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The Electrolux Company is expanding their trading links with nine countries across world. The gap analysis is applied for the assessment of economic exposure on the Electrolux Company. The company is equipped with operational, economic, and strategic risks. The risks framework should be determined for the management of currency risks, currency hedging risks, and others. The company is looking forward for applying gap analysis in the course of action plan of liquidity gap analysis, interest rate gap analysis, and foreign exchange gap analysis. The economic exposure of the Electrolux Company can be identified by applying following principles:
The Transaction and operation procedures are implemented by the organization to measure the effects of variation in the foreign exchange prices of the product on the financial condition of the organization. The gain or loss of the company can be measured with the analysis of the operating cash flow. The involvement of the foreign exchange currency and the exposure of international trading program helps in increasing the financial condition of the enterprise. The financial obligations can be settled down with the use of foreign currency in purchasing and sailing of Electrolux product globally across the world. The lending and burrowing of funds can be effectively done by using foreign currency. The contractual cash flow helps in establishing liabilities associated with the company. The financial obligations can be settled down by intimating the operating procedures for managing gain and losses associated with the purchasing and sailing of Electrolux products across the world.
The implementation of the gap analysis procedure helps in increasing the operational income, capital turnover rate, and return on net asset of the Electrolux Company which can be predicted from the graph below:
The Electrolux is having joint venture with 29 countries for establishing their brand supply throughout the world. The Electrolux Company works on establishing operating exposure with the use of foreign currency. The following steps should be followed by the company to enhance its financial condition of the enterprise:
The following diagram shows the area of concern which helps in satisfying the customer demands which in turn result in the financial stiffness of the company.
The Electrolux Company should deploy foreign exchange investment in his working curriculum for exploring the financial condition of the enterprise. The company is expanding their joint venture with 29 countries for subsidizing their product availability. The geographic diversification helps in increasing the sale return value through the accumulation of foreign currency. The return on investment (ROI) is increased by utilizing purchasing and sailing of product in different nation. The foreign exchange policies should be signed for reducing the business risk, political risk, and foreign exchange risks associated with the foreign government. The company should invest for proposing their supply of product brand to other nation. Business investment with the foreign investment plan helps in making the company prosperity globally (Panteleeva and Oyner, 2013). The company should manage joint venture with the other countries for exploring the product supply in different nation. Organization of economic co-operation and Development (OCED) should indulge in the company policy for making foreign based policies for the Electrolux organization. The foreign direct investment program is organized for managing supply and demand of Electrolux Company within other nation for increasing the prosperity of the country with other nations. The CEO of Electrolux company should approve the budget for indulging foreign policies in the working platform of the company. The global marketing of the company can be increased with the development plan of foreign investment with other countries. The required action plan should be developed by the company for managing global risk, business risk, and foreign risks associated with the company.
Political risks and countries obligation should be managed before signing foreign exchange policies with other nations:
Digital Transformation helps in exploring the brand awareness program in the global market. Electrolux focuses on amending the procedure related to the updating of the cost management program, initializing digital transformation, and operational excellence program. There are technological risks associated with the acceptance and innovation in the working platform of enterprise.
The management of supply and demand of the product across global world is difficult to handle. The disruption can occur in satisfying the demand of the global customer.
The expansion of the Electrolux enterprise with the deployment of foreign exchange policies is equipped with political risks which are associated with the proposed project. The prediction of the stock price is the major problem area for the enterprise. The accuracy in the stock price helps in managing good relation with other nation. The Electrolux organizes revolution in their product according to the global trends. The innovation in the product increases the price rate of the product. The increase in price of the stock raises the concern of political risk due to the association of the foreign market. The decision making capability of the owner get adversely affected due to the involvement of political issues which exist with the foreign investment (OECD and World Bank Group, 2014). The agreement with the foreign government for the supply of Electrolux product into their nation helps in increasing the accessing to the global market, advancement in the technology with the inclusion of new features according to the requirement of the user worldwide, and improving the financial performance of the nation. The strategic planned developed for the organization growth should include the procedures of FDI so that political risks which are associated with the government policies should be resolved. The long term sustainability of the company can be achieved by maximizing the share of capital investment in foreign policies. The international agreement with the foreign government should be signed for managing the environment and political risks associated with the export and import of Electrolux product with the other nation. The transparency with the agreement in developing foreign relationship helps in analysing the benefits of FDI in the growth of the Electrolux Company. The decision should be taken for signing policies and share in the global world of business. The Electrolux works on expanding its profitability ratio by deploying following scheme plan (Electrolux, 2017):
Global value chain are vulnerable to handle the exogenous shocks because the global value chain helps in analysing the risks associated with the functional program of the enterprise. The vulnerability associate with the external shock can be reviewed for evaluating the risks in managing the material availability on the demand from foreign market. The global value chain focuses on structural framework to handle relationship for the management of Electrolux productivity in the foreign market. The technological advancement in the product design help in resolving the issues related with the external shocks to explore product features in the competition of global market. The trading barrier which exists with the export of the Electrolux product can be resolved by signing agreement with the foreign government. The strategic planned developed for the organization growth should include the procedures of FDI so that political risks which are associated with the government policies should be resolved. The following process should be undertaken by the Electrolux company to resolve their disruption in the working platform.
The Electrolux Company is having strong risks management department for accessing potential disruption associated with the company policies structure. There are various risks associated for managing the functional program of the enterprise such as developing agreement with the foreign government, strategic risks associated with the operational program of the enterprise, addition of new features and innovation in the product according to the demand of global customers, issues related with market analysis, and political risks (OECD Council, 2016).
The Company can alleviate these risks by indulging proactively risks mitigation strategies for the company to raise output of the organization. The agreement should be signed with the foreign and domestic government to resolve political and environmental issues, operational procedures should be equipped with the addition of new features and innovation in the product development program, increasing satisfaction level of the customers helps in increasing the financial performance of the enterprise. The implementation of new administration program for the organization functionality on the global basis helps in analysing the quality of service provided to the customer worldwide. The operational risk plan of the enterprise should be evaluated for removing the flaws and obscure from it. The risks review team should be organized for managing the crisis and issues with regard to the operational procedure of the enterprise (Koboekae, 2014). The Contract should be signed for the effective management of the Electrolux product supply with the foreign nation government. The company is looking forward to resolve their risks by designing the cross functional program for enhancing the product quality, by modularizing the product design, and providing outstanding service support on their product. The following is the value chain for the working structure of the Electrolux Company:
The enterprise risk management framework helps in handling the strategic operation of the enterprise. The following table helps in identifying risk framework and its associated limitation:
|
Electrolux Risk Framework |
Description |
Limitation |
|
External Risks |
The uncertainties associated with the political government plan are developing agreement with the foreign policies. The monitoring of the market helps in analysing the macroeconomic risks associated with the working procedures of the enterprise |
Difficulty in analysing the strategic operation of the market competitors |
|
Strategic Risk |
The execution of the strategic plan of the enterprise can be cope up with the internal and external risks associated with the firm. The strategic framework of the Electrolux organization is used for handling the business process (Electrolux, 2016). |
Difficulty in setting priority to the strategic plan |
|
Operational Risks |
The performance of the organization depends on the operational structure been followed for completing the manufacturing process of the product. The controlling of the risks helps in increasing the quality of the Electrolux products |
Difficulty in applying proactive action plan for resolving issues during the curriculum of the operational procedures |
|
Financial Risks |
The capital investments in the foreign market have some market risks associated with the positive and negative impact on the organization financial condition. |
No action plan can be implemented to protect the organization from the effect of variation in the cost of market. The variation in the market costing structure can have an adverse effect on the financial performance of the enterprise (Booth and Rotenberg, 2014) |
The risk framework of the Electrolux Company is depicted from the diagram below:
Risk governance, leadership and organization structure are the core areas of balancing the risks associated with the enterprise. The corporate governance policies helps in managing political risks associated with the external agencies and foreign government. The planner of the Electrolux companies develops plans for having agreement with the domestic and foreign government for initializing the flow of goods in the market (Kaplan and Mikes, 2012). The leadership quality of the project manager directly affects the decision taken in the upgrading of the organization policies structure. The organization structure helps in monitoring the improvement in the performance of the subordinate to achieve the target plan of the enterprise. The company is looking forward to develop foreign relationship with various nation to initialize the global market plan for the sale of the product. The behaviour and the action plan of the employees get affected by the follow up of the corporate governance policies. The organization structure functions for monitoring the flow of activities and procedure among the employees. The ethical behaviour of the employees should be measured for managing the security issues which exist with the Electrolux Company. The effective management of Electrolux organization policies at the global level helps in providing quality of service to the customers.
References
Beit, L. (2014). Political risks and Foreign direct investment. Retrieved from https://kops.uni-konstanz.de/bitstream/handle/123456789/12070/161_1.pdf;sequence=1
Booth, L., and Rotenberg, W. (2014). Assessing foreign exchange Exposure. Retrieved from https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1467-646X.1990.tb00015.x
Carl, B., and Moeller, S. (2014). A model for making foreign direct investment. Retrieved from https://www.fm-kp.si/zalozba/ISSN/1581-6311/7_027-044.pdf
Electrolux. (2016). Risk management annual report 2016. Retrieved from https://www.electroluxgroup.com/annualreports/2016/en/the-share-and-risk-management/risk-management/
Haakonsson, S. (2014). External shocks in global value chain. Retrieved from https://studenttheses.cbs.dk/bitstream/handle/10417/4569/lea_bruun_nielsen.pdf?sequence=1
Kaplan, R., and Mikes, A. (2012). Managing risks: A new framework. Retrieved from https://hbr.org/2012/06/managing-risks-a-new-framework
Koboekae, T. (2014). The impact of political risks on foreign direct investment decision by multinational corporation. Retrieved from https://repository.up.ac.za/bitstream/handle/2263/30613/dissertation.pdf?sequence=1&isAllowed=y
Lily, J, Kogid, M., Mulok, D., Sang, L., and Asid, R. (2014). Exchange rate movement and foreign direct investment in economies. Retrieved from https://www.hindawi.com/journals/ecri/2014/320949/
OECD and World Bank Group. (2014). Global value chain: Challenges, opportunities, and implication of policies. Retrieved from https://www.oecd.org/tad/gvc_report_g20_july_2014.pdf
OECD council. (2015). Interconnected economies: Benefiting from global value chain. Retrieved from https://www.oecd.org/mcm/C-MIN(2013)15-ENG.pdf
Panteleeva, E., and Oyner, O. (2013). Corporate brand values perception gap analysis as an international marketing management assessment system tool. Retrieved from https://www.hse.ru/data/2013/01/25/1306171660/03MAN2012.pdf
Electrolux. (2017). Shape life for the better: Electrolux Annual Report 2017.
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