Company From The US To Greenland

Company Is Disneycountry Is From Usacountry Is To Greenlandnuukp

Company is Disney+ , country is from USA , country is to Greenland ( Nuuk ), product/service is Entertainment - Films - Television - Streaming Services , How ( FDI/Export/License ) is FDI/License. Will you get paid in local Currency? Think about it very carefully. Read Ch 11 and respond to the question. Add research sources by hyperlinking the cells where you write your response.

Paper For Above instruction

The international expansion of Disney+ into Greenland, specifically Nuuk, presents a compelling case to analyze the currency implications linked to licensing and Foreign Direct Investment (FDI). As a streaming service originating from the United States, Disney+ must adapt to Greenland's economic and financial landscape, especially when dealing with licensing agreements and revenue receipt mechanisms. This paper explores whether Disney+ will receive payments in local currency or in a different currency, considering the nature of their operation and the relevant financial concepts discussed in Chapter 11 of international business literature.

Disney+ operates under a licensing model when expanding into Greenland, which involves licensing agreements with local distributors or partners. Licensing, as opposed to establishing a wholly owned subsidiary through FDI, often means that the licensee (local distributor) handles the actual delivery of services and collection of revenues. For Disney+, this implies that local partners in Greenland would distribute content and collect subscription fees from Greenlandic consumers. According to Chapter 11, licensing agreements generally lead to payments in the licensor's home currency or the currency agreed upon in the licensing contract.

Given that Disney+ is based in the USA, the primary currency for licensing payments and royalties tends to be the US Dollar (USD). This is because the company's financial records and reporting are primarily maintained in USD, and licensing contracts often specify USD as the payment currency due to the company's geographical origin and transaction preferences. However, the local currency—Greenlandic Kroner (DKK)—may also be involved if the licensing agreement incorporates local currency payments or if local payments are processed through financial institutions that convert revenues into USD.

In practice, revenues collected from Greenlandic users are likely to be received initially in local currency (DKK) because local payment processors and card transactions are typically settled in the local or regional currency due to banking regulations and consumer preferences. These local collections are then converted into USD by financial institutions before being remitted to Disney+. This process exposes Disney+ to currency conversion risk, which is a standard consideration in international licensing agreements when local currencies are involved.

Another consideration is whether Disney+ will prefer to receive payments directly in USD or in DKK. Many multinational corporations prefer to have revenues settled in USD because it simplifies financial management and currency risk management. Nevertheless, local currency payments can facilitate smoother transactions and increased customer satisfaction, which may be a strategic decision made by Disney+ in partnership with local distributors.

Referring to Chapter 11, the currency in which Disney+ gets paid depends on the terms of the licensing agreement, the financial arrangements with local partners, and the currency conversion policies of the involved banks. In cases where no specific currency is stipulated, the default is often USD due to Disney+'s American headquarters. However, with the increasing global use of local currencies in digital transactions, it is plausible that Disney+ could negotiate to receive and hold revenues in DKK. This would mitigate currency risk for Disney+ but might require additional financial management strategies such as hedging (Gopinath et al., 2020).

In conclusion, while Disney+ will most likely receive its revenues from Greenland in USD due to contractual and operational reasons, the initial collection—via local payment platforms or methods—will probably be in DKK. The actual receipt in USD occurs after currency conversion by financial institutions, exposing Disney+ to exchange rate fluctuations. Therefore, although the primary payment for licensing is often stipulated in USD, actual preliminary payments can be in local currency. This hybrid approach balances operational efficiency with financial risk management in international digital licensing strategies.

References

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