FINANCE FOR INTERNATIONAL BUSINESS FINAL ASSIGNMENT

Tài chính trong kinh doanh quốc tế là một trong những nghiệp vụ đỉnh cao của doanh nghiệp khi đầu tư, kinh doanh trên toàn cầu. Trong tài liệu này, sẽ giúp chúng ta có cách nhìn bao quát về tác động của tỷ giá hối đoái lên doanh thu, lợi nhuận của doanh nghiệp. Cách áp dụng các công cụ bảo hiểm tỷ giá để giảmhạn chế sự biến động của tỷ giá

COURSE TITLE: FINANCE FOR INTERNATIONAL BUSINESS Students: ID: Lecturer: UBIS INTAKE 5: 2013– 2014 COURSE CODE: 1|Page FIN 604 COURSE CODE: MGT 601 APRIL 2014 Optimal financial strategy for import shipments of company ANL Submitted by: Viet Nam April 09, 2020 2|Page TABLE OF CONTENT Introduction Business overview Country overview .4 Scope of import Macro – financial issues and measure Foreign exchange exposures 10 Conclusion 11 References 12 LIST OF FIGURES INTRODUCTION Due to competitive pressures, ANL Company was founded with the mission to provide a method of selling new, with a new customer segment This is a segment has huge potential, expected revenue of about $ 66 million in years The company intends to import large quantities of goods from China to serve the business However, the issue of concern is the 3|Page risk of this market: policy risk, exchange rate risk, quality risk, risks territorial disputes with Vietnam How does? Please keep track the next section to more clearly BUSINESS OVERVIEW After months of research and consideration, getting the advice from experts in consumer installment payment, the CEO has proposed a new project, expanding the company platform ANP That project focuses on telecommunications business installment payment, customer segments workers in the industrial zone, products is on average, approximately equal to one month's income workers Since this is a new field, to minimize the risk of brand, CEO proposed to establish a new company for this project, named ANL Company, 100% of the equity of ANP Who is ANP? ANP Company is a 3rd largest company in Vietnam in terms of manufacturing, distribution and sales in the field of telecommunications: mobile phone, tablet, computer The market has been a fierce competition by the formidable opponents as Nguyen Kim, Mobile World, FPT store (top five of Viet Nam on sale details mobile phone) In particular, the new trend now is installment sales The opponents were quick links with the company for consumer installment loans leading in Vietnam such as PPF, ACS, SGVF (top three on installment sale in Viet Nam) Facing the risk of losing market share, BOD has requested CEO to study business strategies that best suited for ANP The challenges that CEOs face: - The strategy must be consistent with the new consumer trends globally installment - sales It will become a go later if also linked with the giants of consumer installment PPF, - ACS and HD Finance The company is losing market share Must find a new way of sales, new customer segments and less cost, both efficiency and potentially a global reach Full name of new company: ANL Trading and Service Joint Stock Company Location (place of operation): Long Hau Industrial zone, Can Giuoc district, Long An province Target customers are 30,000 workers in Long Hau Industrial zone, and the owner has available facilities, the commercial advantages, should be the first step, office business located here Vision: Consumers supply solution for workers in industrial zone In year next, supply at 50 industrial Zone, with 100,000 customers 4|Page Mission: create the best value for myself How to perform: to give society the highest satisfaction with the goods, services, solutions and by using quality of service Market segmentation: step 1, about years, focus to workers in Long Hau industrial zone, after that, if the operator successfully can expand into the supply chain to serve its own customers - workers, with more than 200 point nationwide (according (Trang, 2013), to June 2013, Vietnam has more than 332 industrial parks and economic zones of border, coastal, not including industrial clusters) and can apply the same model to countries outside Vietnam Revenue estimated of the value chain is about VND 1,400 billion # USD 66.3 million COUNTRY OVERVIEW Strategy product of ANL only supply goods with price corresponds to the average income of workers, ie, currently around VND 2.5 - million With mobile products, price as above but still meet the trend of used goods market (smart phones, strong configuration, watch online music, web surfing, social networking … (Cam, 2013)) This is a major concern of CEO finally the Chinese market is a best choice to import But the problem is that the risks and advantages to choosing imported goods from China is what? Figure 1: PEST analysis about China Item Policy Content - Communist Party China leaders throughout Opportunity - Stabilization policies, laws - There have been laws: Foreign - Convenient in Economic 5|Page Trade Law of The People's Republic of China (China, 2006) - High tax rates (VAT: 13% -17% consumption tax: 1% -40%) - 2nd World GDP: 8.22 trillion (World Bank, 2013) - Inflation rate month gap deposits of VND against USD is 7% / year Figure 3: Deposit interest rate table in VND and USD Date 04/07/2014 Sources: HD Bank Based on the forward rate expressions listed, we can see the spot rate VND/USD is 21,110.00, 3-month forward rate is 21,237.00 => ie months later, USD appreciated 0.6% against the VND As usual Viet Nam, to forward purchase contract, ANL must deposit (non interest) 3% on the total value of the forward contract, # U.S $ 15,000.00, # VND 316,650,000.00 ANL losses due to non-interest margin is VND 5,937,188 #0.056% (=5,937,188/(500,000*21,110)) Total cost if the 3-month forward contract is 0.656% Figure 4: Forward price VND/USD date 04/07/2014 Sources: Techcombank 9|Page Thus, the optimal financing strategy for the L/C is: Saving deposit VND, the 3-month period, the due date is the date of payment L/C (07/15/2014) Purchase forward contract of USD 3-month period, the date the contract is the date of payment L/C This business strategy known as covered interest arbitrage (CIA) It is stated as follows: general principles, the spot rate and the forward rate corresponding to equilibrium interest rate of that currency If for any reason that it is not balanced, then we can business and make profits, business is called covered interest arbitrage (H.Moffett, 2004, pp 6-23) Calculation of efficiency: If the CIA does not apply, ie buy dollars spot at the time of signing the contract, savings deposits 3-month period, the time limit for payment on the day of payment L/C, known as Option 1: Value 500,000 Spot 21,100 VND/USD VND/US 21,237 D 0.50% year 7.50% year month forward month Interest rate USD Interest rate VND term Option Option 0.04% month 0.63% month PV 499,375.52 USD PV 10,421,866,152.7 VND Costs margin for forward contract Efficacy: USD (109,020,141.16 ) 5,937,18 Option save more than option # VND 109 million FOREIGN EXCHANGE EXPOSURES 10 | P a g e 10,536,823,481.9 VND Figure 5: Exchange rate of VND/USD year later Sources: Vietnam's central bank As the chart shows, in the past years, from April/2009 to April/2014, the VND/USD has increased from 16,938 to 21,036, equivalent, 24.19% However, the exchange rate from 03/03/2011 to present time quite stable, varying from 20.685 to 21,036, # 1.7% Thus, for more than years from 3/2011 to 4/2014 rates increased only 1.7%, which is a positive signal to businesses wishing to pay in USD According (Hai, 2014), rate in 2014 is expected to be stable, not fluctuating more than 2% The information to support this claim is: foreign exchange reserves of Vietnam reached $ 32 billion # 12 weeks of imports, the largest ever; FDI, FII, ODA continues to increase; is the 2nd consecutive year trade surplus; inflation was controlled at one of number Analyzing historical and trends show that the VND / USD in 2004 is quite stable, however to ensure risk, ANL need to implement hedging by buying forward contracts of USD month implementation date contract on the day of payment L / C Buy month forward exchange rate is listed as 21.237 VND / USD Contract performance to date, ANL will be buying dollars for the signed Also need to say more about forward contract, according (Eakins, 2012, p 591): “Interestrate forward contracts involve the future sale or purchase of a debt instrument and have several dimensions: (1) specification of the actual debt instrument that will be delivered at a future date, (2) amount of the debt instrument to be delivered, (3) price (interest rate) on the debt instrument when it is delivered, and (4) date on which delivery will take place” And, the advantage of forward contracts is that they can be as flexible as the parties involved want them to be This means that an institution may be able to hedge completely the interestrate risk for the exact security it is holding in its portfolio CONCLUSION 11 | P a g e The macroeconomic policies of Vietnam began promoting positive effect The basic indicators such as inflation, interest rate, balance of payments, foreign exchange reserves are stable and good development trend Exchange rate of VND / USD steady over the past years, this trend will continue at least up to 2014 Forward exchange rate and the spot rate is the difference, enabling business CIA To ensure the financial risk for ANL in the payment L/C above while creating the highest financial performance, financial strategy is proposed: Purchase forward contract for 3-month USD Business the interest differential (CIA) REFERENCES Cam, N (2013, 11 25) Smartphone bình dân xu hướng tất yếu Retrieved 04 03, 2014, from VnEconomy: http://vneconomy.vn/20131125120030830P0C16/smartphone-binh-dan-se-laxu-huong-tat-yeu.htm China, t E (2006, 04 17) Foreign Trade Law of The People's Republic of China Retrieved 04 06, 2014, from chinadaily.com.cn: http://www.chinadaily.com.cn/bizchina/200604/17/content_569437_6.htm Creative Commons Attribution-ShareAlike 3.0 License (2011) THE TRANS-PACIFIC PARTNERSHIP AGREEMENT Retrieved 04 06, 2014, from tppinfo: http://tppinfo.org/ 12 | P a g e Credit Research Foundation (Copyright 1999) Understanding and Using Letters of Credit, Part II Retrieved 04 06, 2014, from crfonline.org: http://www.crfonline.org/orc/cro/cro-9-2.html Eakins, F S (2012) Financial market and Institutions seventh edition Boston: Pearson Education, Inc., H.Moffett, D K (2004) International Parity Conditions In Multinational Business Finance (pp 6-23) Pearson Addison-Wesley Hai, H (2014, 01 17) USD / VND in 2014 is forecast up to 21,456 dong Retrieved 04 06, 2014, from BizLive: http://bizlive.vn/vang-tien/ty-gia-usdvnd-2014-duoc-du-bao-len-toi-21456-dong74709.html Israel Ministry of Industry, Trade and Labor (Updated November 2010 (original May 2009)) Market Analysis Report: China’s Electronics Industry export.gov.il, Morrison, W M (February 3, 2014) China’s Economic Rise: History, Trends, Congressional research service, Trang, N (2013, june 25) Các khu công nghiệp, khu kinh tế hút 110 tỷ USD Retrieved march 18, 2014, from VNeconomy: http://vneconomy.vn/20130625025647807P0C9920/cac-khu-congnghiep-khu-kinh-te-hut-hon-110-ty-usd.htm World Bank (2013, 12 17) World Development Indicators database Retrieved 04 06, 2014, from http://databank.worldbank.org/: http://databank.worldbank.org/data/download/GDP.pdf 13 | P a g e ... ensure the financial risk for ANL in the payment L/C above while creating the highest financial performance, financial strategy is proposed: Purchase forward contract for 3-month USD Business... for CNBC, and climate bill signing, delivery of documents for delivery ANL Step 9: HD Bank reported on account the CNBC Step 10: CNBC reported on account the Huawei This approach is safe in international. .. Total cost if the 3-month forward contract is 0.656% Figure 4: Forward price VND/USD date 04/07/2014 Sources: Techcombank 9|Page Thus, the optimal financing strategy for the L/C is: Saving deposit