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    Exporting to a Foreign Country

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    For my International Business class, each of us needed to develop a fictitious American company to export "something" to a foreign country. The final report is to "prepare a budget and financial overview for our global venture. Prepare a financial analysis in terms of currency risk management and financing our global expansion. Discuss what financial institutions and instruments you would use to achieve your global expansion."

    My fictitious company is exporting washing machines to Costa Rica.

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    Risk Analysis is a formal framework that is used to evaluate the risks that organizations can face. A good risk analysis affords the organization the opportunity to decide what actions to take to minimize disruptions or decide whether the suggested strategies can be used to control risk and are cost-effective. Above risk is a perceived extent of possible loss, but risk can be view with various levels of impact, what may be a small risk for one person may destroy the livelihood of someone else.

    Organization uses several of methods and tools to assess risks, tools from database integrated software to basic spreadsheet templates. Whatever the method used, each driving forces has several categories (Business Investment, Business Development, and Business Operations) which opportunities and risks can be assessed. A country risk is one in which a country will not be able to honor its financial commitments and a political risk is one in which the investor privileges are affected by the regime in force. The regime may impose restrictions on repatriation of profits. One should first study their culture, come out with a list of do's and don'ts and prepare its staff to face the eventualities incident in that country. My recommendations:
    1. A proper research and first hand information should be obtained on cultural and living styles of people.
    2. Counter guarantees should be sought from the government of Costarica and the business viability assessed in all fairness
    3. Prior training and appraisal of cultural traditions of Costa Rica should be imparted to the staff intended to be sent to that country.
    4. Government participation and proactive policy on conjuring investor confidence should be sought.
    5. Capital insurance in the self interest of the company and so on..
    There can be various Country-Specific Risks.

    It affects both domestic and foreign firms that reside in a host country. These risks, which arise from the actions of the host government, apply more to the multinational corporation whose cash flows are impacted. Examples include exchange controls, currency inconvertibility, and blockage of funds.

    Exchange Controls
    A common policy of host governments facing balance-of-payments difficulties is to impose exchange controls that block the transfer of funds to nonresidents.
    Currency Inconvertibility
    Some governments will not permit conversion of the local currency into another currency
    Blockage of Funds
    Subsidiaries of MNCs typically send funds back to their parents to repay inter company loans, remit dividends, and pay for supplies and other ...

    Solution Summary

    This solution discusses the financial institutions and instruments that would be used to achieve global expansion.