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International Financial Market

Free Essay Sample «International Financial Market»

Introduction

International financial market involves that financial market across the borders of the countries. Due to the globalization and the integration of the information technology to the business practices, the businesses are diversifying their operations to different parts of the world. As information can be shared freely thanks to the technology, businesses are targeting customers outside their geographical boundaries and thus broadening their market of goods and services. International marketing- concepts are similar all over the world but the environments within which the businesses operate are different in terms of business laws, the cost of doing businesses, advertising and distribution of the goods and the services the firms produce. Thus the firm should diversify its operations to the places where it can operate without much hindrances and thus able to reap the maximum benefits.

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Business firm are diversifying their operations to other place of the world due to various sound reasons such as the availability of the market of the goods thy are producing, the availability of the inputs such as raw materials and cheap labor, to fulfill the orders that would be impossible to satisfy while still in their home countries, diversification of the business risks and to avoid unsuitable situations in the home countries such as restrictive laws that inhibit businesses from achieving their goals and objectives and also the recession or the financial slow down like the one we have ust experienced (Frank, 2007).

Business organization penetrates other markets by applying different methods such as acquisition of the firms in the foreign countries, through franchising, through mergers or even by starting the operations from the ground. In our case, Acme a company in the United States wants to diversify its operations to the European markets and it has an option of acquiring Jel industries which has its headquarters in a country that is a member of European Union or DBC industries whose headquarters are in a country that does not belong to the European Union. I would advice Acme, a United States, to acquire Jel industries which have its headquarters in a country that is part of the European Union due to the advantages that are accrued by operating within the economic blocs such as European Union (Frank, 2007).

Advantages of trading in the European Union

Low cost of doing business

Acme by acquiring Jel industries would ensure a reduction in the costs of doing business since there would be no exchange rate charged to convert currency of one country to other with the European Union. Since Acme would be transacting with individuals and other companies within the economic bloc, the cost of doing business would be low since all countries use a common currency that is Euro hence there is no cost of exchanging the currency (Frank, 2007).

Free movement of capital

In operating within the country that is a member off European Union, there would be no obstacles in the movement of both physical and human capital. Thus Acme would have access to raw materials and finances from any country that is member of the economic bloc.

Low interest rates

By Acme diversifying its operations to a country within the economic block which is the European Union it would be in a position to access finances from other countries within the European Union at Low interest rate.  Since the company has access to funds it is in position to expand its operations at the same time are able to acquire superior technology in the market (Philip, 2006).

Stability

By Acme diversifying its operations to the country that is a member of European Union its operations would not be affected by the fluctuation of the currency due to the stability of the Euro. In case of the recessions or the economic melt down that was experience by many economies of the world, the European central bank due to its massive size will be in position to handle the shocks in the market (Philip, 2006).

Conclusion

In conclusion, the Acme would accrue various benefits by acquiring the company that is in a country that is a member of European Union as compared to the company that is not in a country which is a member of the European Union. Some of the benefits accrued include free movement of resources within the economic bloc, low interest rate, stability of the market and zero exchange rate.

Free Essay Sample «International Financial Market»

 

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