Professional Documents
Culture Documents
Finance Function
20-1
International
Business
Environments &
M. A. Bashar
Operations
Associate Professor
Department of Management
University of Chittagong
12-2
Objectives
To describe the multinational finance function and how it fits
in the MNEs organization structure
To show how companies can acquire outside funds for normal
operations and expansion
To discuss the major internal sources of funds available to the
MNE and show how these funds are managed globally
To explain how companies protect against the major financial
risks of inflation and exchange-rate movement
To highlight some of the financial aspects of the investment
decision
20-3
EXTERNAL INFLUENCES
OBJECTIVES
PHYSICAL AND
SOCIETAL FACTORS
STRATEGY
MEANS
COMPETITIVE
ENVIRONMENT
Modes
Overlaying
Alternatives
Functions
Marketing
Exporting and
importing
Global manufacturing
Supply chain
management
Accounting
FINANCE
Human resources
20-4
Introduction
MNEs need access to capital
Finance is integral to firms operating strategies
Concern with access to capital in local and global
markets
20-5
C ash M anager
V P , F in a n c e
V P , O p e r a t io n s
C o n t r o lle r
T re a s u re r
C r e d it M a n a g e r
G lo b a l F in a n c e
E x p o s u re
M anagem ent
B udget
P la n n in g
C a p it a l
E x p e n d it u r e
B id S u p p o r t
VP, R &D
F in a n c ia l
P la n n in g
P r o c e s s F o r e ig n
C u rre n c y
20-6
20-7
20-8
20-9
20-10
20-11
Emerging markets
Developed markets
1994
96.40%
87.30%
12.70%
1998
6.90%
93.10%
2001 Prentice Hall
20-12
20-13
Favorable
regulatory
climate
Efficient and
experienced
financial
community
Offshore
Financial
Center
Economic and
political stability
Good
communications
Good supportive
services
20-14
20-15
Parent
Company
Loans
Dividends,
royalties,
and fees
French
Subsidiary
Guarantee
loans
Loans
Extensions of
accounts payable
2001 Prentice Hall
Invests more
equity capital
Brazilian
Subsidiary
20-16
20-17
20-18
French
Subsidiary
$150,000
$50,000
Italian
Subsidiary
$200,000
$200,000
$200,000
$50,000
German
Subsidiary
$100,000
United Kingdom
Subsidiary
20-19
Multilateral Netting
French
Subsidiary
Italian
Subsidiary
$100,000
$150,000
Clearing
Account
$150,000
$100,000
German
Subsidiary
United Kingdom
Subsidiary
20-20
Exposure-Management Strategy
Defining and measuring exposure
MNE must forecast the degree of exposure in each
major currency in which it operates
exchange-rate movements are forecasted using
in-house or external experts
Reporting systemsubstantial participation from foreign
operations combined with central control
Foreign input important to ensure forecasting
effectiveness
Central control of exposure protects resources more
efficiently
defines and controls overall company exposure
MNEs should devise uniform reporting system for its
subsidiaries
Time periods of reports vary
Final reporting
be at corporate level 20-22
2001should
Prentice Hall
20-23
20-24
20-25