Conclusion/references SMARTCLOTHING LTD (SCL) You have been appointed as an advisor to a leading global garment retailing company (SmartClothing Ltd (SCL) – a hypothetical company) established in...

Conclusion/references

SMARTCLOTHING LTD (SCL)

You have been appointed as an advisor to a leading global garment retailing company (SmartClothing Ltd (SCL) – a hypothetical company) established in Australia. The company owns number of popular garment brand names which have been internationally protected by AustralianIP (https://www.ipaustralia.gov.au/). As an expert in international finance and banking, you are required to assist SCL to develop and maintain its international financial management strategy. Currently, the company owned number of garment manufacturing units in Thailand and Indonesia. The company also use a Chinese Firm in Shanghai as its buying agent of high-quality materials for its product line. Its products are traded worldwide mostly in high income countries such as Australia, USA, UK, Europe and Middle East. The growing demand for the companies branded products have forced the company to re-think its current production and financing strategy.

The company purchase all clothing materials and other raw materials from China through its buying agents. The buying agent are paid in Australian dollar (AUD) for all supplies. The company normally negotiated the buying contacts in every six months. The payments for the contacts are settled in three months once the materials are shipped from China to its manufacturing locations. SCL monthly remit AUD for paying all other production cost including labour to its subsidiaries in Thailand and Indonesia. The company used to invoice all its sales in Australian dollar. The management believe their current strategy of using Australian dollar for all its international transactions help them to address the possible foreign exchange risk exposure to its financial condition.

The popularity of the companies branded products increase the demand into a level which cannot be satisfied by its current manufacturing facilities. The company is considering all possible alternatives for increasing its current manufacturing capacity. The marketing manager of the company has proposed two alternatives. The first is proposed to look for sub-contracting to produce some products to small garment producers in Indonesia. The company believe this strategy may not be required heavy capital commitment in the short run. The second proposal suggest to expand the firm owned manufacturing facilities to India. According to marketing manager, the second alternative can proceed in the medium time after assessing the business opportunities in India.

In the light of above background information, you are required to develop a management advisory report addressing the following issues.

Introduction
Part one: General introduction

1. Define in your own words what is meant by globalisation.
2. Identify the ways, multinationals exploit their global financial systems to create value.
3. Explain key motivations for firms (in general) to expand abroad
4. Explain the organisational challenges of managing the finance function in a multinational corporation. Where should the locus of financial decision-making be housed? And How is it different to the domestic firm financial management?

Useful links

• Reserve Bank of Australia for foreign exchange rates:https://www.rba.gov.au/statistics/historical-data.html#exchange-rates
• World Bank for country specific data:https://data.worldbank.org/
• World Bank for country risk analysis:http://www.doingbusiness.org/en/rankings
• OECD for Country risk assessment:http://www.oecd.org/trade/xcred/crc.htm
• S&P Global - Country Risk Assessment Update:http://www.maalot.co.il/Publications/OAC XXXXXXXXXXpdf
• Web link for Central Banks:http://www.centralbanksguide.com/central+banks+list/