Unit 1 Portfolio: Choose A Company Throughout This Course

Unit 1 Portfoliochoose A Company Throughout This Course You Will Be

Choose a company throughout this course you will be “following” a Multi-National Corporation (MNC) and performing a series of reports, case studies, and activities that intend for you to see how an organization operates on the international level. You may choose from the list of pre-approved MNCs below:

• American International Group
• Capital One
• Coca-Cola
• Royal Dutch Shell
• Wal-Mart

For this assignment, you are to choose an MNC that you want to research throughout the course and submit it for approval. Your topic approval should include the name of the MNC and a description of why the organization is considered an MNC. You should also choose one of the objectives below to perform a minimum 200-word analysis of how the objective applies to your chosen MNC.

Objectives

1. Examine the concept of the current account balance.
2. Employ the current account balance to extend national income accounting to open economies.
3. Apply national income accounting to the interaction of saving, investment, and net exports.
4. Evaluate and discuss the national money markets in which interest rates are determined.
5. Compare how monetary policy and interest rates feed into the foreign exchange market.
6. Discuss the concept of the real exchange rate.
7. Analyze the factors that affect real exchange rates and relative currency prices in the long run.
8. Explain the role of the real exchange rate in determining the aggregate demand for a country's output.
9. Demonstrate causes and effects of balance of payments crises.
10. Evaluate how alternative multilateral systems for pegging exchange rates work.
11. Explain how the goals of internal and external balance motivate economic policymakers in open economies.
12. Summarize how the monetary and fiscal policies of a large country such as the United States are transmitted abroad.
13. Analyze the economic function of international portfolio diversification.
14. Explain factors leading to the explosive recent growth of international financial markets.
15. Analyze problems in the regulation and supervision of international banks and nonbank financial institutions.

Minimum: 200 words

Unit II Portfolio

For your second assignment, you are to perform some preliminary investigation into the MNC you chose by performing a brief survey and creating a portfolio. Start with the history of the organization and provide some brief background into how the organization entered the international stage and how globalization has played a part in the organization’s growth.

When creating the portfolio, you should provide examples of the types of transactions the MNC has made within foreign exchange markets and if there are netting arrangements the organization has made. You should also investigate the purpose of the company’s actions and what this will mean for them in short-term and long-term arrangements with other corporations. For example:

• Did they have to purchase stock of a company?
• Will they owe significant monies due to the foreign exchange deal?
• Will this affect their cash flow?
• Will the appreciation or depreciation of exchange rates affect their transaction?

These are just a few questions to get your mind jogging on this topic. Based upon your readings, you should be able to come up with some questions of your own that are more specific to the company you chose, and the types of transactions they make within the forex market.

This assignment is important to understanding interactions companies make within international markets and how this affects everyone, down to the end-user. Minimum: 2 pages (Double spaced, with Times New Roman 12 pt. font, appropriate APA style writing and citations)

Paper For Above instruction

The focus of this portfolio is to explore the international operations of a chosen multinational corporation (MNC), understanding its role in global markets, and analyzing how its international transactions influence both the company's financial health and the broader economic environment. Selecting a company from the given list—such as Coca-Cola or Wal-Mart—provides a foundation for examining the intricacies of international business strategies, currency exchange mechanisms, and globalization impacts. Through this process, we gain insights into how MNCs navigate foreign exchange markets, manage currency risks, and leverage international financial systems to sustain growth and competitiveness.

Introduction and Choice of MNC

For this analysis, I have selected Coca-Cola, a renowned beverage giant with a significant global footprint. Coca-Cola epitomizes an MNC due to its widespread operational presence across diverse nations, its involvement in international trade of finished products and raw materials, and its strategic adaptation to local markets. The company's origin dates back to 1892, originating in the United States, and it expanded globally through aggressive marketing, strategic partnerships, and acquisitions. Globalization has played a pivotal role in Coca-Cola’s growth, facilitating access to international markets, fostering supply chain efficiencies, and enabling brand recognition worldwide. The company's ability to adapt its product offerings and marketing strategies to regional preferences highlights its integration into the global economy.

Historical Overview and Entry into International Markets

Coca-Cola began its international expansion in the early 20th century, initially entering markets in Latin America and Asia. Post-World War II, the company accelerated its global reach through franchising and direct investments. Notably, the 1980s marked a period of rapid expansion with the opening of new bottling plants and marketing campaigns tailored to local cultures. The company’s entry into emerging markets was driven by the desire to diversify revenue streams and capitalize on increasing disposable incomes. The advent of globalization, characterized by trade liberalization, technological advancements, and international investment flows, substantially contributed to Coca-Cola’s proliferation. The ease of transportation, improved communication, and lowered trade barriers enabled the company to establish distribution networks worldwide.

Foreign Exchange Transactions and Financial Strategies

Coca-Cola engages in numerous foreign exchange transactions, primarily related to procurement of raw materials, production costs, and inter-company transfers across borders. For example, the company might purchase concentrate, packaging materials, or raw ingredients in local currencies, paying suppliers in their native country’s currency. To manage currency risk, Coca-Cola uses netting arrangements, where transactions among subsidiaries are offset to minimize the need for external currency exchanges, reducing transaction costs and exposure to exchange rate fluctuations.

In terms of currency management, Coca-Cola employs hedging strategies such as forward contracts and options to lock in exchange rates for predictable costs and revenues. These strategies protect the company from adverse currency movements that could erode profit margins or inflate costs. For instance, if the local currency depreciates against the US dollar, Coca-Cola’s costs in foreign markets might rise, impacting profitability unless appropriately hedged.

Impacts of Currency Fluctuations and Short/Long-term Implications

Currency fluctuations significantly influence Coca-Cola’s financial outcomes. A depreciation of foreign currencies can increase the cost of imported ingredients, raw materials, or equipment. Conversely, currency appreciation may boost local sales’ profitability when translated back to USD, but could also hurt exports by making products more expensive abroad. The company’s strategic use of currency derivatives aims to stabilize these effects, ensuring consistent margins. In the short term, currency volatility might lead to unpredictable financial results, affecting quarterly earnings and investor confidence. Long-term, Coca-Cola’s diversified global footprint spreads risk, but sustained currency movements can alter market shares, pricing strategies, and investment decisions.

Conclusion

Coca-Cola exemplifies a successful MNC adept at navigating international financial landscapes. Its strategic engagement in foreign exchange markets, utilization of hedging instruments, and adaptation to globalization factors enable sustainable growth and competitiveness. Understanding the company’s foreign exchange transactions offers a window into the complexities multinational corporations face in balancing financial risks with operational opportunities. As globalization continues to evolve, Coca-Cola’s financial management strategies will remain crucial to its capacity to operate efficiently across diverse economic environments.

References

• Baumol, W. J., & Blinder, A. S. (2015). Economics: Principles and Policy (13th ed.). Cengage Learning.
• Bloomberg. (2023). Coca-Cola’s global strategy and currency risk management. Retrieved from https://www.bloomberg.com
• Brealey, R., Myers, S., & Allen, F. (2020). Principles of Corporate Finance (13th ed.). McGraw-Hill Education.
• Coca-Cola Company. (2022). Annual Report 2022. Retrieved from https://www.coca-colacompany.com
• Froot, K. A., & Stein, J. C. (1991). Exchange rate dynamics and foreign exchange risk management. NBER Working Paper No. 3932.
• Gartner, W. B. (2021). Global Business Strategies of Multinational Corporations. Journal of International Business Studies, 52(4), 514-533.
• Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2018). International Economics: Theory and Policy (11th ed.). Pearson.
• Marshall, A. (1890). Principles of Economics. Macmillan.
• Reuters. (2023). Currency hedging strategies of multinational corporations. Retrieved from https://www.reuters.com
• Zhang, G., & Li, Y. (2019). Globalization and international financial markets: Trends and challenges. International Review of Economics & Finance, 61, 361-374.