Global Business Venture - Essay Example

Financial analysis Global business venture (Whole foods Market) The Canadian whole foods market venture hopes to stick positively in the Canadian customer’s minds. This business venture plan introduces the Canadian whole foods business within the Canada markets and its environs. The global venture, which will begin in Canada, will start with different studies and reports. The venture has a proven potential of making massive profits (Petusevsky, 2002). However, the business venture would need to ensure that all its investments are worth its risks that the Canadian markets bring. With a population of over 35 million and still growing, Canada markets remain a perfect place to start up the business venture. The startup of the whole food market venture in Canada will involve different foods supermarket chains that specialize in both the organic foods and natural foods. This venture aims at expanding in to the global markets within three years. The Canadian whole food will generally operate in the Canadian markets in one segment thus the organic foods supermarkets and the natural foods supermarket. The venture will operate in different stores across the Canada markets. The stores will be averagely 38,000 square feet depending with the location of the venture (Petusevsky, 2002). The venture will not be limited to grocery, produce and floral, bakery, coffee, tea, nutritional supplements, prepared foods and catering, whole fields and whole family of brands (Petusevsky, 2002). Financial Overview of the venture In a spurn of one year, the Canadian Whole Foods business venture will be projected to grow in terms of its revenues and the reduction of sales percentage devoted to the total costs of sold goods. Company’s store development activities Store Opening during fiscal year 2014 Properties tendered Total Leases signed No. of Stores (Relocations) No. of relocations New Areas Average Store Size 10 5 5 53,500 6 2 1 40,600 16 7 6 Costs 2014 Direct store expenses Pre-Opening Expenses General Expenses Administrative Expenses Relocation Total Expenses $ 9,005, 700 $ 38,400 270,000 100,00 11,290 $ 9,4253 870 Assets 2014 Cash and Cash equivalents Restricted Cash Short term investments Merchandise inventories Accounts receivable Total Current assets for the venture $ 130,660 $ 80,090 $ 102,900 $ 300,000 $ 102,000 $ 715,650 Dealing with foreign exchange risk for the global venture Opening the business venture in Canada will most definitely be a challenging prospect with issues ranging to exchange risks and settling in the new market ventures. In most cases, issues to do with financial risks tend to affect the business if not well taken care of (Rush, 2012). Foreign exchange risks in this case will exist when the financial transaction will be denominated in the currency, which is not part of the base currency, and in this case, the business venture. Alternatively, the foreign exchange risk will exist when the foreign lesser of the global venture maintains financial statements that is in the currency which is not part of the reporting currency and in this case the consolidated entity. For the case of the Canada whole foods venture, which operates abroad, there is high possibility that it would lose too much money even if the global venture is not prepared to crystalize its assets. Some of the common types of challenges that would most likely affect the venture due to foreign exchange risk include; translation exposure, economic exposure, and transaction exposure (Rush, 2012). Dealing with foreign risk for this particular global venture would require various aspects. The two most common approaches on how the business venture will handle the foreign exchange risks is through netting and hedging. In this case, hedging is the aspect where the business venture will sell or buy a forward exchange contract, which will cover any organization receivables or liabilities, which will be dominated in the foreign Canada currency (Rush, 2012). In this case, the Canada Whole food venture will use the Interest Rate Swap to deal with this situation. Alternatively, the venture will use the aspect of netting to deal with its foreign exchange rate risks. In this case, netting will involve the maintenance of equal levels of receivables that are foreign against foreign payables (Rush, 2012). By the start of this venture in Canada, the net position will be zero whereas the exchange rate risk will be avoided. Other options at which the business venture will use to deal with the foreign exchange risk are hedges and various derivatives types. Financing sources for the business venture Deciding to engage in this type of global venture will most likely require some kind of financials and capital. The Canadian Whole Food venture will primarily be engaged in both import and export financing something, which the international department of the venture’s bank handles. Being a new business venture in to the international market, the organization will most definitely conduct its business via export and import transactions; however, there are various ways in, which the venture will attain its financials to conduct its business operations (Minniti, 2007). The three ways include; letter of credit, open account transactions and documentary draft. Alternatively, the business venture will seek its finances through venture capital financing and syndicate bank loans from Canada Banks. Having located the Canada markets as a perfect place to launch its business operations, the best institutions to finance the business venture are the Canada Banks. Loans from Canada banks will most definitely come in handy in this case. Overseas private Investment Corporation will also come in handy in financing the global business venture (Minniti, 2007). Centralized versus decentralized organization With all said and done, the business venture would most likely need an effective organizational structure to run the business operations (Ireland, 2008). The management of the business venture will be responsible for the creation of an effective organizational structure, which in this case, it would be an extension of the venture’s owner management style, personality and character. In doing that, there are two systems of management that would be put under consideration that is the centralized or the decentralized systems (Ireland, 2008). Being a new and small venture in the market, the business venture will operate under a centralized organizational structure where the owner of the business venture will make most of the organizational decisions. The owner will also provide the direction at which the organization will operate. However, with the growth of the business venture in future, the business venture will switch this system to the decentralized organizational structure where a range of individuals will be responsible for coming up with business decisions. Chain of command in the venture Business Owner Manager Superintendent Supervisor Marketing/Financials References Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2008). Understanding business strategy: Concepts and cases. Mason, OH: South-Western Cengage Learning. Minniti, M. (2007). Entrepreneurship: The engine of growth. Westport, Conn: Praeger Publishers. Petusevsky, S. (2002). The Whole Foods Market cookbook: A guide to natural foods with 350 recipes. New York: Clarkson Potter. Rush, John. (2012). Foreign Exchange Risk Management. John Wiley & Sons Inc. Read More