Hauffman Trucking Company - Essay Example

Effects of globalization on financial decisions Globalization has greatly influenced the way businesses are managed. With companies diversifying and setting up shop around the world, there are several positive and negative effects of globalization on the financial decisions of organizations. Globalization allows the company to compete internationally thus gaining new resources and consequently more revenue. The company enters new markets and attracts new investors who contribute to the growth of the company.

This allows the organization to grow its capital base and further expand into other markets. The choice of the location is important since, a prime location enables the company reap benefits that would have essentially cost the company lots of money to acquire. For example, access to new and efficient technological innovations (Caprio, 2013).Globalization encourages mergers between organizations thus creating bigger companies. This increases the revenue and the value of the organization. The organization gains a larger market share, a decrease in expenses and experiences a decrease in expenses.

The prime negative effect of globalization is outsourcing. This is the hiring of new staff from outside the organization to the subsidiary companies set up in different countries. This increases the organization`s expenditure in catering for the increased number of employees. Factors that contribute to exchange rate risksThere are five main factors contributing to exchange rate risks. They include the expectations of the economic growth. An economy responds to a growing population in different ways.

If the growth occurs too rapidly, the cost of living will increase due to the unnecessary wages paid. With higher growth comes higher inflation and this increases the exchange rates. On the other hand, deflation, which normally occurs during recession, is a sign of economic stagnation. This lowers the exchange rates. Other factors include, trade balance, central bank actions, employment outlooks and interest rates (Wagner, 2009). ReferencesCaprio, G., Beck, T., Claessens, S., & Schmukler, S. L. (2013). The evidence and impact of financial globalization.

Boston: Academic Press. Wagner, S. M., & Bode, C. (2009). Managing risk and security: The safeguard of long-term success for logistics service providers. Berne: Haupt.