Chapter 1 Running Your Own MNC
Developing Your Idea
Create an idea for your own MNC to conduct international business. Your idea should be simplified to the degree that you could possibly implement it someday. However, your idea should also be sufficiently creative to be successful if done properly. Your idea should focus on one country and one foreign currency, since many MNCs are focused in this manner when they are first created. So that you can recognize the issues regarding exchange rate risk that are discussed throughout this text, you should assume that you will receive foreign currency when selling your product. Your idea should be for a small MNC instead of a large MNC because even most large MNCs began as small firms. The following questions will help you define your MNC idea:
Will any expenses you incur from producing the product be in dollars or some other currency?
Chapter 2 Running Your Own MNC
Assessing Country Factors That Will Affect the Demand for Your Product
Accessing Trade Data
Determine whether the product you plan to sell is already one of the main exports to that country.
Accessing Import Controls
Review the import controls set by that country's government. Determine whether your business would be affected by trade regulations.
Chapter 3 Running Your Own MNC
Using the Foreign Exchange Market
Will you possibly need the forward market? Explain.
Chapter 4 Running Your Own MNC
Monitoring Movements in the Foreign Currency's Value
What key factors likely affect the value of the foreign currency of concern over time?
Chapter 6 Running Your Own MNC
Monitoring Central Bank Intervention
Accessing Central Bank Information
Go to www.bis.org/cbanks.htm to access the Web site link for the central bank in your target country. Determine whether this central bank intervenes to control its currency in the foreign exchange market.
Assessing Spot and Forward Rates
Chapter 8 Running Your Own MNC
Determining Whether IFE Holds
Use The Wall Street Journal or another data source to record the interest rate differential between the interest rate of the foreign country in which you plan to do business and the U.S. rate over the last five or so quarters. Then, review the exchange rate percentage change in the foreign currency of concern over each of those corresponding quarters to determine whether the international Fisher effect (IFE) appears to hold over those quarters for that currency.
Chapter 9 Running Your Own MNC
Monitoring Exchange Rate Trends
Use a business periodical or the Internet to determine how the value of the foreign currency of concern has changed in each of the last five weeks. Does it appear that there is a trend over the last five weeks? What is the mean percent-age change over these weeks? If you believed that the currency's value would continue following the recent trend, would it appreciate or depreciate in the near future?
Chapter 13 Running Your Own MNC
Establishing a Subsidiary in Foreign Country
Identify the disadvantages associated with establishing a small subsidiary in the foreign country of concern.
Chapter 14 Running Your Own MNC
Deriving a Required Rate of Return for an International Project
Consider a possible project that would result in expansion of your international business. Describe how you would derive a required rate of return for this project.
Chapter 19 Running Your Own MNC
Ensuring Payment for Exports
Explain how your business could ensure payment for the products that you are exporting to a foreign country.
Chapter 20 Running Your Own MNC
Financing in Foreign Currency
Explain how you could use foreign financing for your business in a manner that would reduce your exposure to exchange rate risk. Be specific.
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