................182.7 Issuing Eurobond.................................................................................................................182.7.1 Drivers for Issuing Eurobond.......................................................................................182.7.2 Advantage and Disadvantage of Issuing Eurobond......................................................192.7.3 Process of Issuing Eurobond........................................................................................193.0 Critical Risk Analysis..............................................................................................................193.1 Critical Risk for Project Execution Using Sensitivities.......................................................193.2 Critical Risk for Project Execution Using Foreign Exchange.............................................203.3 Critical Risk for Project Execution Using Political Risk.....................................................214.0 Conclusion...............................................................................................................................225.0 Recommendation.....................................................................................................................23Reference List................................................................................................................................26
4INTERNATIONAL BUSINESS1.0 IntroductionInternational business defines the business activities, which involve cross-bordertransactions of goods and services between two or more than two countries. Due to liberation,open market and freedom of conducting business, most of the organizations are highly inclinedtowards operating business in international markets (Christiaens et al., 2015). In such situation,financial management is the most important aspect for every internal business organization. Thesuccess of an international business is highly dependent on effective international financialmanagement. International financial management is extremely important for an internationalorganization, which helps in trading and making money through exchange of foreign currency(Cremers et al., 2016). Proper international financial management assists in maintaining theinternational organization financially stable through properly dealing with different currency,different political situation, diversified opportunity and imperfect markets. Such financialmanagement also contributes in currency derivatives, multi-currency bonds, cross-border stocklisting and international mutual funds. While considering the international financial management in New Zealand, it can befound that the organizations of this country are adopting several effective finance options forproper managing the financial status in international markets. Free trade agreement and openmarker of business have encouraged the organizations in going beyond their domestic boundariesand operate internationally (Demir & Bahadir, 2014). Moreover, the organizations of thiscountry adopt alternative paths towards globalizing the cost and availability of capital. Theyoften issue international bonds as debt investment for raising capital in operating internationalbusiness. Apart from that, the organization also utilize equity listing for selling shares to public
5INTERNATIONAL BUSINESSfor managing their international financial status through raising capital from the foreign publicfor operating international business. On the other hand, the organizations often issueEuroequityin foreign markets for raising capital from the public. Such options help theinternational organizations of New Zealand in effective international financial management. Figure 1: International Financial Management Options(Source: Altman et al., 2017)This study will discuss the international financial management of Dantata, which is anautomotive organization listed on both Australia as well as USA. Now, the organization is goingto construct a new manufacturing plant in India. The study will evaluate and discuss variousbusiness finance options for the organization towards raising capital for constructing the newmanufacturing plants. The study will also provide a critical risk analysis for the organizationthrough sensitivities, foreign exchange and political risks associated with project execution. At
6INTERNATIONAL BUSINESSlast, the study will also provide some recommendation to the organization through SAMRTobjectives towards effectively managing the international financial management for its newproject in India. 2.0 Business Finance Options2.1 Banking Option2.1.1 Drivers of Banking OptionsBanking can be an effective option for Dantata for financing its new manufacturingplants in India. In India, the organization can get both options like working capital loans andfunding. According to Alexander et al. (2014), in working capital loans, the Indian bankinginstitutes offer loans for running one complete cycle of revenue generating operations. On theother hand, in funding option, the baking institutes of India allow the business organization toshare their business plan, valuation of the business and project report for sanctioning the businessloans. Therefore, Dantata can avail options for two of loan options for establishing their newmanufacturing plant in India. Furthermore, Richards and van Staden, (2015) opined that oneinteresting driver for banking options in India is collateral free business loans offered by somebanking institutes. Moreover, some Indian Lending business banks like HDFC, Baroda, Axis andICICI have more than 7 to 8 different options for collateral free business loans. In such options,Dantata can even get loan approval without sharing the inventory of the business. Stent et al. (2017) pointed out that with the developing economic condition of India, thebusiness organizations can avail bank loans from the Indian banks even at less interest rate.Moreover, the average interest rate range for business loans in Indian banks is between 10%-20%. Therefore, Dantata cab avail adequate business loans with quite less interest rate. On the
7INTERNATIONAL BUSINESSother hand, India is full of banking finance options, where numerous banks provide easy andflexible business loans options. Moreover, Dantata can easily avail business loans for newmanufacturing plants from the Indian banks like State Bank of India, ICICI Bank, HDFC Bank,Kotak Business Loan, Tata Capital, Yes Bank and many more. Figure 1: Banking Options in India with Lower Cost of Funds(Source: De Jonghe & Öztekin, 2015)2.1.2 Advantage and Disadvantage of Banking OptionMartínez‐Ferrero and Frías‐Aceituno (2015) pointed out that banking loans are alwaysavailable in Indian banks, as the banking institutes must need to keep their depositor’s moneyworking and earn more interest than the banks pay to its depositors. Therefore, Dantata can availtheir business loans for new manufacturing plants in India whenever required. On the other hand,Attig and Cleary (2014) opined that borrowing too much amount of business loans can lead todecreased cash flow for the business. In this way, it can hamper the business success of Dantatain Indian market. Furthermore, Jiang et al. (2013) opined that the interest generated in business
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