International Dimensions of Financial Management
For firms that pursue international opportunities, the role of financial managers has additional dimensions. How financial decisions are centralized or distributed will change the nature of risk and the prospects for success. For example: How will the firm measure and compare risk across currencies as certain projects are evaluated for capital investment? Will all profits flow back to the domestic home office, remain in the respective countries, or be distributed across the firm? Will capital budgeting be qualified differently for the foreign affiliates to account for differing national economies? Addressing these questions requires managers to understand the language of finance and how financial decisions change as companies go global.
Imagine the following scenario:
You are a senior manager at a sports clothing retailer, WEARe Sport,which began in the domestic marketplace and has prospered for the past 15 years. All stores are currently in the United States. Now senior leadership is exploring options to enter foreign markets in South America, Africa, and Asia. You have been named to the exploratory committee to provide recommendations and guidance for how this potential international enterprise might be financed. The committee has been tasked with providing answers to the following questions:
1. ShouldWEAReenter foreign markets as an exporter, in a licensing agreement, a joint venture, or a fully-owned foreign subsidiary?
2. What are the pros and cons as we look at each approach? What are the pros and cons of applying the same hurdle rate for our investments across all global operations versus allowing individual country managers to incorporate sovereign spreads into their discount rate computations?
3. What do we need to consider as we recruit financial managers for our foreign affiliates to ensure financial practices are consistent with our organizational culture and mission, yet responsive to local risks and opportunities?
4. What options do we need to consider as we organize to finance in international capital markets?
5. What direct and indirect learning approaches should be undertaken to ensure that our financial strategies will lead to success?
As the committee is set to meet in the following week, the committee chairperson, Monica, has asked group members to submit their thoughts about three of the five questions above so as to gauge the interest level of the group members in the areas identified and to get an initial sense of the range of options being considered for each question.
To prepare for this Discussion, review this week's Learning Resources. Then review the five questions posted above and select the three that interest you the most. For your post, clearly state which questions you have selected and then provide your answers. Then postby Day 3your responses to three of the five questions posted above.
•Clearly state which three questions you selected
•Explain the pros and cons of the choices available to the firm as it considers why some financial decisions should be controlled by corporate headquarters and why others might be best left to the foreign affiliate.
•Develop an evidence-based argument for each of your answers and support your conclusions with references from this week's Learning Resources, your own research, and, where applicable, your own professional experience.
Attachment:- The perils of pertnering in developing markets.rar