Managing Resources in the International Business Environment

Question 1

Critically discuss the impact of globalisation on the global economy over the past 30 years with reference to theoretical models and trends in international trade and foreign direct investment. Highlight the challenges and opportunities that globalisation may face in the future, focusing on the current political, economic, environmental and technological direction the global economic system is headed towards.                                                                                                            (2000 words)

Question 2

Considering increasing demand in Asia, and existing uncertain economic conditions in the European car market, the car maker BMW aims to consolidate the strength of their brand in Asia by way of capital investment project. BMW plans to capturing the full potential of the Asian Car market and willing to make huge investment. The plan includes the full scale penetration including setting up luxury car production plant. Assume that BMW has to choose either China or India for the go ahead of the project. In considering such large project, the financial managers at BMW must analyse the cash flows that arise from the project. In addition they must realistically estimate of the discount rate that applies to the particular investment. 

Cash flows for the Full Projects in both countries are as follows:

Year    Net Cash Flow China    Net Cash Flow – India
0    -21 million    -15 million
1    3 million    1 million
2    6 million    2 million
3    6 million    4 million
4    6 million    8 million
5    6 million    8 million

The risk of each project attracts a discount rate of 8 per cent. 

a.    Which Country should BMW invest in? Show your calculations and critically justify your decision. (10 Marks)
b.    Incorporate in your discussion, impact of taxation on the cash flows of the project over the 5 years.  (10 Marks)
c.    Further considering current world economic climate the future exchange rates are uncertain.  How would you analysis/anticipate the change in exchange rates. Write your proposal to mitigate impact of possible exchange rate fluctuations (10 Marks)

                                                                        (1000 words)