How Globalization has Changed MNCs' Financial Management (Term Paper Sample)
discuss how globalization has changed MNCs’ financial management.
We are now living in a world where all major economic functions-consumptions, productions and investment-are highly globalized. For example, U.S. consumers routinely purchase oil imported from Saudi Arabia and Nigeria, garments from China, TV sets from Korea, shoes from Indonesia, and wines from France. Foreigners, in turn, purchase American-made aircraft, software, wheat and etc.
Like consumption, production of goods and services have become highly globalized as a result of multinational corporations (MNCs)’ effort to source inputs and locate production anywhere in the world where costs are lower and profits are higher. Recently, financial markets have also become highly integrated. This development allows MNCs gain access to foreign capitals, as illustrated by Toyota’s venture in China was partly financed by American investors who purchase Toyota shares traded on the New York Stock Exchange (Eun and Resnick International Financial Management 6e).
Because of globalization, it is essential for future business leaders to keep engaged in current events to develop critical thinking skills. This writing assignment will help increase your grasp of course concepts as well as ability to work with and apply concepts to real-world events.
In your term report, discuss how globalization has changed MNCs’ financial management.
- To meet university’s writing requirement, the main body of your report should contain at least 2,500 words.
- A report containing fewer than 2,500 words will get a grade of zero.
- You should provide thorough discussion of the assigned topic.
- You should refer to at least three WSJ articles published since Sept 01, 2015 as examples to support your discussion.
- Your term report should contain a cover page that lists the number of words in the main body of the report.
- Your term report should contain a citation page that outlines the sources of information you use as reference.
- Your term report will be graded by its quality, indicated by its correctness, thoroughness, professionalism and originality. Please refer to the “writing evaluation rubric” posted to CC for more details.
How Globalization Has Changed MNCs' Financial Management
How Globalization Has Changed MNCs' Financial Management
Financial management at the international level has become a significant process that requires a good economic relationship between countries and the global economy in general. International financial activities need active management practices and tools as it entails not just finances, but also financial management processes. Financial management is a process of dealing with both resources and financial operation. Therefore, international financial management is one of the latest concepts being utilized by MNCs, assisting them in cross-disciplinary decision-making processes that include a holistic approach to financial planning, financial control, and financial decision –making processes. With the globalized world, Multinational Corporations currently rely on international financial management to meet their objectives of having the competitive advantage in the global marketplace at the same time maximizing shareholders’ profit (Bhalla, 2011).
Overview of Globalization and MNCs' Financial Management
Owing to the globalization, financial management is changing because of the changing market environment, business, and technological advancement. In the recent past, financial markets have become highly integrated enabling investors to diversify their investment internationally. The US investors have continuously invested in overseas markets as other countries such as the Japanese investors equally investing in the US and other countries (Nauman-Etienne, 2010). Major corporations like Sony and IBM have their share listed at the foreign stock exchange markets. At the same time, rapid internationalization of business has occurred due to increased demand of goods and services facilitated by the open border trade, globally. Everything from technology, capital, and human resource has reached top level with no single country being self-sufficient to assume the availability of the resources provided by the vast and multidimensional global village.
Currently, people are living in the world with major economic functions that are highly globalized. It is vital for multinational corporations to understand the international dimension of financial management. Multinational corporations with their worldwide production and distribution activities need to adjust to the international financial management in the light of changes in the international environment to facilitate the international trading activities (Nauman-Etienne, 2010).
The Nature and Scope of the International Financial Management
Like any other finance function, international finance of multinational corporations have two functions of treasury and control. Treasury is in charge of financial planning analysis, acquiring funds, investment financing decision and risk management, and cash management. Controls deal with functions such as external reporting, tax planning management accounting, budget planning, and information system among others (Rugman and Brewer, 2012). For multinational corporations to maximize returns from investment at the same time minimize the cost of finance, the firms have been forced to take portfolio decision based on analysis of the international markets. Since the firms raise money from various financial markets internationally, multinational corporations have come up with strategies for exploiting market by superior forecasting of the ability to generate financial gains using different strategies (Rugman & Brewer, 2012).
Even though managing international finance is complex because of a wide variety of financial mechanism, funding options, and investment options are always available to manage corporate finances. Multinational corporations are multidiscipli...
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