According to our market forecast study in 2003, demand for office supplies in the UK is declining which forces IFM Supplies plc (IFM) to penetrate new markets in order to achieve its growth and profit objectives. Another reason for exploring overseas markets is the aim to diversify risk across national boundaries making IFM less dependant upon single markets. According to the decision 63/2006, the board of directors is planning to establish foreign subsidiaries during the next few years in Europe, Asia and Africa. This report written by the finance department and directed to the CFO Mr Kamara, gives an overview of financial and non-financial factors (Chapter 2) that have to be considered before finalising the proposal. Potential risks and a brief description of possible external strategies to manage such risks are described in Chapter 3. The impact of export trade will be explored in Chapter 4. Chapter 5 highlights three remedies for IFM’s high foreign debtors.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Important Factors
- Financial Factors
- Non-financial Factors
- Potential Risks and External Strategies
- Currency Risk
- Transaction Exposure
- Translation Exposure
- Economic Exposure
- External Hedging Techniques
- Forward Market Hedge
- Money Market Hedge
- Futures Hedge
- Currency Options Hedge
- Currency Swaps
- Currency Risk
- Impact of Export Trade
- Remedies to Reduce Foreign Debtors
- Export Factoring
- Bills of Exchange
- Letter of Credit
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This report aims to provide a comprehensive analysis of financial and non-financial factors to consider before establishing foreign subsidiaries for IFM Supplies plc (IFM). The report also explores potential risks associated with foreign investments and outlines external hedging techniques for managing such risks. Finally, it examines the impact of export trade and highlights remedies for managing high foreign debtors.
- Financial and Non-financial Factors in Foreign Subsidiary Establishment
- Currency Risk Management Strategies
- Impact of Export Trade on Business Operations
- Managing Foreign Debtors
- Strategic Risk Mitigation and Business Growth
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This chapter introduces the context of IFM Supplies plc's decision to establish foreign subsidiaries due to declining domestic demand and the need for risk diversification. It outlines the report's structure and its purpose of providing an overview of financial and non-financial factors, potential risks, and strategies for managing those risks.
- Important Factors: This chapter delves into both financial and non-financial factors that need to be considered when setting up foreign subsidiaries. It examines issues related to financing options, exchange rates, local borrowing restrictions, and tax implications.
- Potential Risks and External Strategies: This chapter focuses on potential risks associated with foreign investments, particularly currency risk. It discusses transaction exposure, translation exposure, and economic exposure, providing a framework for understanding the different types of currency risk. Additionally, it explores various external hedging techniques, such as forward market hedges, money market hedges, futures hedges, currency options hedges, and currency swaps.
- Impact of Export Trade: This chapter examines the impact of export trade on IFM's business operations. It likely explores the challenges and opportunities presented by exporting goods and services to new markets, potentially including topics like trade finance, payment terms, and international trade regulations.
- Remedies to Reduce Foreign Debtors: This chapter focuses on strategies for mitigating the risk of high foreign debtors. It examines specific methods such as export factoring, bills of exchange, and letters of credit, providing insights into how IFM can manage its credit exposure and improve its cash flow.
Schlüsselwörter (Keywords)
This report focuses on key concepts such as foreign subsidiary establishment, financial and non-financial factors, currency risk, hedging techniques, export trade, foreign debtors, risk mitigation, strategic decision-making, and business growth.
Frequently Asked Questions
Why did IFM Supplies plc decide to expand into foreign markets?
Due to declining demand for office supplies in the UK, the company aimed to penetrate new markets to achieve growth and diversify national risks.
What are the main types of currency risk discussed?
The report identifies three types: transaction exposure, translation exposure, and economic exposure.
What external hedging techniques can manage currency risk?
Techniques include forward market hedges, money market hedges, futures, currency options, and currency swaps.
How can a company reduce the risk of high foreign debtors?
The report suggests using export factoring, bills of exchange, and letters of credit as remedies.
What non-financial factors are important when setting up subsidiaries?
Important factors include local borrowing restrictions, tax implications, and the general socio-political environment of the target country.
- Arbeit zitieren
- Matthias Meier (Autor:in), 2006, Financial and Non-financial Issues and Risks of Setting Up Foreign Subsidiaries and Impact of Export Trade , München, GRIN Verlag, https://www.grin.com/document/57535
