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International Business Paper (Essay Sample)

Global businesses are often exposed to financial risks such as currency volatility. These foreign exchange (FX) risks affect all aspects of a global firm. Next, you will read about the automobile industry. Auto makers' operations and manufacturing can be affected by currency fluctuations. In the assigned articles and case you will find out how Nissan and other firms managed this FX risk. Required Reading: Kim, Yong-Cheol & R. McElreath (2001) "Managing operating exposure: A case study of the automobile industry", Multinational Business Review. Detroit: Spring 2001. v 9, Iss. 1; pg. 21-27. Book Review (2005) "The gaijin who saved Nissan", Business Week,1/17/2005, accessed 5/16/2009 at: http://www(dot)businessweek(dot)com/magazine/content/05_03/b3916021_mz005.htm Napolo, D. (2005) "Managing FX risk; an eight step plan to establish corporate foreign exchange policy", Treasury & Risk Management magazine, March 2005. Accessed 5/16/2009 at: https://www(dot)wellsfargo(dot)com/downloads/pdf/com/focus/risk/manage_fx_risk_reprint.pdf Note: We also recommend you examine information on Nissan's websites below. Bandwidth restrictions may prohibit your accessing Nissan's website; however, it is still possible to complete the assignment without access. http://www(dot)nissanusa(dot)com/more-nissan-sites/ http://www(dot)nissanusa(dot)com/about/ Case Assignment: Write a 2-3 page paper, answering these questions: What did Carlos Ghosn and Nissan do in order to manage global financial risk and why? Did Nissan follow Napolo's (2005) 8 steps? Discuss which steps they did and those they did not follow. source..
Running Head: International Business
International Business Paper
The aim of any company is should be to overcome these berries and expand the business to become bigger. Companies have been going global in order to create a bigger market for their products. However these companies face a big challenge in trying to do business in those countries. One of the problems is financial risk due the difference in currencies. This paper examines how Ghosn was able to overcome financial risks and recover Nissan Company.
International Business
Many companies have gone global in today’s business world in order to find markets for their products. This means that the companies have to conduct transactions between the borders where there are different currencies that are volatile and pose the risk of loss in conducting the transactions. It is therefore important for companies to find mechanisms which they can use to reduce this risk and avoid incurring losses through transactions (Hyman, 2005).
According to Homaifar (2004), the risk of foreign exchange rates volatility is always intense for companies that are operating globally. Such is the case with Nissan an automobile company that has branches in different parts of the world. Nissan was a very competitive and favorable company in the automobile industry before the 1990s when it started experiencing financial problems with huge debts that led to its merger with Renault in 1999. Nissan had opted to unite with General Motors but the plan did not work. It experienced a devaluation of the yen from 100 to 90 for the dollar. This is the form of financial risk that leads to companies loosing value due to cross border transactions. The loss of value led to Moody’s and Standard agencies announcing that Nissan was going to be reduced from investment grade to junk. After the merger the vice president of Renault became the CEO of Nissan and introduced policies that have led to Nissan recovering to its form and position as one of the world’s largest automobile company.
Recovery of Nissan is credited to its CEO who put in place policies that led to the company being able to recover and make profits to pay off its debts that amounted to $22billion at the time when it merged with Renault. Today Nissan is one of the biggest automobile companies in the world. There were many changes made including firing of employees and Ghosn insisted that such actions had to be taken promising that if Nissan didn’t make ...
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