International Banking & Finance – INTL 702 – 004

Fall 2022
Assignment 3: Running Your MNC Individual

The Business School

Global Business Management, Centennial College

Professor Andrea Thompson-Facey

October 22nd, 2022

1. QUESTION 1: OVERVIEW OF THE CORPORATION – DARSHANA LAD
2. Please provide an overview of the Corporation, including but not including when and how it was incorporated, by who, the board of directors, a specific interest of the Corporation, its headquarters, size, regions of operations and strength in the market.

Canada’s Bloomex.ca imports its blossoms through a network of international growers and flower brokers via two distribution centres in Greater Vancouver and Greater Toronto. The creation of a Bangladeshi office is being discussed to cut down on landing expenses and optimize logistics. Dimitri will do an expansion study to see whether constructing a third transhipment facility in Bangladesh is profitable based on the available information. Compared to just maintaining the present Canadian facilities, the study will ascertain whether the new facility will genuinely cut lead times and if those modifications will eventually offer savings.

Bloomex Company was founded in 2005 with headquarters in Ottawa, Ontario and is privately owned by its creator and president, Dimitri Lokhonia. This marked the beginning of the Company’s fast expansion on a global scale. So far, Bloomex has expanded to 180 countries (Bodily & Ovchinnikov, 2017).

To “be the world’s favourite gift delivery site for discovering the exceptional value and uncommon selections” is one of Bloomex’sprimary missions. This statement shows the firm’s goal of portraying itself as a secure and respectable marketplace to its clientele. In this portion of the mission statement, Bloomex emphasizes sustained growth and widespread availability. As of the year 2020, there are 200 people on staff. Bloomex’s online sales are predicted to be between $10 million and $25 million per year. There are an average of 28,472 new visits to Bloomex.ca per month (Thoughts, 2013).

Theoretical blueprint for how a business plans to generate profit. Bloomex acts as an intermediary between sellers and buyers in its online marketplace. As the pioneer Canadian flower delivery website, Bloomex set the standard for the industry.

For the third part, let’s talk about economies of scale. In the beginning, Bloomex invested much in I.T. and CRM training and education; however, the firm has now leveraged this knowledge to serve over 100 million clients and develop the largest online marketplace for a fraction of the original investment. Localization (Thoughts, 2013).

1. The MNC wants to expand in new markets. Choose a foreign country (host country) and explain your reasons for choosing the host country. State clear reasons for your choice of the host country. Do a profile of the country, including its strengths and weaknesses

Regarding consumer spending, Bangladesh is a promising market for internet merchants. It’s crucial to keep in mind that the Company’s online operation relies heavily on the support of the young demographic. Most of today’s internet users are part of the millennial generation, including more than 164.7 million Canadians (Bodily & Ovchinnikov, 2017). Also, by the end of the decade, the nation’s 130+ million teenagers will make up the majority of the target demographic for this sector. Due to its sizeable population, Bangladesh allows e-commerce giants to enter a new and possibly profitable market.

Strengths

Despite its rapid expansion, Bloomex Ca Logistics Optimization has never compromised on the food quality they provide to its customers. These dishes are expertly made to order for each diner. Furthermore, these businesses are individualized, and Bloomex Ca Logistics Optimization offers a wide range of flowers to suit various preferences and needs. Bloomex Ca Logistics Optimization works with reliable vendors. The supply chain management process is sped up because of their prompt delivery of raw materials and active substances. Because of the persuasiveness of their marketing, they have successfully captured the imagination of their target audience. Like Mother’s Day commercials, the Bloomex Ca Logistics Optimization marketing campaign encourages viewers to unconditionally appreciate their mothers and fathers (swotanalytica, 2022).

The lightning-fast delivery time of Bloomex Ca Logistics Optimization has made it a top choice for many customers. To top it all off, they guarantee delivery within 30 minutes, or they’ll pay for the customer’s inconvenience (called “complimentary business”). They are always on time.

Weaknesses

Several franchisees are available to take orders for Bloomex Ca Logistics Optimization, but there are no actual locations where customers may sit down and eat. The disloyalty of certain franchise employees is causing problems for Bloomex Ca Logistics Optimization. As franchises grow, it becomes more difficult to monitor every dishonest worker. It’s incredibly challenging for Bloomex Ca Logistics Optimization to managing its business when franchisees are spread out throughout the city. The Company’s aspirations are too far ahead of its current technology. More money has to be put into their technology if they want to succeed in the current market. Financial analysts at Bloomex Ca Logistics Optimization found that actual company earnings fell short of forecasts. The Corporation has to fix its sales if it wants to boost its efficiency and bottom line (swotanalytica, 2022).

1. There are different ways to enter a foreign market. Discuss the various options and explain how you will enter the foreign market. (Example, franchise, acquisition). Choose a location in a foreign country (city). Explain why you chose the town.

• By incorporating Baazee.com’s digital infrastructure into its own in 2023, Bloomex will enter the Bangladeshi market formally. Bloomex’s entry into the Bangladeshi market solved a significant problem for local courier services: how to get off the ground with little capital (Bodily & Ovchinnikov, 2017).
• Direct exporting occurs when a company forego intermediariesto deliver its wares directly to the final customer in the host country. Delivery agents are employed to expedite sales and receive a commission for their services.
• Multinational companies (MNCs) that want to produce or manufacture in a foreign country may license their intellectual property by teaming up with local businesses interested in using the MNC’s patents, trademarks, and licenses. Multinational firms may benefit, temporarily and at a price, from licensing (MNCs).
• A franchise agreement is like a license agreement, except that the franchisee in the host country retains day-to-day management of the Company. Multinational firms sell franchises in the host country, where they are often well-received even though the host country has little to no say in its day-to-day operations. They set the bar for quality, decide on the dimensions of their products, and establish the procedures by which the Company operates (datanyze, 2022).
• The capital city of Dhaka is an ideal location from which to showcase Bloomex to the rest of the globe. Regarding significanttowns in Bangladesh, Dhaka has been the most productive GDP growth during the last two years. The increase in urbanization and the number of individuals actively participating in the economy provide an unprecedented abundance of business opportunities. Dhaka, the capital of Bangladesh, is a bustling metropolis and a fascinating crossroads of cultures.
• The firm should maintain low pricing to capitalize on the increased consumer spending that will inevitably occur when the economy improves.
• Strategies for ensuring the Company can meet the needs of Bangladeshi consumers—methods of growth that make the most of present conditions.
• Those ladies should be targeted with advertisements and products more likely to resonate with them (Bodily & Ovchinnikov, 2017).

e.Identify the gap in the market. Explain the growth potential. Is there some evidence that consumers in foreign countries will purchase your product?

The challenges of Bangladeshi internet gift-giving should be approached with sensitivity to the country’s unique cultural preferences. Companies considering expanding into Bangladesh would do well to keep the country’s distinctive culture in mind. Those that fail to account for customers’ varying cultural conventions and preferences may find themselves out of business. Bangladeshis value different things than Americans do when it comes to financial success. Affluent people in many Western societies are expected to waste their money on the highest quality things, which means they have the freedom to order anything they want, no matter how excessive, from the comfort of their homes. Even yet, in Bangladesh, modesty is highly valued. Since this is the case, it’s unlikely that the wealthy would buy expensive goods from stores like Bloomex. This implies they prioritize products widely used and sold in their region (swotanalytica, 2022). Consequently, websites must be cautious when selling products, as some of them could offend people from more traditional cultures.

1. Discuss the competitive advantage of the Corporation.

• Bloomex’s competitive strategy is on using cutting-edge technology to lower the fixed and variable costs associated with operating an international delivery service.
• The Company’s primary strategy is to keep costs low and turn a profit, and this strategy encompasses management strategies, aggressive expansion tactics, and related strategic objectives. Because of the competitive advantages it acquires, a company’s market may influence prices in the industry.

QUESTION 2: MNC FINANCING. THE MNC WILL NEED FINANCING TO PURCHASE THE PRODUCT OR RAW MATERIAL NEW SUPPLIER – UZAIR SYED

1. Discuss the amount of financing needed.

Investments in Bangladesh typically cost about $6,000,000. (swotanalytica, 2022) So that it may remain competitive, the Company has to increase around the market average. Our multinational Corporation’s (MNC) and the local market’s contractual terms will determine the range of the amount. They’ve agreed to combine resources and provide a hand.

1. Explain how you arrived at the amount and how it will be spent.

There will be costs, so it’s wise to set aside some money in case of an emergency. This budget will be used to pay for operational expenses, including renting office space, paying staff and customers who travel from out of town, acquiring relevant permissions and licenses, purchasing necessary safety gear, and paying for insurance. This sum will increase by the amounts above plus the expenses connected with registering and getting the required documentation (swotanalytica, 2022).

1. c. Explain the different options available for financing.

Equity finance involves the present owners of a company selling a piece of the Company to potential new investors. They do this while simultaneously expanding their consumer base and output. In a nutshell, equity is the same as ownership. The sale of the owner’s shares signifies the transfer of management control away from the owner. Since the investors are responsible for any losses if the business fails, this is a popular option for many companies. A major perk of this approach is that the Company may keep the funds and not have to repay anybody. Owners and investors both lose money when a business fails. That means there will be no external factors influencing the Company. The biggest problem with this plan is that it requires you to cede some management authority over the business (swotanalytica, 2022).

Funding through Debt: Loans to creditors are a typical funding source in such situations, but they must be returned at some point. Interest rates are included, making them more reasonable. Interest is a cost associated with borrowing money. Loans may be obtained quickly and simply using the collator’s assets as security. The best part about this plan is that it puts you in charge of the Company rather than the lenders. Banks and other investors care only that they receive their money back on time and have no interest in the success or failure of your Company. The main disadvantage of this approach is the need for consistent monthly income intake to pay off debt (swotanalytica, 2022). It may not be easy to meet the Company’s regular monthly expenses.

1. From your discussions from “c”, choose the best option for your 1corporation and explain its advantages for the Corporation.

Bloomex’s best option, as mentioned in option “C,” is debt financing. Our Company is successful and profitable. Therefore, the Corporation will always have the capital to pay its bills and eliminate any debt. Because of this, the present owners may keep all their shares and maintain complete control of the Company. The firm has projected $4 million in annual sales by 2021.

Consequently, the Corporation has sufficient funds to make all required interest and debt payments. In addition, Bloomex anticipates revenue equal to the cost of the joint venture and related documentation. We’ve determined that this is the optimal course of action for our global Company.
e. Will you seek financing in the domestic or foreign country, why, how, and where?
Include the impact of interest rates and foreign exchange rates in your answer.

To fulfil Bloomex’s criteria, we want to request financing in Bangladesh. The Company’s expertise with the necessary documents and local rules is crucial. There is also the possibility that a business’ credit may improve over time, making it simpler to get financing in the future. Bloomex’s interest rates may be negotiated with banks. When approaching a bank for a loan, a firm must first compile a comprehensive budget. Another issue is that each foreign nation has its own rules about which banks can provide loans (swotanalytica, 2022).

QUESTION 3: ENTERING A NEW MARKET COMES WITH RISK – SYED HASEEB

1. What are the financial risks of the host country?

Given the present state of the world economy, it is more important than ever that a firm has the financial resources to remain solvent. If the desired results are achieved, the same discipline is required in the finance department’s management, structure, and operations. As a result of the discrepancy between the Canadian dollars used in transactions and the Bangladeshi taka used in accounting, Bloomex is highly vulnerable to foreign exchange risk. It is necessary to convert Bangladeshi Taka transactions into U.S. Dollars before they can be officially recorded. The risk of having one’s profits or expenditures fluctuate owing to fluctuations in the value of either currency is present as the value of one currency (here, the Bangladeshi Taka) varies with another (here, the U.S. dollar). Businesses operating across international borders must consider factors like the appreciation or depreciation of both currencies to optimize invoice value and cash received in return (swotanalytica, 2022).

1. What are the political and economic risks of the host country?

Economic Risk

Canadian businesses may find Bangladesh an exciting area to invest in due to the country’s enormous economic potential. We had been introducing increasingly diversified exhibits to the government for five years beforeBloomex’s worldwide distribution service. However, despite the epidemic of COVID-19, Bangladesh remained our 52nd-biggest trading partner and 111th-largest export market in 2020. Following this, consecutive administrations lowered barriers to international direct investment, reduced domestic taxes, eliminated tariffs, and derestricted several sectors. Therefore, despite some hiccups along the way, the economy has expanded gradually and is now among the world’s strongest (KHALIL, 2022). Bangladesh’s exporters and investors confront difficulties. Above everything else, they are:

Delivery services, both domestic and international, will face stiff competition. Businesses and individuals in Bangladesh are acutely aware of the dollar’s worth. It’s possible that a Canadian company’s profit would be unnoticeable even if it moved its operations to Bangladesh to take advantage of the lower operating costs there. However, a significant challenge lies in whether or not they can provide the items at a cost acceptable to retailers and wholesalers in Bangladesh (KHALIL, 2022).

Inadequate infrastructure: This might be a source of trouble for the government. Bangladesh’s rapidly expanding urban population is putting pressure on the country’s transportation infrastructure, including roads, railways, ports, airports, power plants, and communications networks. To succeed in the Bangladeshi market, foreign companies must take the following into account (KHALIL, 2022).

Bangladeshis in Canada have their own distinct business culture, emphasizing personal relationships, even in the professional sphere. Building trust between business partners is key to concluding successful transactions. For example, a Canadian firm entering the Bangladeshi market for the first time could decide to do it alone rather than seek out the assistance of a knowledgeable Bangladeshi partner. Accordingly, it is simple to understand why local partners may be helpful, particularly in the early stages of entering a new market (KHALIL, 2022).

Possible Political Consequences

Many Western multinational corporations have little control over the external factors endangering Bangladeshi investments and plans (Harchaoui et al., 2021). Here are a few instances of such progress:

• Political uncertainty is causing delays in democratic decision-making.
• Unfavourable worldwide trends or uncertainties regarding capital, supply, management, price, or taxes.
• Misunderstandings, impediments, or legal problems may arise from local partners and stakeholders owing to cultural differences.
• Conflict and strikes in the workplace.
• Government and social unpredictability hinder business as usual.
• It’s the government’s incompetence and corruption, for one.
• Disadvantages and rising costs not anticipated due to international territory issues.
• Modifications in interest rates, variations in unemployment, and changes in exchange rates (Harchaoui et al., 2021).

1. Discuss the types of foreign exchange exposures.

The danger of losing money on transactions denominated in a currency other than the Company own is known as “foreign exchange exposure” (Arensberg, 2018). There are three main types of exposure to exchange rate swings:

When a company’s financial dealings traverse international boundaries, it opens itself up to the risk of transaction exposure. One potential issue is that the exchange rate may fluctuate before the deal is concluded. Transaction risk is mainly determined by how long it takes for a deal to be finalized. Potential disagreements may be mitigated using options and future contracts (Arensberg, 2018).

Economic Vulnerability: The risk that a company’s projected value would differ from its actual value due to inevitable exposure to currency movements. Some well-known causes of these dangers include global instability and government obligations from the financial sector (Arensberg, 2018).

A Canadian firm’s risk when engaging with a foreign regulatory body and reporting financial results in the local currency is known as “translation vulnerability.” Translation risk occurs when a company has significant assets, liabilities, or equity denominated in a foreign currency (Arensberg, 2018).

1. Which foreign exchange exposures will impact the MNC? Explain why?

• A multinational firm is profoundly impacted by its exposure to transactional risk in foreign currency markets. Transaction exposure refers to a business’s dangers while making international purchases or sales. There is a possibility that the market exchange rate may adversely influence a particular transaction just before settlement (Harchaoui et al., 2021).
• If the Canadian Company’s currency appreciates relative to the Bangladeshi currency, Bangladesh may need to pay more in local cash to fulfil the agreed-upon price (Harchaoui et al., 2021).
• Currency fluctuations are more likely to occur since contracts are often not settled immediately after signing. Transaction risk is often reduced byusing futures contracts and foreign currency options (Harchaoui et al., 2021).

1. Research and study historical foreign exchange rates between the home country and the host country for a minimum of 12-36 months. Analyze the trend.

The following graph shows the tremendous shift in Canadian and Bangladeshi currency exchange rates over the last several years. One Canadian dollar in 2020 was equivalent to 63.311 Bangladeshi takas, but by 2021, that rate had increased to 67.872 BDT. The dollar only rose in value by 0.7% in one year. There may have been little fluctuations, but in June 2022, 1 CAD was for 7 BDT, a yield of over 0.9%. Although it’s not a tremendous increase, the value of one Canadian dollar in Bangladeshi taka as of October 2022 is 73.4 BDT.

Nonetheless, the value of the exchange rate has almost steadied during the last year (xe., 2022). Just like the value of any other freely traded item or service, the exchange rate between the Canadian dollar and the Bangladeshi taka is presently set by market forces. Both factors that boost demand for Canadian dollars and dampen demand for foreign currency affect the direction of the exchange rate. The Covid-19 virus may have had a significant role in the devaluation of the Bangladeshi taka against the Canadian dollar. There may be far-reaching repercussions from the Bangladeshi economy’s recent downturn. The closure largely immobilized Bangladesh’s service sector, upon which the country’s economy depends. The fluctuation in the value of a currency relative to another’s has been steadily decreasing since the year 2021’s end when everything started running smoothly. Graph showing the USD/BDT exchange rate over the last two years:

Source: xe.com, (2022)

Bloomex Finance Statement Report 2020-2021

Source: macrotrends.net (2022)

QUESTION 4. THE CFO HAS NOTICED A CONSTANT INCREASE IN THE STOCK MARKET AND SEES THIS AS A GOOD OPPORTUNITY TO PURCHASE A STOCK – SHAMIK KUNDER

1. Examine the Corporation’s financials for the last two years and discuss the Company’s performance. Include the following in your answer: Sales revenue, profits, earnings per share, debt ratios, liquidity ratios and gross margins.

• Analyze and debate eBay’s financial performance during the last two years. Sales, earnings, EPS, debt to equity, liquidity, and gross margins should all be included.
• Since 2018, eBay’s net sales have been rising, with a meteoric rise of $7,941 million between 2020 and 2021 and an even more dramatic rise of $7,000 million between 2021 and 2022.
• Gains in per-share profits: eBay’s earnings per share climbed from $7.89 in 2020 to $20.54 the following year.
• The Company’s debt-to-equity ratio decreased from 0.93 in 2020 to 1.25 in 2021.
• We calculated the Company’s liquidity ratio to be 1.48 in 2020 and 1.97 in 2021.
• During 2020, the firm’s gross margin was 78.33%, and it is expected to rise to 77.85% (macrotrends, 2022)

1. Discuss the reasons for changes in the stock price for the last 12 months.

Gains from eBay’s Total Home Strategy and digital operations have contributed to the Company’s stellar stock performance. The goal of the Total Home Strategy is to enhance the omnichannel shopping experience and boost productivity across the home. eBay hopes this approach will expand its presence in the do-it-yourself and professional markets. Furthermore, management is committed to maximizing shareholder value by allocating resources effectively and prudently. In addition, putting so much effort and money into their goods and services increased their stock price by 111% between 2020 and 2021, giving them a market valuation larger than Amazon’s for the first time in five years (macrotrends, 2022).

1. Use the Gordon Growth Model to calculate the stock’s actual value. Comment on the results.

For the GGM to work, one must assume that a company can continue to operate continuously and pay dividends indefinitely. The formula is as follows:

P = D1 / (r-g) (r-g) (r-g)

• Suppose the stock was worth P; how much would you pay for it?
• The following year’s dividend payment is referred to as D1.
• Let’s define r, the rate of return-on-investment capital:
• The letter g stands for the dividend growth rate.

To calculate D1, we will assume dividends of $0.7200 in 2021 and $0.6400 in 2020, with dividend growth rates of 12.50% [(0.16-0.64) and 30.93% (0.72-0.18) respectively, yielding an average dividend growth rate of (0.80+0.75). This would equate to a dividend yield of $1.55.

1. Make your Recommendation to the board. Should the MNC purchase the stock you are asked to monitor? Yes/no and explain your reasons, including financial analysis.

The DIY, hardware, home appliance, and home improvement market is developing quickly, as seen by the annual report and other observations; as the trend illustrates, the industry has an enormous possibility to generate profits; as a result, I would propose that the board buy eBay’s shares.

Question 5. Apart from the stock, you are asked to monitor, choose another store you would recommend to the CFO to purchase and explain the reason for your choice.

In light of these considerations, I propose that the CFO invest in Infosys stock.

Amazon is the next google because with the introduction of their Amazon Ads service, and they have now openly challenged google. I think it will be an excellent time to purchase the stock of Amazon because they are already the pioneers in web services. The launch of Amazon Ads is just the beginning of the Company’s long and prosperous future.

Financial Report for

Figure 1: Liquidity and cash resources

Source: https://ebay.q4cdn.com/

Figure 2: Cash Flow Summary

Source: https://www.marketwatch.com/

Figure 3: Statements of Operations

Source: https://www.prnewswire.com/

Figure 4: Balanced Sheet

Source: https://finance.yahoo.com/

Figure 5: Assets and Liabilities.

Source: https://www.macrotrends.net/

Figure 6: Assets and Liabilities.

Source: https://www.macrotrends.net/

REFERENCES

Arensberg, M. B. (2018). Population ageing: the opportunity for business expansion, an invitational paper presented at the Asia-pacific economic cooperation (APEC) international workshop on Adaptation to population ageing issues, July 17, 2017, Ha Noi, Viet Nam. Journal of Health, Population and nutrition, 37(1), 1-11.

Bodily, S. E., & Ovchinnikov, A. S. (2017). Bloomex. Ca Logistics Optimization. Darden Business Publishing Cases.

Bloomex Company Profile: Management and Employees List. Datanyze. (2022). Retrieved October 23, 2022, from https://www.datanyze.com/companies/bloomex/29660233

eBay financial ratios for analysis 2009-2022: EBAY (2022) Macrotrends. Available at: https://www.macrotrends.net/stocks/charts/EBAY/ebay/financial-ratios (Accessed: October 23, 2022).

Harchaoui, T. M., Maseland, R. K., & Watkinson, J. A. (2021). Carving Out an Empire? How China Strategically Uses Aid to Facilitate Chinese Business Expansion in Africa. Journal of African Economies, 30(2), 183-205.

Harchaoui, T. M., Maseland, R. K., & Watkinson, J. A. (2021). Carving Out an Empire? How China Strategically Uses Aid to Facilitate Chinese Business Expansion in Africa. Journal of African Economies, 30(2), 183-205.

KHALIL, S. R. (2022). EXPLORING THE DRIVERS OF CHINESE BUSINESS EXPANSION STRATEGY INTO PAKISTAN AND OTHER DEVELOPING COUNTRIES.

SWOT analysis of Bloomex CA Logistics Optimization. Bloomex Ca Logistics Optimization SWOT Analysis (10 Steps) – Strengths, Weaknesses, Opportunities & Threats. (2022). Retrieved October 23, 2022, from https://swotanalytica.com/darden/bloomex-ca-logistics-optimization.php

Thoughts, F. (2013, November 4). Market leader 1-800-flowers could face greater competition in the U.S. and internationally (NASDAQ:FLWS). SeekingAlpha. Retrieved October 23, 2022, from https://seekingalpha.com/article/1739012-market-leader-1minus-800-flowers-could-face-greater-competition-in-the-u-s-and-internationally

Xe currency converter. Xe Currency Converter – Live Exchange Rates Today. (n.d.). Retrieved October 23, 2022, from https://www.xe.com/currencyconverter/