...PESTEL analysis Political: * Stable political environment * Austria and Switzerland are doing business with the whole world (opportunities) Economical: * Same currency in AT * Exchange rate Euro – CHF 1:1.20 Economical Factors As Austria and Germany are in the monetary union both have the EURO as the only currency which makes it easier for kekswerkstatt to sell to customers in Austria. No exchange rates fluctuations have to be considered. Switzerland’s currency is the Swiss Franc or CHF. The exchange rate of the EURO and the CHF is 1€ : 1.20 CHF. This means that a Swiss customer has to pay 20% more than a German or Austrian customer for the same cookie. An average package of kekswerkstatt costs about 10€ so that in the end a Swiss has to pay 12€ which is affordable as we will see later in the report in the section purchasing power. But imaging a business customer wants to buy some cookies as a giveaways. If the amount on the invoice is 200€ for example the Swiss customer has to pay 40€ more which can be sometimes a reason not to buy if the exchange rate is not favorable. * Many SMEs 99.7% : contribution to total turnover 60% * Many suppliers, availability of high quality resources (also regional producers) * High motivated people are easy to find (career attitude) * Share of generic and regional products is increasing Social: * Healthy life is important * Quality instead of quantity (people are willing to buy/ pay more for...
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...International Finance: A Course Overview Mihir A. Desai* Harvard University and NBER ABSTRACT This paper describes the International Finance course at Harvard Business School for instructors considering adopting the associated material. The paper begins by arguing that the forces of globalization have fundamentally changed the scope and activities of firms thereby altering the practice of finance within these firms. As a consequence of an increasing reliance on tightly-integrated foreign operations, a parallel world of finance has been opened within every multinational firm and this world has, heretofore, been overlooked. The course materials are designed to address the many aspects of financial decision making within global firms prompted by these changes that are not addressed in traditional materials. The paper provides an overview of the structure of the course and its seven modules with particular emphasis on the three modules that constitute the core of the course. The paper also describes an analytical framework that has been developed through the creation of the course materials to guide critical financial decisions on financing, investment, risk management and incentive management within a multinational firm. This framework emphasizes the need to reconcile conflicting forces in order for multinational firms to gain competitive advantage from their internal capital markets. The paper concludes with a discussion of the course's pedagogical approach and detailed descriptions...
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...MANAGING F OREIGN E XCHANGE R ISK WITH DERIVATIVES by Gregory W. Brown* The University of North Carolina at Chapel Hill May, 2000 Version 3.4 Abstract This study investigates the foreign exchange risk management program of HDG Inc. (pseudonym), an industry leading manufacturer of durable equipment with sales in more than 50 countries. The analysis relies primarily on a three month field study in the treasury of HDG. Precise examination of factors affecting why and how the firm manages its foreign exchange exposure are explored through the use of internal firm documents, discussions with managers, and data on 3110 foreign-exchange derivative transactions over a three and a half year period. Results indicate that several commonly cited reasons for corporate hedging are probably not the primary motivation for why HDG undertakes a risk management program. Instead, informational asymmetries, facilitation of internal contracting, and competitive pricing concerns seem to motivate hedging. How HDG hedges depends on accounting treatment, derivative market liquidity, foreign exchange volatility, exposure volatility, technical factors, and recent hedging outcomes. * Department of Finance, Kenan-Flagler Business School, The University of North Carolina at Chapel Hill, CB 3490 – McColl Building, Chapel Hill, NC 27599-3490. Voice: (919) 962-9250, Fax: (919) 962-2068, Email: gregwbrown@unc.edu. A more recent version of this document may be available from my web page: http://itr.bschool...
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...In a private placement, securities are sold to private (individual) investors rather than to institutions. (b) Private placements occur most frequently with stocks, but bonds can also be sold in a private placement. (c) Private placements are convenient for issuers, but the convenience is offset by higher flotation costs. (d) The SEC requires that all private placements be handled by a registered investment banker. (e) Private placements can generally bring in funds faster than is the case with public offerings. (Points: 20) 3. (TCO E) Dakota Trucking Company (DTC) is evaluating a potential lease for a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 10%, and the loan would be amortized over the truck's 4-year life. The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of $10,000. If DTC buys the truck, its after tax cash flows would be the following: (Year 1) - 6,339; (Year 2) -4,764; (Year 3)-9,943; (Year 4) -5,640; all occurring at the end of...
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...PREFACE During the last two decades, there has been a turmoil in the field of international money market resulting in various changes in the international subject of foreign exchange in a rather difficult one for it is highly technical and strictly governed by regulation which changes frequently. After a successful completion of internship program on Dhaka Bank, Khatungonj Branch over the topic of “Foreign Exchange Dealings”, I have attempted to produce a report over the mentioned topic. FOCUS OF THE REPORT This report highlights the theoretical as well as practical background of foreign exchange. As the DBL Ktg Branch deals with Import Business as well Export Business, this report will focus on import & export business mechanisms of foreign exchange. Initially this report will make a brief highlight on the overall Dhaka Bank Limited (DBL) & its Khatungonj (Ktg) Branch. Then it will discuss the basics of foreign exchange, means and methods for settlement of International trade, Import procedures, Details of documenting credit, exchange rate determination and financial statistics on foreign exchange business. In the end, the report will enclose an appendix, which will show the various financial results’ summary of the DBL Ktg Branch. I hope the report will achieve its ultimate objective. SAIDUL ALAM ACKNOWLEDGEMENT I have the pleasure to express my gratitude to the Almighty Allah (SWT) for giving me opportunity to complete my BBA course, internship Program...
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...Chapter Exchange Rate Determination and Forecasting QUESTIONS 1. What is the difference between the ex ante and the ex post real interest rate? 10 Answer: The ex post interest rate corrects the nominal interest rate with the realized or ex post rate of inflation; whereas the ex-ante (or expected) real interest rate corrects the nominal interest rate for expected inflation. As a lender, you care about the real return on your investment, which is the return that measures your increase in purchasing power between two periods of time. If you invest $1, you sacrifice $1 1+i real goods now, where P(t) is the price level. In 1 year, you get back , where i is the P(t) P(t+1) nominal rate of interest. We calculate the real return by dividing the real amount you get back by the real amount that you invest. Thus, if rep is the ex post real rate of return and ex post real interest rate, we have 1 + r ep ⎛ 1+i ⎞ ⎜ P(t+1) ⎟ ⎠ = (1 + i ) = ⎝ ⎛ 1 ⎞ ⎛ P(t+1) ⎞ ⎜ P(t) ⎟ ⎜ P(t) ⎟ ⎝ ⎠ ⎝ ⎠ Notice that the real rate of interest depends on the realization of the rate of inflation because P(t + 1)/P(t) = 1 + π(t + 1), where π(t + 1) is the rate of inflation between time t and t + 1. For simplicity, we drop the time notation and simply write 1 + r ep = If we subtract 1 from each side, we have (1 + i) (1 + π) r ep = which is often approximated as (1 + i) (1 + π) i-π = (1 + π) (1 + π) (1 + π) rep = i – π The approximation involves ignoring the term (1 + π) in the denominator...
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...1.1 Introduction: Rate at which one currency may be converted into another. The exchange rate is used when simply converting one currency to another currency or for engaging in speculation or trading in the foreign exchange market. There are a wide variety of factors which influence the exchange rate, such as interest rates, inflation, and the state of politics and the economy in each country it also called rate of exchange or foreign exchange rate or currency exchange rate. 1.2 Objective of the Report: The primary objective of this report is to know the over functions of government in foreign exchange market. But the objective behind this study is something broader. Objectives of the study are summarized in the following manner: • To describe the exchange rate systems used by various government. • To explain how government can use direct and indirect intervention influence exchange rates. • To study existing government control over exchange rate system. • To know how government can affect economic conditions. • To have some theoretical exposures that will be helpful for our future career. 1.3 Methodology: For preparing this report, we have undergone group discussion, collected data from internet. We also studied different circulars and reference books on this topic. We hope these criteria will be enough to find out different picture of government influence on exchange rate system. 1.4 Limitations of the Study: 1. The time, 1(One) week...
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...The purpose of this paper is to highlight and examine the key strategic risks for Koch Industries as they look to expand their market share to the Philippines. Furthermore, this paper will also outline a financial strategy for implementing this expansion by identifying the associated risks of foreign currency exposure, as well as addressing the major dimensions on international finance, evaluate the basic functions of the international banking system and financial market, and finally recommendations on the best way ahead for Koch Industries entering the Philippine market. To begin, this paper will first examine the possible risks of foreign currency exposure for Koch Industries in the Philippines. As financial markets have become more global and fast moving, foreign currency exposure can have an enormous and rapid impact on profitability can be potentially catastrophic to even the most entrenched and successful companies. Managing exposure and mitigating risk is large and involved process, and has been shown that companies in western industrial economies are quite refined and cultured in currency hedging and conduct business with a modest amount of risk. However, while there is a plethora of evidence supporting the actions of western industries much less is available regarding companies in the rapidly emerging Asia-Pacific region. The results of a 13-year study conducted by Professor David Parsley, of the Owen Vanderbilt Graduate School of Management, found that “the basic...
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...1. Introduction Basically, business cannot run efficiently and effectively without any management practices. This report will cover about the analysis and development towards practice of management. The author considers there are so many variations of management practices, it depend on the countries that may have different cultures and situation in which business can be accepted. 2. Background to Company Erling Persson established H&M in 1947, in Vasteras, Sweden with only provide women’s clothes and called Hennes. Hennes refers to Swedish word means hers. In 1968, Persson bought the hunting and fishing tools named Mauritz Widforss in Stockholm and the availability of men’s clothing began, so the firm started to offer both women’s and men’s clothes and the name Hennes became Hennes and Mauritz, abbreviated to H&M. After that, the company has continued to expand their business through rapid expansion. H&M is top fashion retailer in Europe and it is built with a strong corporate culture, which is explains how we work to achieve our goals and objectives. There are over 94,000 employees who work for H&M and today approximately 2,700 stores are extending across 48 markets in Europe, North America, North Africa, Asia, and the Middle East. 1. Product Our company provides fashion collection for all gender starts from kids until adult. Those collections include clothes, shoes, bags, accessories, and other fashionable things. The company also has a group called H&M...
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...Virtual Organization Strategy for Kudler Fine Foods For many organizations, strategic decisions play an important role in how the organization plans to expand its business and its profits. There are many factors management must consider before making a final decision as to which approach will provide the most benefits as well as bringing in the most capital. Each approach considered will present strengths, weaknesses, opportunities, and risks that management must carefully consider. Each approach will also have an impact on the organization’s decision should they decide to pursue an international location. The decisions management faces are not easy ones and they must carefully determine the best strategic approach or run the risk of financial ruin. Kudler Fine Foods Kudler Fine Foods is one such organization looking to expand its operations. Currently, Kudler Fine Foods owns and operates three stores all based in the San Diego, California area. Kudler Fine Foods, an upscale specialty foods store offering domestic and foreign foods as well as spirits to its customers, began in mid-1998 and within nine months was already making a profit. Kudler Fine Foods opened two additional stores, one in 2000 and one in 2003 (Apollo Group, 2011). Because business has been so good, management is looking at another possible expansion and is seriously considering the options available. In order to make the most beneficial as well as profitable decision, management must take its time and...
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...Volatility of exchange rate The main objective of this research is to present a rationalized concept of the theory and composition of exchange rate that are compulsory to solve the important economic problems facing the economy in the country, like volatile exchange rate, unbalanced financial circumstances and frustration of government to have control over domestic money market. “Exchange rate” shows that how much unit of onenation’s currency can be purchased with one unit of domestic currency. More precisely, exchange rate is a conversion factor that determines rate of change of currencies. While exchange rates volatility shows that exchange rate is settled on demand and supply of one nation’s currency, it may turn out fastest moving price of currency and bring all the foreign capital in the economy. Exchange rate volatility can influence the decisions of policy makers and affect the volume of exports and imports. It can also affect the allocation of manufacturing of goods, reserve money, exports, imports and balance of payments. Exchange rate volatility provides chances to domestic investors to invest in foreign currency to obtain higher profits and thus domestic currency undervalue and foreign currency gain values. Moreover, this volatility of exchange rate directly influences the prices of exports, imports, reserve money, manufacturing productions and their growth rates. Traders and investors always support the system where the discrepancy of the difference between actual...
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...do not think that they need to know because they use on-balance-sheet instruments to protect themselves before and after currency rates reach troublesome levels. This is puzzling because performing a rough estimate of at least the exposure of cash flows is not prohibitive and could be valuable. Another puzzling finding is that firms use currency derivatives to hedgerinsure individual short-term transactions, without apparently trying to estimate aggregate transaction exposure. q 2000 Elsevier Science B.V. All rights reserved. JEL classification: G15; G30 Keywords: Currency risk exposure; Swiss industrial corporation; On-balance-sheet instruments 1. Introduction This paper surveys the currency risk management practices of Swiss industrial corporations. Many of them sell most of their output abroad and would therefore seem to be heavily exposed to currency risk. In fact, currency risk can be substantial. Between 1978 and 1996, the Swiss franc experienced dramatic swings in relation to major currencies such as the U.S. dollar, the Italian lira, and the ) Corresponding author. 0927-5398r00r$ - see front matter q 2000 Elsevier Science B.V. All rights reserved. PII: S 0 9 2 7 - 5 3 9 8 Ž 0 0 . 0 0 0 1 4 - 1 318 C. Loderer, K. Pichlerr Journal of Empirical Finance 7 (2000) 317–344 British pound. Comparing highest and lowest exchange...
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...forecast financial statements are percent of sales method and constant growth method. The constant growth method expects the future growth of the company to grow at a constant rate. There is a problem with this method and that is it’s hard for company to maintain a constant growth throughout it’s life. Therefore this method will be eliminated to forecast the statements. This then leaves us with the percent sales method. To forecast using the percent sales method, financial analyst must look at the historical financial statements and of items on the income statements and balance sheets. The best data to use to determine percentage of sales should be historical data from income and balance statements. After finding the percentage of sales, Mr. Rose can use that to forecast the future financial statements for the company. If the company decides to go international, this will add risk to the company. Some risk that the company may face would be exchange rate, differences in interest rates, and political risk. These risk play a great part in how the business of the firm operate. It will affect the future cash flows of the company. According to the foreign exchange risk, there are a few relationships that link this risk together. They are spot and forward exchange rates, interest rates, and inflation rates. The political risk is between how foreign and domestic companies are treated. Foreign operations work differently in foreign and domestic companies. To manage political...
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...Acronyms Used in this Report |ATM |Automated Teller Machine | |BRPD |Banking Regulation and Policy Department | |CEO |Chief Executive Officer | |COD |Clean Over Draft | |CRAB |Credit Rating Agency of Bangladesh | |DD |Demand draft | |EFT |Electronic Fund Transfer | |EMI |Equal Monthly Installment | |EPS |Earning Per Share | |FDBP |Foreign Documentary Bill Purchase | |FDR |Fixed Deposit Receipt | |GOB |Government of Bangladesh ...
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...What is exchange rate? In finance, exchange rate is the value of one country currency in terms of another country currency. In other words, it is the rate that will be exchanged by one country currency in order to obtain another country currency. For example: When Vivian ,a Malaysian wants to travel to America, she will need to change Malaysia ringgit into US Dollar in order to consume any kind of facility or shelter provided in America. Exchange rate is needed because one nation’s currency is not always accepted in another. Besides that, exchange rates changes every day and when exchange rate changes, it affect different stakeholders in different ways depending on the direction of change. Exchange rates are determined in the foreign exchange market and are open to a wide range of different type of buyers and sellers across different country. Currency trading is continuous from 20:15GMT Sunday to 22:00 GMT Friday. Furthermore, when others say a statement such as an interbank exchange rate of 80 Japanese yen(¥80) to the United Stated dollar (US $) give the meaning of US$ 1 will be exchanged for each ¥80 or ¥80 will be exchange for each US$1. In other words, an individual must give up US$1 to get ¥80. However, if the exchange rate in one country is higher than another, this means that the value of money of that country is worth more than a country with a lower exchange rate. Also, exchange rates are market clearing price that equilibrate supplies and demand in the foreign exchange...
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