Mars, Inc. investment abroad considers its foreign operations utilizing the firms overall riskiness. Foreign exchange risk of expropriation and constant government intercession are increasing the political and financial risks multinational corporations encounter when functioning in a foreign continent. Mars, Inc., U.S. Corporation vends chocolates, rice, pet products, etc. abroad (Europe). Mars, Inc. must be aware of the risks involved between the euro and the dollar changes from a daily basis. The strategic risks and financial strategy to consider for possible expansion is advanced international markets increase Mars, Inc. sales and products in existing markets is the easiest and most risk-free approach towards expanding.
The role played by currency speculators, particularly, should not be underestimated, as it exerts significant influence on the market. In addition, foreign investment in equities/stock, property and bond markets can play an important role in influencing a currency. The tactic requires a bigger locality, different pricing strategies, innovative/improved marketing techniques but it will be in a customer group with whom you already have a relationship. Introduce a New product/service that have been accumulating data, consumer reaction of the newest product which would be an expansion tactic and when positioned as adding value and being responsive to consumer requirements, this can be a relatively risk-free method to expand. Possible risks of foreign currency exposure for Mars, Inc. would be the volatile exchange rates and country specific risks this can be caused by the movement or action in the exchange rate of foreign and US currency. This type of movement of the exchange adjustment in currency can alter Mars, Inc. relative competitive position in both the domestic and foreign markets which can have affecting consequences to Mars, Inc. operations cash flow.
A strategy Mars, Inc. can be effective in managing exchange risk exposure if management observes the MNC currency risk which Mars, Inc. financial operations team can measure by the sensitivity of the its future cash flows and market value of the markets unsystematic deviations in exchange rates. However, it becomes expensive for the reason that any multinational corporation is incapable of being advantageous of the economy of scale. The management of foreign currency exposure and risk is emphasized on costs and benefits of different approaches. Mars, Inc. can implement comprehensive method of risk management, predominantly where the scope of exposure is great, or where management has a cautious assertiveness toward risk.
“Financial market is a market in which financial assets that is traded. In addition to enabling exchange of previously issued financial assets, markets facilitate borrowing and lending by facilitating the sale by newly issued financial assets. A financial institution is the most important source of profits is through financial asset transactions”....