Presentation on Exchange rates and International managerial issues

2. International Business
Presented To:
Maam Rimsha Najeeb
Presented By:
Tanzeel Mehmood
J1F18MCOM0014
Department: Master of commerce
Submission Date: 23 July 2020

3. Topics
 Accounting for exchange rates
 Major international managerial issues

4. Accounting for exchange rates
 An exchange rate is the rate at which one currency will be
exchanged for another. It is also regarded as the value of
one country's currency in relation to another currency.
 For example, an interbank exchange rate of 114 Pakistani
rupee to the united states dollar means that ¥114 will be
exchanged for each US$1 or that US$1 will be exchanged for
each ¥114.
 In this case it is said that the price of a dollar in relation to
rupee is ¥114, or equivalently that the price of a rupee in
relation to dollars is $1/114.The government has the
authority to change exchange rate when needed.

5. Types of accounting exchange rates
 Fixed exchange rate
 Flexible exchange rate
 Forward rate
 Spot rate
 Direct method
 Indirect method
 Bid & ask price

6. Types (Continued…)
Fixed exchange rate
 The fixed exchange rate is the standard rate set by the
monetary authorities of the governance for one or
more currencies
Flexible exchange rate
 Flexible or Floating
 Under the flexible exchange rate, the value of currency
is decided by supply and demand factors

7. Types (Continued…)
Forward rate
 A forward rate is a one that is determined as per the terms
of a forward contract.
 It stipulates the purchase or sale of a foreign currency at a
predetermined rate at some date in the future.
Spot rate
 The spot rate is the current exchange rate for any currency.
It is the rate at which your currency shall be converted if
you decided to execute a foreign transaction “right now”.
 They represent the day-to-day exchange rate and vary by a
few basis points every day

8. Types (Continued…)
Direct method
 Under the given number of units of local currency per unit
of foreign currency is quoted. Thy are designated as direct
rates because the rupee rate is single foreign currency unit
obtain directly. Direct currency quotation is also called
home currency quotation.
Indirect method
 Under the given number of units of foreign currency per
unit of national currencies is quoted. the indirect
quotation is also known as foreign currency quotation.

9. Types (Continued…)
Bid & ask price
 Bid rate is also known as buying rate
 Ask rate is also known as selling rate
 Bid rate is the rate at which the bank will pay you
should you go to it to buy Euros against USD. It is
nothing but the buying rate for the bank.
 Ask rate is the rate which the bank “asks” from you to
obtain a unit of Euro against value in dollar. It is
nothing but the selling rate for the bank.

10. Major international managerial issues
 International Managerial Issues.. Managerial Safety
Leadership can make or break your process! ...
However, they should not try to take the process over
as this can lead to employee withdrawal and a failed
effort. Equally, a lack of commitment can be
detrimental in so many ways, that the process can fail
in a relatively short time.

11. Major international managerial issues
 Covid-19
 International company structure
 Foreign laws and regulations
 International accounting
 Cost calculation and global pricing strategy
 Universal payment methods
 Currency rates
 Choosing the right global shipment methods
 Communication difficulties and cultural differences
 Political risks
 Worldwide environmental issues

12. Major international managerial issues (continued….)
Covid-19
 Creating problems for international trading.
 Decreeing production.
 Increasing unemployment.
 Increasing inflation.
 Affected to currencies.

13. Major international managerial issues (continued….)
International company structure
 If your aim is to be competitive globally, you must have a
team in place that’s up for the challenge. One fundamental
consideration is the structure of your organization and the
location of your teams.
 Coca-Cola offers one example of effective multinational
business structure.

14. Major international managerial issues (continued….)
Foreign laws and regulations
 Along with getting your company structure in place,
gaining a comprehensive understanding of the local
laws and regulations governing your target markets.
 From tax implications through to trading laws,
navigating legal requirements is a central function
for any successful international business.
 Eligibility to trade is a significant consideration, as are
potential tariffs and the legal costs associated with
entering new markets.

15. Major international managerial issues (continued….)
International accounting
 Accounting strategy is key to maximizing revenue, and
the location where your business is registered can
impact your tax liability. Mitigating the risk of
multiple layers of taxation makes good business sense
for any organization trading abroad.
 Being aware of tax treaties between countries where
your business is trading will help to ensure you’re not
paying double taxes unnecessarily.

16. Major international managerial issues (continued….)
Communication difficulties & cultural differences
 Good communication is at the heart of effective
international business strategy. However, communicating
across cultures can be a very real challenge.
 Effective communication with colleagues, clients, and
customers abroad is essential for success in international
business. And it’s often more than just a language barrier
you need to think about — nonverbal communication can
make or break business deals too.

17. Major international managerial issues (continued….)
Political risks
 An obvious risk for international business is political
uncertainty and instability. Countries and emerging
markets that may offer considerable opportunities for
expanding global businesses may also pose challenges,
which more established markets do not.
 Before considering expansion into a new or unknown
market, a risk assessment of the economic and
political landscape is critical.

18. Major international managerial issues (continued….)
Worldwide environmental issues
 As the environmental risks and effects of climate change
are becoming better understood, sustainability is high
on the agenda of many major global corporations.
 Recent international legislations and proposals, such as
the UN’s Sustainable Development Goals, have put
environmental issues at the forefront of international
business development.

19. Major international managerial issues (continued….)
Cost calculation and global pricing strategy
 Setting the price for your products and services can present
challenges when doing business overseas and should be
another major consideration of your strategy.
 You must consider costs to remain competitive, while still
ensuring profit. Researching the prices of direct, local-
market competitors can give you a benchmark.

20. Major international managerial issues (continued….)
Universal payment methods
 The proliferation of international e-commerce websites
has made selling goods overseas easier and more
affordable for businesses and consumers.
 However, payment methods that are commonly accepted
in your home market might be unavailable abroad.
 Determining acceptable payment methods and ensuring
secure processing must be a central consideration for
businesses who seeks to trade internationally.

21. Major international managerial issues (continued….)
Currency rates
 While price setting and payment methods are major
considerations, currency rate fluctuation is one of the most
challenging international business problems to navigate.
 Monitoring exchange rates must therefore be a central part of
the strategy for all international businesses. However, global
economic volatility can make forecasting profit especially
difficult, particularly when rates fluctuate at unpredictable
levels.

22. Major international managerial issues (continued….)
Choosing the right global shipment methods
 The potential of online sales presents a huge international
business opportunity for retailers in the 21st century, but
finding reliable, fast, and cost-effective shipment and
distribution methods can be a difficult balance in some
markets.
 Depending on the volume and destination of your shipments,
will you send by land, sea, air, or a combination.

23. Overview
Now I am going to give overview about these topics.
 Accounting for exchange rates
 Major international managerial issues
 First of all I would like brief explanation about accounting for
exchange rates. An exchange rate is the rate at which one
currency will be exchanged for another. It is also regarded as the
value of one country's currency in relation to another currency.
Types of exchange rates.
 Fixed exchange rate
 Flexible exchange rate
 Forward rate

24. Overview (Cont’d)
 Spot rate
 Direct method
 Indirect method
 Bid & ask price
 The second one is major international managerial issues
Managerial Safety Leadership can make or break your process! ...
However, they should not try to take the process over as this can
lead to employee withdrawal and a failed effort. Equally, a lack of
commitment can be detrimental in so many ways, that the
process can fail in a relatively short time.
11 Major international managerial issues.
 Covid-19
 International company structure

25. Overview (Cont’d)
 Foreign laws and regulations
 International accounting
 Cost calculation and global pricing strategy
 Universal payment methods
 Currency rates
 Choosing the right global shipment methods
 Communication difficulties and cultural differences
 Political risks
 Worldwide environmental issues
It is overview about two topics, above discuss in detail.

26. Any question if you have?