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BTEC Unit 39 International Business P4 (Pass)
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BTEC Unit 39 International Business P4 (Pass)
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P4:Describe how monetary environment affects the businesses that operate
internationally.
Entering a new market could provide a lot of opportunities for Perfetti Van Melle.
However when going into new markets money is needed. For PVM to be
successful in another market it is important they get financed in their
international trading activities. A lot of intermediaries such as banks and financial
institutions can finance these transactions by financing the trade. A international
bank is a good example of an intermediary which can help finance PVM`s
international trading activity. International banks lend and borrow money in
international markets which makes it easier for PVM to do business in the new
market. A few services an international bank offers are forfeiting, letter of credit
and trade credit.
Forfeiting: for PVM would mean that they accept an immediate cash
payment from the bank for their credit sales to their customer. The cash
paid by the bank however is discounted if they PVM agree to this they will
have immediate payment from the bank and will not have to worry about if
their customer is going to pay them, they do not have all the money but at
least they made something form it. They also cannot forfeit the payment
from the customer at a later date.
Letter of credit: the letter of credit is a document from a bank that
guarantees payment. The bank acts as a third party only releasing funds
when certain conditions are met. An example could be if PMV had a
customer in a foreign market and doubted that the customer would pay the
product. To manage risk, PVM uses an agreement requiring the customer
to pay with a letter of credit. The customer has to apply for a letter of credit
at the bank. The customers bank will only release funds when the shipment
has happened and PVM provides evidence that they have shipped the
products.
Trade credit: this will be an agreement between PVM and another business
to purchase their products or services on credit, or on account instead of
immediate payment on purchase. The time when the credit has to be paid
back is discussed; it can vary from a few days to a few months.
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