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Multinational Corporation proposal

• Cover the following topics – Use proper APA formatting and Peer-Reviewed references.
• Include an introduction, conclusion, and references (again, proper APA format).
• Should be around 2000 words

I. Developing the Idea
Create an idea for a MNC to conduct international business. The idea should be simplified to the degree that one 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. The following questions will help you define the MNC idea:
1. What is the product that you plan to sell?
2. What foreign country do you plan to target?
3. How will you sell the product in that country? (i.e., through a distributor? by mail?)
4. Is there some evidence that consumers in that country would buy this type of product?
5. Do you need to purchase supplies or to hire labor?
6. Will any expenses you incur from producing the product be in dollars or some other currency?

II. Assessing Country Factors That Will Affect the Demand for Your Product
1. Identify the factors that can affect the balance of trade between the United States and the country that you targeted for your business. Explain how each of these factors may affect the demand for your product.
2. Which of these factors is likely to be most important in affecting the demand for your product?
Accessing Trade Data
Determine whether the product you plan to sell is already one of the main exports to that country.
Accessing Import Controls
Review the import controls set by that country’s government. Determine whether your business would be affected by trade regulations.

III. Using the Foreign Exchange Market
1. Explain how you will use the spot market for your business.
2. What bank do you plan to use to exchange the foreign currency received for dollars? What is the bid/ask spread on a recent quotation by that bank? (Call the bank to obtain quotations.)
3. 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.

IV. Monitoring Movements in the Foreign Currency’s Value
What key factors likely affect the value of the foreign currency of concern over time?

V. Using Currency Futures and Options
a. How can you use currency futures to hedge the exchange rate risk of your MNC?
b. How can you use currency options to hedge the exchange rate risk of your MNC?
Accessing Futures Quotes
Go to www.cmegroup.com. Determine the prevailing futures price of the main foreign currency for your business. Go to www.oanda.com and determine the prevailing spot rate. What is the discount or premium of the futures price?

VI. Monitoring Central Bank Intervention
a. How can your business be affected if the Fed attempts to strengthen the dollar in the foreign exchange market?
b. If the Fed decides to weaken the dollar, how will your business be affected?
c. How can indirect central bank intervention affect your business even if there is no impact on exchange rates?
Accessing Central Bank Information
Go to www.bis.org/cbanks.htm to access the Web site link for the central bank in your target country. Determine whether this central bank intervenes to control its currency in the foreign exchange market.

VII. Establishing a Subsidiary in Foreign Country
a. Assuming that the created international business is successful, identify reasons why it may be feasible to establish a small subsidiary in the foreign country rather than continue exporting.
b. Identify the disadvantages associated with establishing a small subsidiary in the foreign country of concern.

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