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International business - Case Study Example

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Foreign exposure has been classified into three types. They are a transaction, translation, and industrial exposure.
Its impact is higher if the comparison…
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International Business in China and India The two countries have faced foreign exchange exposure from the economic transaction they undergo in the global market. Foreign exposure has been classified into three types. They are a transaction, translation, and industrial exposure.
In economic exposure
Its impact is higher if the comparison is performed. The exposure has a direct bearing on the company and affects the value and the quality of the product (Levi 24). As the value of the foreign exchange decreases, it directly affects the value of the organization.
Translation exposure
The type of exposure happens because it contains the translation of the accounts of the home currency. In this mode, the statement reporting books are translated so as the proceeding activity will be taken over by the legal bodies. The importance of this type of translation is it makes sense to the financial statements and to show the position of the company’s date of home currency.
Transaction exposure
It forms the simplest currency exposure that can be understood by the ordinary learners. It pertains the duration of the exposure while taking place and it involves a foreign exchange in the business. It also targets the monetary process for the profit generation.
The management can initiate some strategies to control these exposures. The use of money markets, foreign exchange derivative such as future contracts and forward contracts (Levi 24). The opted strategy is the company carefully selection of production sites with the aim of reducing cost. The businesses that rely on the domestic market vary from because the profit produced by the dependent firms is high.
The policies that have been implemented by the IMF will not work well with the developing countries having a young economy. The policy states that, “Since the debt crisis of 1980’s, the IMF has assumed the role of bailing out countries in case of the financial crisis. (caused in a large part by the currency speculation in the global casino economy). With the emergency loan packages tied to certain conditions, often referred to as structure adjustment policies” (Levi 24). From these policies, IMF was opposed because of some reasons. Among the reason was that from the structured adjustment policies, IMF created an immoral system of modern day colonialism.
The collaboration of IMF with World Bank and WTO, it exposed the economy to inequality and destruction of the environment. Cutting expenditure on health and educations was their advice to countries so that they can pay their debt. When this is performed, elimination of necessary food and putting aside, transportation will automatically devalue the currency of the nation and the economy at large (Levi 24). Another reason was that the IMF served the welfare of the rich countries. Decision-making was affected because they organization was dominated by the rich countries. The voting ability resulted from the amount of money that is paid to the IMF system by the country. The group was accused of being a secretive institution that has no accountability.
Countries are paying taxes to the IMF, but its operation is always contacted in a top secrecy. The loan packages design is not participated in the affected member’s communities. It works with the selected group of bankers and elected ministers who make policies without involving the government agencies.
Works cited
Levi, Maurice D. (2005). International Finance, fourth Edition. New, NY: Routledge. ISBN 978-0-41-530-900-4 Read More
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