Global Business Organizations.docx

Global Business Organizations.docx

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GlobalBusinessOrganizations

GlobalBusinessOrganizations

Contents

1.Introduction

2.Comparethevariousmethodsusedtodecidethefinancialplanningandcontrollingauthoritygiventosubsidiaries

3.Themostcommonmethodsusedbyglobalbusinessorganizationstomanageglobalcashflows

4.Themethodsusedbyglobalbusinessorganizationstoguardagainstfinanciallossesassociatedwithexchangeraterisks

5.Howglobalbusinessorganizationscarryoutthecapitalexpenditureanalysisandbudgetingneededformajorinvestments

6.Thecurrentinternationalfinancialstrategiesusedbyglobalbusinessorganizations

7.Conclusion

8.References

Introduction

Inthisreport,wearerequiredtocomparethevariousmethodsusedtodecidethefinancialplanningandcontrollingauthoritygiventosubsidiaries.However,wealsoidentifythemostcommonmethodsusedbyglobalbusinessorganizationstomanageglobalcashflows.Then,weevaluatethemethodsusedbyglobalbusinessorganizationstoguardagainstfinanciallossesassociatedwithexchangeraterisks.However,weidentifyhowglobalbusinessorganizationscarryoutthecapitalexpenditureanalysisandbudgetingneededformajorinvestments.Atlast,wealsoevaluatecurrentinternationalfinancialstrategiesusedbyglobalbusinessorganizations.

Comparethevariousmethodsusedtodecidethefinancialplanningandcontrollingauthoritygiventosubsidiaries

Asuccessfulbusinessgeneratesenoughcashtocovercostsandmakeaprofit.Mostbusinessesareexpectedtohavetoaplanoutliningwhentheyarelikelytobecomeprofitable.Therearethreemethodstodecidethefinancialplanningandcontrollingauthoritygiventosubsidiaries,suchasapportionment,SBUstatus,autonomousunits.

Apportionmentmeanstheywouldapportiontheirrights.SBUisstandforstrategicbusinessunits.Underthiskindofmethod,branch’scompositionanddevelopmentactivitiesisapartofwholecompany’sstrategy.Autonomousunitsmeanthattheycouldarrangetheirfinancialplanningandcontrollingaccordingtotheapportionedmission.

Decentralizationistheprocessofdispersingdecision-makingparentofgroupclosertothesubsidiary.However,theforeignmanagermaybeexpectedtooperateandthinkasthestockholdersoftheparentcorporationwouldwantobtaingoalsandobjectives,sotheforeignmanagermakesdecisionsaimedatincreasingtheparent'sdomesticcurrencyvalueofthesubsidiary.Thecontrolmechanisminsuchcorporationsistoevaluateforeignmanagersbasedontheirabilitytoincreasethatvalue.What’smore,financialmanagersattheparentmakemostofthedecisions.Theychoosetomovefundsamongdivisionsbasedonasystemwideviewratherthanwhatisbestforasinglesubsidiary.Moreover,ahighlycentralizedsystemwouldhaveforeignmanagersevaluatedontheirabilitytomeetgoalsestablishedbytheparentforkeyvariableslikesalesorlaborcosts.

InthecaseofMcDonald's,theyshouldtakethemethodofdecentralizedmanagement.Asaworldfamouscompany,theirsubsidiariesmayhaveamaturefinancialplanningsystemandgettheabilitytosolvetheproblems.Underthemethodofdecentralizedmanagement,theirstaffcouldpromotetheirpersonaladvantages,reflectthepersonalvaluesandimprovestaffs’creativitytothechangingmarket.

InthecaseofCoca-Cola,theymayconsidertoadoptthemethodofcentralizedmanagement.Asafamousmanufacturecompany,itneedscentralizedfinancialplanningstrategiesandreinforcesthecontrollingwhichcanimprovetheefficiencyofthecompanybusinessoperation.However,centralizedmanagementcouldunifiesstaffs’actionandmakethestrictmanagementontheirstafftopreventthedangeroussituations.

Themostcommonmethodsusedbyglobalbusinessorganizationstomanageglobalcashflows

Cashflowmanagementistheprocessofmonitoring,analyzing,andadjustingyourbusiness'cashflows.Cashmanagementisabroadtermthatreferstothecollection,concentration,anddisbursementofcash.However,therearethreemethodstomanageglobalcashflowswhichareusedbyglobalbusinessorganizations,suchasflowbetweensubsidiaries,transferpricingandfundingpositioning.What’smore,themultinationalcashmanagementinvolvescentralizedmanagement.Ontheotherhand,effectivenettingrequiresaccurateandtimelyreportingoftransactionsbyalldivisionsofthecorporation,theparentfinancialmanagersdeterminethenetpayerorreceiverpositionofeachsubsidiaryfortheweeklynetting,nettingcouldstilloccurbyleadingorlaggingcurrencyflows.

Theflowbetweensubsidiariesisthecashflowsbetweenparentcompaniesandsubsidiariesviatransferringinintra-corporation.Beyondthetransferofcash,thecorporationwillhavegoodsandservicesandresourcesmovingbetweensubsidiaries.Forexample,Coca-Cola’ssubsidiaryin