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Competitive Global financial management

PART 1

I have a company here in the U.S (BELL TECH U.S.A) that has been in acquisition talks with two different companies based in Europe. One of them is DEE Industries, headquartered in a country that is part of the European Union (EU), and uses the Euro, the second is KIM Industries, headquartered in another European country which is not a member of the EU and does not use the Euro as its primary currency.

Based only on the rationale of whether or not the company is located in a country within or outside of the European Union, please recommend one of these two companies to my company and let me know why the company is recommended and preferred to the other. In addition to that, please let me know the possible implications of running a business in a country that is within or outside of the European Union.

I will also like to know the pros & cons of the choice selected.

Note: Please put the following into considerations-

Foreign exchange risks

Political risk,
The goal of management, and
Market imperfections.

Emerging Market Crises

Here are three crises which demonstrate the critical roles of currencies in the global economy:

1. The Asian crisis of 1997. Although this was not the collapse of any one currency, economy, or system, the complex structures combining government, society and business through the Far East provide a backdrop for understanding the tenuous linkage between business, government, and society.

2. The Russian crisis of 1998. The loss of the relatively stable ruble, once considered the cornerstone and symbol of success of President Boris Yeltsin's regime, was a potential death blow to the current Russian government and economic system. If nothing else, Russian borrowers may find themselves unwelcome for years to come in the international capital markets.

3. The Brazilian crisis of 1999. Potentially the mildest of the three currency collapses, the Brazilian real's fall in January 1999 was the result of a long-expected correction in an ill-conceived currency policy. Because so many major Brazilian firms are publicly traded, this crisis serves as an excellent example of how equity markets revalue firms that are exposed to currency devaluations and vice versa.

PART 2:

As part of expanding my business internationally, my company (BELL TECH U.S.A), a multinational enterprise (MNE), is currently in the planning stages of establishing a Greenfield production facility overseas. I need to present a proposal to the steering committee comparing the advantages and disadvantages of starting operations in one of two selected foreign countries.

The steering committee has determined that one alternative must be a member of the European Union (EU) while the other cannot be a member of the EU. Subject to these conditions, I can select any two foreign countries, except China, India, Czech Republic, and Romania for comparison.

Considerations: Factors to consider in comparative analysis include, among other topics, a discussion of the different countries' currencies, trade policies and cultural variables that may affect my business operations and profitability in each country. I will like the final report to be concluded with a recommendation and supporting rationale as to which country should be selected for the new facility.

Solution Preview

Part 1:

In the current economic scenario, European Union is going through turbulent times due to the current Eurozone crisis wherein there is a widespread fear of default by some of the member nations. The sovereign debt crisis has major implications on the financial, economic and political scenario in the European Union. In such a scenario, there are several negative implications of acquiring a company in the European Union because the perceived benefits of acquiring a company in the EU region is negatively affected by the ongoing crisis.

Hence, the short term scenario for Europe looks very negative and thus, it is highly advisable that the organization acquires a company outside of the European Union. However, at the same time, it is also to be noted that this factor alone cannot be brought into play in this decision because there are several other factors that needs to be analyzed to finalize this decision.

The current crisis definitely affects the foreign ...

Solution Summary

Comparative Global Financial Management for Bell Tech USA in non-EU operations

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