Financial Management in International Trade

This project discusses the financial management aspects in international trade, including the differentiation between domestic and international markets, capital allocation, and evaluation of the UK economy. It also explores the challenges faced by the country due to industrialization and trade policies.

INTERNATIONAL TRADE
FINANCE AND
INVESTMENT

Executive Summary
Financial management aspects have been discussed in this project. Differentiation in
between the domestic market and international market in respect to financial accusation has
been discussed precisely in this project. Economic evaluation of United Kingdom has been
conducted.
Financial market invole different types of market such as share market, loand and
advancaes and many suhc markjets that support in channelising proper flow of financial
resources of the organsiation.
In the domestic economy capital allocation is all done only at a dometsic level. IN cae
of internatiioonal market capital allocatioopn is done at the international level. The overall
resources are also more in case of international market as compare to the domestic market.
Public offering is the major funding souyrce that is needed to strengthen the flow of
financial resources in the market.Public holding allow the companyt to initiate the people so
that they can invets in the operations of organisation. Financial resources are required to
generate a smooth flow of financial resources and liquidity posiiton of company.
Inflation in international economy is veruy critical to control and it put a major impact
over the flow of financfial resouirces in the internetional market. IN the international market
the financial resources are also wast taht is needed a strong controlover the financial
resources of the organsiation so that proper utilisatioon can established.
Trade policiers summarises into the credit policy and other such policies that can
creatre a smooth environment for the organsiation to entertain sales against the operaions
chnanelises. Tade polciy involve different other policies like taxation,export polisy and many
such policies create a smooth flow of trade in market.

TABLE OF CONTENTS
INTRODUCTION.....................................................................................................................................4
TASK.......................................................................................................................................................4
Background of finance market...........................................................................................................4
Capital allocation within domestic economy.....................................................................................6
Capital allocation within international market..................................................................................8
Evaluation of Economy.....................................................................................................................8
Evaluation of Challenges that the country faces due to Industrialisation and Trade Policies.........10
CONCLUSION.......................................................................................................................................11
RECOMMENDATION............................................................................................................................11
REFERENCES.........................................................................................................................................12

INTRODUCTION
Finance management is defined as managing all different financial resources
associated with the organisation. This report is based on the case study of International
Investment Organisation in respect to its financial management practices. Henceforth, in this
project background of finance market will be discussed. Capital allocation within the
domestic economy would also be researched around in this report. Allocation of capital
resources in the international market are also a key point which will discuss in this project.
Furthermore, a critical eye would make on the economy of United Kingdom. Key challenges
economy in United Kingdom is facing in context to the industrialisation and trade policies
would also elaborate in this project. In the end of the project necessary recommendations
would also provide against dealing all such challenges of industrialisation and trade policies
cater to the economic growth of the country.
TASK
Background of finance market
Finance management is among the key area of practice associated with the
organisation. Financial resources are among he rare resources company and organisation
holding due to their specific limitations. Finance market is one of the key tool that allow
organisations and companies to entertain success and growth in business. All such
organisations that channelize better management of its financial resources entertain more
effective growth oriented opportunities in the target market (Pinckney, Cohen and Leonard,
2019). As the finances of the company influence the productivity and efficiencies of every
single functional activity of organisation which denote about the massive influence of the
finance market in the overall growth potential of the organisation. Financial market is linked
with every single functional activity operated by the organisation, it provide an ease in
enhancing accessibility for the operations, it also involve trade in marketable and non
marketable securities, involvement of financial intermediaries and also deals in long term
investment. All these are the different aspects of the finance market. On the basis of the needs
and requirements of the economy in United Kingdom entire finance market is segregated into
depository and non depository institutions.
Depository institutions

Depository institutions are such component of finance market that takes deposits form
investors available in the market. It comprises with commercial banks, mutual saving banks,
credit cooperative society and saving or loan associations like organisations. All these
stakeholders are directly involved in dealing with the funds associated with the finance
market. These institutions and stakeholders are engaged in providing liquidity solutions to all
the businesses and organisations associated with the business environment. Depository
institutions significantly affect the entire finance market (Okanazu, 2018). All the
organisations, institutions and companies engaged in doing business functions take financial
support from these depository institutions in order to channelize different functional activities
at the organisation level.
Non depository institutions
Non depository institutions are another key component associated with the finance
market in United Kingdom. This part of finance market is slightly different from the direct
transactions involved with the finance market. This involve such organisations that functions
as financial intermediaries but not as a bank and also they take the risk on the financial losses
but also they denoted as the non depository institutions associated with the finance market.
Institutions and stakeholders like pension fund institutions, mutual fund companies, insurance
companies and brokerage firms (Ward and Forker, 2017). All these institutions and
organisation put a huge involvement in enhancing the capital values of the entire finance
market and create a direct influence over the market situation in context to the financial
solutions. They provide direct benefits to all the people along with expending some
significant amount of risk. For all the individuals and organisation who likes to take risk these
institutions are the best possible approaches to gain healthy financial outcomes by taking risk
on the financial investments.
Types of finance market
Finance market is completely a huge world in all together. It is a key driver of
economy and support institutions, organisations and companies in entertaining all different
functional responsibilities of such respective organisations. Financial market is comprise with
various types that are denoted as cash or spot market, future market, money market, capital
market, primary market, secondary market, debt market, equity market, over the counter
market and exchange traded market (Setyawati and Suroso, 2017). All these are the different
dimensions associated with the finance market. Every market has its own specific role which

delivers some kind of financial requirements of the society. In order to gain the maximum
level of financial outcomes in the financial market its essential to choose the right market and
deliver operations and decision making in right direction. All these finance market carry a
strong contribution in the overall growth and development of the United Kingdom.
Capital allocation within domestic economy
Capital allocation is the huge part of the finance market. Capital allocation is denoted
as the segregation of overall capital associated with the organisation in delivering all different
functional responsibilities associated with the organisation. Financial resources are limited in
number which requires a specific management in order to transact the financial resources in
the best way possible. Allocation of capital is the decision making which denote Capital
allocation is the decision which International Investment Organisation needs to make in
against to the business objectives (Saputra, Jayawarsa and Atmadja, 2019). It becomes
essential for the organisation to allocate its funds in more effective manner. Allocation of
capital comprises with different practices such as strategic capital budgeting, investment
project section and investment governance. All these three different approach would support
the International Investment Organisation in delivering the best level of capital allocation
practice in context to the domestic market.
Strategic capital budgeting
All the top and successful companies in United Kingdom regularly monitor the
financial resources they acquire and the utilisation of various financial decisions these
organisation make. Management at the International Investment Organisation form the
financial portfolio which allow the organisation to keep the strong eye over the utilisation of
the financial resources associated with the organisation. With the support of proper strategies
capital budgeting is conducted by the company. Its essential to assess the different needs and
requirements of the organisation. Strategic capital budgeting involve taking decision in
regards to meet all such needs and requirements of the International Investment Organisation
by driving budgeting technique (Nwaobia, Ogundajo and Theogene, 2016). Finance
department of International Investment Organisation issue the financial guidelines that
involve the approaches and ways to utilise the financial resources of the organisation. In the
domestic market it’s important for the organisation to make budget appropriately. All
competitors at the United Kingdom associated with the organisation are also needed to
consider while making the suitable budgeting decision in favour of the organisation.

Investment project selection
Investment project selection is another key approach that associated with the
allocation of company’s financial resources at domestic level. While evaluating the
investment decisions organisation contain various options available in the domestic market.
Before making any such investment decision it’s important for the organisation to identify
and select the right and the most appropriate proposal available in the domestic market to
invest. Selection of investment proposal is a critical topic that company address as all the
investment proposals available in market contain its own luxury and challenges that create
drawback related to such investment. This is a crucial finance allocation that is available in
front of the organisation. Decisions International Investment Organisation take in respect to
its investment create a direct impact over the overall growth and development of the
organisation (Valaskova, Bartosova and Kubala, 2019). As the financial resources are always
limited in number so it becomes the key responsibility of the management at International
Investment Organisation to make the best level of investment decisions that can boost the
overall growth of the company in market. Organisations like International Investment
Organisation are associated with various stakeholders in the domestic market of United
Kingdom that can suggest various investment proposals which can improve the capital value
of the organisation. It’s important for the organisation to make the best investment decision
that can not only boost overall growth rate of organisation in short term but also in long run
that can boost the growth of company in domestic market and also make the position more
stronger in the domestic market of United Kingdom. Organisation culture, efficiencies of
employees, maintenance and various other elements also needed to evaluate and analysis
before making any kind of investment decision by company.
Investment governance
Capital governance is another critical side of the financial allocation in the economy.
The allocator situated at the top level of financial market establish certain guidelines and code
of conducts that needed to be cope up with in order to make the best level of investment
decisions in the organisation. In order to tract investments at the corporate level these
organisations and institutions make these codes of conducts to operate, monitor and control
the entire financial market. United Kingdom is developed in term of economic growth and
the development context. These organisations and authorities played the significant role in
controlling the entire financial market. The higher authority also needed to overlook that

funds are potentially allocated to all types of organisation irrespective of the scale of the
business. Both large and micro scale organisation must contain the equal opportunity to
generate financial resources against the business operations undertake.
The above mentioned approaches are associated with the financial allocation at the
domestic level of economy.
Capital allocation within international market
International market is denoted as the global market associated with the organisation.
This is the scale of market spreader at the global level. In context to the international market
companies do not confine its shares, securities, debentures only at the domestic level.
Company open up its securities and different investment options for the stakeholders,
investors at the international level. International market is more expended and vast in
comparison to the finance market restricted at the United Kingdom. As the stated fact already
that investment market is a bigger place where funds are generated in bigger amount along
with the market cater bigger risk factor. As the returns are increased which significantly
improve the overall risk involved in the international finance market (Bui, 2018). In the
international market funds and finances are also available in form of receipts like global
depository receipts which also channelizes huge financial requirements of the organisation.
All such companies and organisation expanded at the global level based in United Kingdom
needed to hold its capital in more critical manner any time they make any decision in respect
to the capital allocation in the international market. International market double the growth
opportunities along with it cater more risk to the organisation in delivering the outcomes.
Evaluation of Economy
Economy of the United Kingdom is known as one of the greatest economies in the
world, but from the last few months economy situations of this country are not going well.
Basically, existing economy of the UK is not effective, because there are many international
factors has badly affected to the economic system of this country (Katteland Mazzucato,
2018). In the era of 1800 to 1900, the UK was ruled many other nations, so this factor was
enabled to the leaders of this country for highly improving own economy, and after cold war
the UK seen very higher boost in its economy system. Basically, on that time period, many
existing companies and businesses of the UK was started to exporting their goods and
services in other country, and that’s why this international trade of different UK’s companies
was provided huge foreign exchange to the local government. On the other side, MNCs of

other countries was also motivated to invest in the United Kingdom by expanding their
business operations in this country. That’s why investment of different MNCs in the United
Kingdom in the ear of 80s and 90s was very positively affected to the economic system of
this country. After gaining huge investment, local people of this country were started to grow
financially, because were appropriate jobs and employment opportunities.
Currently London is known as the financial hub of the United Kingdom, because in
almost all MNCs has their corporate offices in this city. The decision of Brexit was also
highly affected to the economic system of this country in both manners, positively and
negatively. Basically, when the UK’s government was taken the decision for exiting from EU
(European Union) in 2016, then many the administration of this union was not felt happy
with this decision of the UK’s government, and ordered to other member European nations of
EU that, not invest a single penny in the United Kingdom. That’s why time period of 2016-17
was also very bad for the United Kingdom’s economic system. However, after one year of
Brexit, there are many European nations was again started to invest in the UK’s economic
system (Caprottiand Cowley, 2019). There are many economists of this country said that,
year 2009 was also not effective of this country, because the UK were faced great recession
in that year, and many people was lots of their jobs and employment. After this recession,
existing government of country reduce its custom and taxation rates for highly inviting many
international companies for the investment. Basically, when many MNCs was invested in the
United Kingdom’s business environment, then people were again enabled to gain great job
and employment opportunities.
After the Brexit, local government of the United Kingdom puts its efforts for
motivating different local people for starting new businesses and start-ups, because this is the
only solution for generating huge employment and job opportunities in market place, and in
2018-19 it has gained very better results from small businesses and start-ups, because these
businesses was contributed in increasing the levels of the UK”s GDP (Gross Domestic
Product). The government of country still depends on small and medium sized businesses for
maintaining an effectiveness within its economic system. Basically, there are over 5.9 million
companies or businessesexistsin the United Kingdom, and in these 5.9 million businesses
there are 5.82 millionbusinesses are only small and micro ventures (Pinar and Unlu, 2020).
These 5.82 million businessesare knowns as the 99.9% of all businesses of the United
Kingdom, and that’s why these ventures are giving their great contribution in overall
development of the country’s economy. However, local government of country is cannot be

depended only on these ventures for maintaining effectiveness in its economic system,
because there are international trade finance and investment also equally matters in the
overall development of economy.
There are Vodafone, Unilever, Tesco, British Petroleum, Marks and Spencer, HSBC
holdings, Aviva etc. major UK based MNCs which currently gives great contribution in the
overall development of this country, because these ventures enable to local government for
raising huge foreign exchange. Basically, when any country has maximum foreign exchange,
then it can simply grow its economic and financial conditions at the international market
place. However, existing corona virus (Covid 19) pandemic has very negatively affected to
the UK’s economic system.
Evaluation of Challenges that the country faces due to Industrialisation and Trade
Policies
Currently the UK faces many challenges due to industrialisation and policies, in
which some major challenges and issues has been discussed below;
Challenge 1: Lack of natural resources
This is the first challenge government of the United Kingdom faces due to trade
policies and industrialisation (Price, 2018). Basically, most industries have always required to
many natural resources for successfully running its business operations, like; fuel for
transportation, coal, timber, natural gages etc. and that’s why these natural resources are
reducing day by day, in which the lack of natural resources challenge has raised due to these
industrialisation and trade policies factors.
Challenge 2: High market competition
According to many MNCs, trade policies of the United Kingdom are very favourable
for businesses and companies of other countries, in which currently many MNCs runs their
business operations in this country, so this factor become challenge to different local ventures
of the United Kingdom. For example; Starbucks is an American coffee café business which
currently serves in the UK as well, and so MNC can develop challenge for the local coffee
café businesses of the UK in the form of high market competition. It means, industrialisation
and trade policies promote the challenge relating to high market competition as well.
Challenge 3: Shortage of talented people

Currently the youth is one of major population of the United Kingdom, in which due
to industrialisation and trade policies, there are many talented and skilled youngsters of this
country are moving on abroad, like; USA, Germany and France etc. to properly utilise their
talent and skills (Sreekanth, 2016). That’s why this is also a big challenge to the government
of the UK, because industrialisation and trade policies promotes the issue of shortage of
talented people.
CONCLUSION
Financial management is all about managing the financial resources associated with
the organisation. This is all about making decision in respect to utilisation of company’s
financial resources along with controlling the risk involved in making such financial decision
making. Domestic market is safer as compare to the international market in regards to
allocate financial resources associated with the organisation. Code of conducts is also
different in both these market which also change the dimensions of the financial allocation in
both these markets. Key challenges associated with the United Kingdom in respect to the
financial allocation is the increased competition, inflation and many such respective
challenges that needed to overlook while channelizing the business decisions.
RECOMMENDATION
In order to improve the financial management of the organisation it require to the
organisation to assess all key areas associated with the financial decision making. Previous
records of the inflation needed to overlook by the company while making any decision
related to the allocation of funds. Level of competition in the market can also be overlooked
while making any investment decision at the organisation.

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