Q1. A capital market is a financial market in which a long-term debt (for more than a year), or equity-backed securities are traded, i.e. bought and sold. The financial instruments which are used in the capital market or loans in the capital market include majorly stock and bonds. In addition, to these there are some other instruments also such as treasury bills, foreign exchange, fixed deposits, debentures, involving debt and equity securities. The purpose of the capital market is that it brings together the investors who hold the capital, and companies seeking capital with the use of equity and debt instruments. These instruments are also termed as securities and the market is referred to as securities market. It has been known that investors can earn good amount by investing in stocks and bonds, however the risks of investing in these instruments is considered higher than any financial instruments in the capital market (Christensen, Hail & Leuz, 2016).
Q2. A borrower can hedge against the unpredictable movements in the exchange rates through entering into the forward contract in order to purchase the required amount of currency which has been borrowed at the exchange rate determined pre-hand, when the loan becomes due. It has been found that this raises the costs of borrower’s cost of capital; however the insurance limits the risk of insurance involved in cases of these transactions. Risks are the aspect of every business and inherent in every trade, but if the risk is measurable, it can be easily managed. In this context it can be stated that currency risks is found to be the crucial risk and significant for the businesses that carry out indigenous productions and their exports are minimal (Bluhm, Overbeck & Wagner, 2016).
Q3. Core competence refers to the concept in the management theory in context to the business organisations which includes the combination of the multiple resources and skills which helps in distinguishing a firm from others in the marketplace. It is considered as an essential concept in every organisation as it defines the strengths and forms the base or foundations of the company’s competitiveness in the industry. For an example, the core competency or these skills may include precision mechanics, fine optics, and micro-electronics.
Core competency of any organisation results from a specific skill or production technique which delivers additional values to the customers as compared to other businesses. In other words, a core competence or competency is for an example, ant specialised skill or knowledge required in carrying out operations. The advantage of core competency to a business can be observed in many aspects, as it helps the business to build and raise the values of customers and other stakeholders (West, Ford & Ibrahim, 2015).
Q4. Firms operating in the global marketplace face two types of competitive pressures which affect and limit their abilities to realize location economies, and experience the effects, and transferring skills within the firm. These two competitive pressures include pressures for cost reductions, and the pressures to become locally responsive. Pressures for the cost reductions force the business firms to lower their unit costs for the products. Whereas, pressures to be locally responsive includes the need for the firm to adapt according to the market, to meet local demands in each market. However, the strategy of local responsiveness often increases the costs of the firm. Pressures for the firms in local responsiveness arise from the differences in consumer taste or preferences and the differences in the infrastructure or other traditional practices. The competitive pressure of cost reduction is found in the cases where the major competitors are based in the low cost locations. Dealing with these two pressures is challenging for the firms operating in the global marketplace (Meyer et al., 2018).
Q5. In a meeting with the superiors to discuss about entering into a foreign market, thus analysing the joint venture prospect it has been found that joint venture has many disadvantage to start for any new business opportunity. Joint venture refers to the commercial enterprise where two or more companies join their forces, in simple terms it is cooperative enterprise formed by two or more business entities with the aim of completing any specific project or any other business activity. BMW and Toyota is one example of the joint venture business. The disadvantage may include the unlimited liability of the partners for the debts and obligations of the company (Yan & Luo, 2016). The other aspects which may be referred to as other disadvantages include taxes, conflicts, and considerations. Thus, considering the disadvantages of the joint venture business it can be stated that I would not suggest my boss about not entering into joint venture.
Q6. A wholly owned subsidiary is the company under the complete control of other company, the company owning the subsidiary is called as parent company. The parent company holds of all the common stocks of the subsidiary. Entering into a wholly owned subsidiary will be beneficial to the firm to reduce the risks of control over their competence. In addition, a firm expanding to a wholly owned subsidiary exerts a tight control over their business operations in multiple countries (White et al., 2014).
Advantages can be observed in a number of ways as the strategy offers an opportunity for the businesses to manage and diversify risks. Diversification act as an advantage for the company as it may occurs that one business may not succeed well, and others may run efficiently. The strategy has some of the negative aspects also, as parent company pays higher for the assets, especially when the companies bidding on the same business (Rothaermel, 2015).
Q7. The product factors of the production refer to the land, labour, capital, enterprise, which are the basic factors or resources in producing a product. These factors tend to affect the location of production, as an example availability of raw materials will determine where to locate the production activities. It means, it can be stated that nearness to the sources of raw material is considered important for every business. The other factors determining location includes, availability of infrastructure facilities, availability of skilled or talented workforce, proximity to market and other valuable resources (Kusumastuti, van Donk & Teunter, 2016).
For an example, in case of the sugar factors suitable for the location of profitable production of refined sugar will include selection of appropriate region which will provide raw materials, easy transportation, availability of power, fuel or gas, water supply must be adequate, disposal facility for waste products and availability of efficient labour. These are the factors which will help in determining the location of refined sugar production (Chen et al., 2015).
Q8. Push strategy is referred to as creating demands for the product or service through promotion. It may include offering discounts to retailers and the trade promotions, and the push strategy also uses appealing package design and maintaining good image for the reliability, value, or style. Push strategy can be observed in the cases of sales of mobile phones, where the manufacturers or the producers offer discounts on their mobiles phones so as to attract the customers towards making purchase. Push promotional strategies focus on the selling directly to the customers, which can be done through point of sale displays, and directly approaching to the customers.
Pull promotional strategy includes the use of advertising to build and increase the demands of the customers for a product or service. The most common example of the pull strategy can be observed for the advertisements of the toys of children which attract them towards purchasing the product. Thus, to compare and contrast between these two strategies, it has been analysed that marketing lies in determining the way how consumers are approached (Verbeke & Asmussen, 2016).
References
Bluhm, C., Overbeck, L. & Wagner, C. (2016). Introduction to credit risk modelling. United States: CRC.
Chen, L. Q., Cheung, L. S., Feng, L., Tanner, W. & Frommer, W. B. (2015). Transport of sugars. Annual Review of Biochemistry, 84, 865-894.
Christensen, H. B., Hail, L. & Leuz, C. (2016). Capital-market effects of securities regulation: Prior conditions, implementation, and enforcement. The Review of Financial Studies, 29(11), 2885-2924.
Kusumastuti, R. D., van Donk, D. P. & Teunter, R. (2016). Crop-related harvesting and processing planning: a review. International Journal of Production Economics, 174, 76-92.
Meyer, K. E., Ding, Y., Li, J. & Zhang, H. (2018). Overcoming distrust: How state-owned enterprises adapt their foreign entries to institutional pressures abroad. In State-Owned Multinationals (pp. 211-251). United Kingdom: Palgrave Macmillan.
Rothaermel, F. T. (2015). Strategic management. United States: McGraw-Hill Education.
Verbeke, A. & Asmussen, C. G. (2016). Global, local, or regional? The locus of MNE strategies. Journal of Management Studies, 53(6), 1051-1075.
West, D. C., Ford, J. & Ibrahim, E. (2015). Strategic marketing: creating competitive advantage. United Kingdom: Oxford University Press.
White III, G. O., Hemphill, T. A., Joplin, J. R. & Marsh, L. A. (2014). Wholly owned foreign subsidiary relation-based strategies in volatile environments. International Business Review, 23(1), 303-312.
Yan, A. & Luo, Y. (2016). International Joint Ventures: Theory and Practice: Theory and Practice. United Kingdom: Routledge.
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