INTRODUCING MULTINATIONAL FINANCIAL MANAGEMENT

DR. SANDEEP KULSHRESTHA

OBJECTIVE OF THE SESSION

To make the students aware of the basics of International Financial Management

To make the students understand the parameters of International Finance

To make the students relate to the topic To kick start an exciting journey in an interesting subject

OLD VERSES NEW

OLD

NEW

GOOD OLD BARTER SYSTEM

SOPHISTICATED INTERNATIONAL TRADE

KEY CHANGES HAPPENED AFTER THE BARTER SYSTEM

Monetary Currencies replaced the barter system Telephone communication

Internet and emails

Easy transfer of Funds Sophisticated technologies

Emergence of large multinational corporations

ANY GUESSES ON WHAT WE SEE IN MULTINATIONAL FINANCIAL MANAGEMENT?

Export and Import trade dynamics
Multinational Corporations are the important players Asia and especially China as emerging economic leader

Import and Export Liberalization

Role of the currency

SOME CHARACTERISTICS OF MULTINATIONAL FINANCIAL MANAGEMENT

Monetary systems influenced primarily by USD, Euro and Pound
Multinational Corporations present in all the leading economies in the world and majority of them are clustered around United States, European Union, China and Japan Other large economies like India, Brazil, Russia also pacing up, with a pie in the trade volumes of big MNCs

Trade blocks and trade restrictions

SOME BASICS OF MONETORY SITUATIONS

In developed countries, because of wealth creation in the economy, the value of currency is high compared to developing and underdeveloped countries In developing countries, value of currency is low because the countries have not been able to create enough wealth (eg: India) In underdeveloped Countries, value of currency is lowest because the countries have not been able to come out of poverty (eg: Afghanistan)

LET US TAKE AN EXAMPLE

In US, Finance Manager in a Medium size company gets an average of $80000 per year (Around 48,00000 per annum) and an average car (say medium size) would cost around $15000 (Around 900000) which is around 18.75% of his annual salary A Finance Manager in India may get a package of Around Rs 12,00000 (let us assume so) and he may buy a WagonR worth Rs 5,50,000, which is around 45% of his salary So the purchasing power is different, hence economies of two countries are different and hence the monitory values differ!

A LITTLE HISTORY OF MULTINATIONAL CORPORATIONS (FROM ORIGINS TO SECOND WORLD WAR)

The earliest historical origins of multinational corporations can be traced to the major colonising and imperialist ventures from Western Europe, notably England and Holland, which began in the 16th century and proceeded for the next several hundred years. During this period, firms such as the British East India Trading Company were formed to promote the trading activities or territorial acquisitions of their home countries in the Far East, Africa, and the Americas.

FROM SECOND WORLD WAR TO NOW

Japanese and European Companies bounced back and started competing with American giants The US economy flourished and a lot of American MNCs started setting up bases in other countries Asian economies like Malaysia, UAE, Thailand opened up new venues for foreign investments 1990s gave new economic giants to the world China, India, Brazil etc Information technology transformed the way businesses work India became a IT superpower

IMPORTANCE OF STUDYING MULTINATIONAL FINANCIAL MANAGEMENT

A window of the world for a Finance Professional Understand how International Financial sector works, specifically with MNCs being dominant players International Trade Financing and its importance for global economy An important subject for Finance Majors in Business schools

INSTANT CLASSWORK

Search on the Internet and find out as to why Rupee was weak in the last month
Can you describe the impact of Blackberrys decision to cut jobs

What is the export situation for India

Thank you
sankulsh@googlemail.com