BRILLIANT ANSWER
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MNCProjectPart1.docxDeveloping Your Idea Create an idea for your own MNC to conduct international business. Your idea should be simplified to the degree that you 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. Once you have made your selection, answer the following questions.
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?
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.
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?
3. Will you possibly need the forward market? Explain.
Accessing Recent Exchange Rates
Go to a web site that has historical exchange rate information for the main foreign currency to which your MNC is exposed. Explain how the exchange rate of that foreign currency has changed over the last month, the last three months, and the last year.
Monitoring Movements in the Foreign Currency's Value
1. What key factors likely affect the value of the main foreign currency to which your MNC is exposed over time? [You would need to closely monitor those factors over time when anticipated future exchange rate movements of that currency.]
