International Finance: Procter & Gamble

International Finance
Name
Institutional Affiliation
International Finance: Procter & Gamble (P&G)
Introduction
As businesses continue to grow, the ultimate goal for many managers becomes expanding operations outside the domestic market. Businesses that operate outside their mother country are known as multinational companies. Most multinational companies (MNCs) sprout from developed economies are guided by the need to increase operations and hence profit by establishing themselves in foreign markets. This paper aims to analyze foreign exchange markets and the factors and risks influencing exchange rates. In doing this, a case example of Procter and Gamble Inc. (P&G) is used. One of America's Fortune 500 MNCs, P&G offers consumer products particularly related to personal care in over 180 countries worldwide. The company boasts of a well-established brand portfolio and invests heavily in product and market research every year.
Advantages and Disadvantages of MNCs
Expanding business outside the domestic economy or the home country comes with some added advantages for a firm, including increased access to customers, access to cheap labor, the ability to spread risks, lower operations costs, and increased consumer confidence. However, this does not imply that multinational companies are not subject to certain disadvantages when operating in foreign markets. Among other disadvantages, these companies operate under foreign laws and regulations, which may at times turn out to be unfavorable as considered to those existing in the home country (Christensen et al., 2020). Other disadvantages that MNCs may face include complex logistics, cultural barriers, and difficulty monitoring fluctuations in currency, conducting market research, and credit risks. These disadvantages may at times outweigh the advantages of expansion in foreign markets and, if not well handled, may lead to business closures.
One of the benefits that P&G as an MNC enjoys is an increased customer base, which translates into increased profits. As aforementioned, P&G has a presence in over 180 countries around the world and a customer base of over four billion. In addition, the company's brand portfolio has generally been created through acquisitions and joint ventures, which has helped the company venture into new markets easily and faster (Christensen et al., 2020). This has also helped in growing domestic industries. Furthermore, it helps local producers or industries through partnerships where the latter supply some of the raw materials required for production by P&G and its subsidiaries.
Expansion into foreign markets has also helped the company to expand exports. While this helps host economies by increasing foreign currency holding, it also helps the home country through profit repatriation. Like many other MNCs, P&G has good control over research and development, spending about 400 million dollars in research and development every year. This investment has helped the company understand its customers' preferences and boost its profitability. In addition, the company's R&D strategy, which is based on partnerships with local companies and researchers, has seen its productivity grow by over 60 percent while reducin...