*NEW* Unit 5 International Business: P2 - Explain the types of finance available for international business.
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Course
Unit 5 - International Business
Institution
PEARSON (PEARSON)
*Certified High Graded Work*: Unit International Business: P2 - Explain the types of finance available for international business.
A2: Financing of international business • Methods used to finance international trade, e.g. prepayment by the importer, letters of credit, export credits, bank lo...
Interestingly, many people's iPhones have been jailbroken to make them fit better with old flip
phones or cheap Androids, and some users have jailbroken versions of Windows installed on
their Macs. These people don't buy Apple. They just want to show their pride. Samsung is also
heavily represented here thanks to its excellent marketing work. Again, their phones aren't
necessarily the best. But they are expensive, I mean you have to be one of the guys if you want
to buy a Samsung and you want people to know about them. Many Western electronic
products such as Nokia, Motorola and Phillips have achieved success in the Chinese market. But
these brands everywhere are struggling to adapt to new tech trends. In China, it will be harder
to compete not only with Apple and Samsung, but also with a handful of local bad boys (literally
local snakes) who can make good products at lower prices: Xiaomi, Huawei and Lenovo.
Increase sales. And overall productivity.
L.A.A, P2:
Explain the types of finance available for international business
In this part of the assignment, I will be undermining how Apple and Tesla finances their
business when operating internationally. These two large multinational corporations devise
new ways to finance their operations in order to keep their organisations afloat. International
enterprises can fund their operations in one of four ways, depending on their circumstances.
They may determine that one option is preferable to the others for a variety of reasons.
Financing of International Business
After researching all of its alternatives, a firm that desires to grow and trade globally must
guarantee that sufficient cash is available to support the business's foreign commerce. Trade
financing decreases global trade risks by balancing the requirements of exporters and
importers. If the exporter pays the freight in advance, the exporter does not have to be
concerned if the importer does not pay for the items. An importer who provides an advance to
an exporter, on the other hand, may refuse to send the products even while he takes the cash.
Larger firms, such as Apple and Tesla, have a clear financial strategy in place to guarantee they
can meet demand. I'll explore many methods for firms to finance their international expansion,
such as bank loans and export credits. Letters of credit and prepayment
Methods implemented to finance international trade
Prepayment by the importer
, A prepayment is paying somebody or a company in advance for goods and services. As a result,
a prepayment to an importer is when a company pays for goods but is required to pay in
advance. In order for this to work, both companies must have a high level of trust in one
another. It is possible they might not wish to deal with you
by supplying you with products if they expect payment
upfront. Due to a lack of trust between the importer and
their businesses, they require upfront payment in order to
provide you with the product you need. The reason for this
may be that you are a new business, the suppliers are
unfamiliar with your way of doing business, and your
organisation is not stable and reputable. Alternatively, you
may be required to pay in advance if there is a high demand
for the goods or services you need, so you know exactly
how much you will have to pay.
Advantages:
➔ During the transfer of goods, part of the payment is received by the exporter, thus
avoiding non-payment
➔ Buying goods and services that are pre-paid might have a fixed price, thus reducing cash
flow forecasting problems
➔ The buyer uses their money to manufacture, thus solving the seller's cash flow
problems, and therefore there is no upper limit on the revenue he can earn.
Disadvantages:
➔ There is little trust by the company exporting the goods to the importer
➔ The political situation in either company is challenging
➔ There is high demand for the goods and, by paying in advance, the price can be fixed at
a particular level
➔ The importer is a new business or new to the market and cannot negotiate better terms
➔ There is a risk of losing out to competitors
Letter of Credit
Trade agreements are essential for businesses with their partners and counterparties. Trust is
incredibly important between buyers and sellers as there is a high risk of taking advantage of
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