Create an idea for mnc
Dr. Sana Naseem
Student Name: _____________
Student ID: _______________
Create an idea for your own MNC to conduct international business. Your idea should be simplified to the degree that you could possibly implement it someday. However, your idea should also be sufficiently creative to be successful if done properly. Your idea should focus on one country and one foreign currency, since many MNCs are focused in this manner when they are first created. So that you can recognize the issues regarding exchange rate risk that are discussed throughout this text, you should assume that you will receive foreign currency when selling your product. Your idea should be for a small MNC instead of a large MNC because even most large MNCs began as small firms. For each chapter, you will answer questions that aim to shape your own MNC. Following the completion of your project, you will present your idea in class or through ZOOM.
Chapter 1 Running Your Own MNC
Developing Your Idea:
The following questions will help you define your MNC idea:
- What is the product that you plan to sell?
- What foreign country do you plan to target?
- How will you sell the product in that country? (i.e., through a distributor? by mail?)
- Is there some evidence that consumers in that country would buy this type of product?
- Do you need to purchase supplies or to hire labor?
- Will any expenses you incur from producing the product be in dollars or some other currency?
Chapter 3 Running Your Own MNC
Using the Foreign Exchange Market:
- Explain how you will use the spot market for your business.
- What bank do you plan to use to exchange the foreign currency received for your local currency?
- What is the bid/ask spread on a recent quotation by that bank? (see your bank website or call the bank to obtain quotations.)
- Will you possibly need the forward market? Explain.
Accessing Recent Exchange Rates
Go to www.oanda.com. Click on “Currency Tools”, scroll down to “Historical Currency Converters”, and then click on “Currency Trends”. Explain how the main foreign currency for your business has changed over the last month, the last three months, and the last year.
Chapter 4 Running Your Own MNC
Monitoring Movements in the Foreign Currency’s Value:
What key factors likely affect the value of the foreign currency of concern over time?
Chapter 5 Running Your Own MNC
Using Currency Futures and Options:
- How can you use currency futures to hedge the exchange rate risk of your MNC?
- How can you use currency options to hedge the exchange rate risk of your MNC?
Chapter 9 Running Your Own MNC
Monitoring Exchange Rate Trends:
Use a business periodical or the Internet to determine how the value of the foreign currency of concern has changed in each of the last five weeks. Does it appear that there is a trend over the last five weeks? What is the mean percentage change over these weeks? If you believed that the currency’s value would continue following the recent trend, would it appreciate or depreciate in the near future?
Chapter 17 Running Your Own MNC
Capital Structure Decisions:
- Describe the capital structure that you would use to run your business.
- Why might the proportion of equity to be used in your business be limited when the business is first created?