3
International Management (Subject) / Trade, Finance and Investment (Lesson)
- Define economy of scale ("Skaleneffekt") - describes the cost advantes of mass production - thus represents a basis for a competitive strategy of cost leadership => higher profits and higher market shares, can buy other companies as well
- Name two Bretton Woods institutions and their main function International Monetary Fund (IMF):- World Bank:-
- What are types of foreign exchange risks? => FEX risk refers to the losses that an international financial transaction may incur due to currency fluctuations=> FEX risk can also affect investors, who trade in international markets and businesses engaged in the import/export of products or services to multiple countries 3 Types: 1) Transaction risk- when buying a product from a company located in another country- the price of the product will be denominated in the selling company's currency- if the selling company's currency were to appreciate versus the buying company's currency then the company doing the buying will have to make a larger payment in its base currency to meet the contracted price 2) Translation risk- a parent company owning a subsidiary in another country could face losses when the subsdiairy's financial statements, which will be denominated in that country's currency, have to be translated back to the parent company's currency 3) Economic risk - "forecast risk"- refers when a company's market value is impacted by an unavioidable exposureto currency fluctations