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AN Assignment OF International Finance

The document discusses international finance and international monetary systems. It provides details about: - The key features of an international monetary system, including facilitating international trade and capital flows, maintaining stable foreign exchange rates, and providing liquidity. - The main stages in the evolution of international monetary systems, from the classic gold standard to the present system established in 1971. - The establishment of the IMF and World Bank in 1944 as results of agreements between nations to set up bodies to promote and support international trade.

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24 views

AN Assignment OF International Finance

The document discusses international finance and international monetary systems. It provides details about: - The key features of an international monetary system, including facilitating international trade and capital flows, maintaining stable foreign exchange rates, and providing liquidity. - The main stages in the evolution of international monetary systems, from the classic gold standard to the present system established in 1971. - The establishment of the IMF and World Bank in 1944 as results of agreements between nations to set up bodies to promote and support international trade.

Uploaded by

Anonymous Ne9hTR
Copyright
© © All Rights Reserved
Available Formats
Download as ODT, PDF, TXT or read online on Scribd
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AN

ASSIGNMENT
OF
INTERNATIONAL
FINANCE

SUBMITTED TO: SUBMITTED BY:


DR. PAWAN DUBEY RAJU KAUR
MBA 2nd YR
BS15MB004
International Monetary System

International monetary system refers to a system that forms rules and standards for facilitating
international trade among the nations. It helps in reallocating the capital and investment from one
nation to another.
It is the global network of the government and financial institutions that determine the exchange rate of
different currencies for international trade. It is a governing body that sets rules and regulations by
which different nations exchange currencies with each other.
With the growing complexity in the international trade and financial market, the international monetary
system is necessary to assign a standard value of the international currencies. The rules and regulations
set by the international monetary system to regulate and control the exchange value of the currencies
are agreed upon by the respective governments of the nations. Thus, the governments stand may affect
the decision making of the international monetary system. For example, change in the trade policy of a
government may affect the international trade of goods and services.
International monetary system motivates and encourages the nations to participate in the international
trade to improve their BOP and minimize the trade deficit. It has grown over the years as a single
architectural body with a vision to integrate the global economy. Some of the important achievements
of the international monetary system over the years have been the establishment of World Bank and
International Monetary Fund in the year 1944.
The establishment of IMF and World Bank is the result of the agreement among nations to set a body,
which promotes and supports the international trade.

FEATURES OF IMS

Flow of international trade and investment according to comparative advantage.

Stability in foreign exchange and should be stable.

Promoting Balance of Payments adjustments to prevent disruptions associated with temporary


or chronic imbalances.

Providing countries with sufficient liquidity to finance temporary balance of payments deficits.

Should at least try avoid adding further uncertainty

Allowing member countries to pursue independent monetary and fiscal policies.


Stages in International Monetary System

Classic Gold Standard (1816-1914)

Interwar Period (1918-1939)

Bretton Woods System (1944-1971)

Present International Monetary System (1971)

GOALS OF MULTINATIONAL COMPANIES (MNCs)

MNCs Definition:
When the domestic company started its business in different countries is called MNCs.
Parent Company: Domestic branch is called main or parent company.
Subsidies Company: In other countries branches is called Subsidies Company.

Goal of multinational companies (MNCs):


Wealth maximization of share holders
There are two ways to maximize the wealth:
Capital Gain
Dividend Increase

Primary goal of MNCs


A primary goal of multinational corporations is to offer their vision for selling products or services in
ways that are relevant to local cultures. A hit results in revenue streams and successful partnerships,
while a miss leaves a trail of mistakes and misunderstandings. Multinational business confronts the
complexity of cultural, linguistic, religious and ethnic bridges in ways that few other institutions can
while maintaining a vision that was drawn up in the boardroom.

Investigate and Disseminate Product Vision


Once the right opportunities for new locations are discovered, a multinational corporation has a goal in
mind. It wants to sell products or services in another place across time zones to a people who are
foreign in a way that the people can relate and choose to purchase the offerings. That's a worthy goal
encumbered with difficult tasks. Research must be done. On the ground investigation must occur.
Casting a brand to a stranger takes guts, determination and trust building.

Market-Adapted Vision Locally and Regionally


The vision has to be marketed in a way that both meets local needs but also builds the corporation's
bottom line. Adapting the vision and products or services to suit the local taste is imperative, otherwise
failure will ensue. Not ruining the product because of undue local cultural influence is a concern.
Political and economic obstacles will come. Ads must be done and redone. Checking out regional
opportunities in neighboring cities or countries creates both opportunity and additional encumbrances.

Transfer Multinational Values to Local Cultures


A multinational corporation has to transfer values to new places in ways that make money and create
value for the new markets. The branding developed in other venues has to be re-branded with fresh
awareness, maintaining the essence of intrinsic properties that brought success in the first place.
Multinational corporations have to know what the cores of their businesses are and what aspects of
their core are malleable.

Receive Back Local Values to Influence Brand


A smart multinational corporation asks for and receives back a transfer of values from new contexts.
These influences affect the brand and can be risky. Nevertheless, the goal is localization of product,
rather than standardization. The product must look local, not like a foreign product. However, too much
localization can destroy a product and cause business failure. The key to learning from the locals is
finding the right people with whom to partner, listening well and promoting new key leaders within the
organization, influencing the brand and services offered. Building a truly global brand demands nothing
less than local partnership.

International Business Theories:

Comparative Advantage: Which area the company is stronger than other company and
its competitor is weak in that area.
Theory of Imperfect Market: Get the benefit of factor of production because the factors are
not equal in the world the business man can get the befit of that inequality.
Product Life cycle Theory: first of all fulfill domestic demand and after fulfill MNCs demand.
Concept of Risk
Risk is a situation in which some kind of loss is possible. Risk is a part of life.

Risk is intangible too, until you experience a loss, or survive a close call.

Nature of Risk

Pure and speculative risk

Fundamental and particular risk

Personal risk

Property risk

Liability risk

Risk arising from failure on part of others

Fidelity risks

Risks due to ownership and use of Transport vehicle

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