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Summarize the major findings from running your own MNC. Discuss the strength and limitations in your project.

Create an idea for your own MNC to conduct international business. Your idea should be simplified to the degree that you could possibly implement it someday. However, your idea should also be sufficiently creative to be successful if done properly. Your idea should focus on one country and one foreign currency, since many MNCs are focused in this manner when they are first created. In your project, you should assume that you will receive foreign currency when selling your product so that you can recognize the issues regarding exchange rate risk that are discussed throughout this text. Your idea should be for a small MNC instead of a large MNC because even most large MNCs began as small firms. The following questions will help you define your MNC idea: 1. What is the product that you plan to sell? 2. How will you sell the product in that country? (i.e., through a distributor? By mail?)

Is there some evidence that consumers in that country would buy this type of product?

Do you need to purchase supplies or to hire labor?

Will any expenses you incur from producing the product be in dollars or some other currency?

Assessing Country Factors That Will Affect the Demand for Your Product 1. Identify the factors that can affect the balance of trade between the United States and the country that you targeted for your business. Explain how each of these factors may affect the demand for your product. 2. Which of these factors is likely to be most important in affecting the demand for your product? Accessing Trade Data Determine whether the product you plan to sell is already one of the main exports to that country. Accessing Import Controls Review the import controls set by that country's government. Determine whether your business would be affected by trade regulations.

Explain how you will use the spot market for your business. 2. What is the bid/ask spread on a recent quotation? 3. Will you possibly need the forward market? Explain. Accessing Bid/Ask Rates and Accessing Recent Exchange Rates Go to http://www.oanda.com. Click on FX Trading and find your instrument (currency exchange pair). Determine the prevailing bid and ask exchange rates for the currency that you will use for your business transactions. Explain how the main foreign currency for your business has changed over the last week.

How can your business be affected if the Fed attempts to strengthen the dollar in the foreign exchange market? 2. If the Fed decides to weaken the dollar, how will your business be affected? 3. How can indirect central bank intervention affect your business even if there is no impact on exchange rates? Accessing Central Bank Information Go to the Web site link for the central bank in your target country. Determine whether this central bank intervenes to control its currency in the foreign exchange market.

Use the Internet to determine how the value of the foreign currency of concern has changed in last week (for example, you can use Yahoo Finance), last month, last year. Does it appear that there is a trend over the last month? What is the mean percentage change over last month? If you believed that the currency's value would continue following the recent trend, would it appreciate or depreciate in the near future?

Recall that when you created your business idea, it was assumed that your receivables would be denominated in the foreign currency of concern upon the sale of your products. 1. Describe your exposure to exchange rate risk. That is, describe the exchange rate conditions affecting the performance of your business. 2. Is your business subject to transaction exposure? economic exposure? translation exposure? Explain why your business is or is not subject to each of these types of exposure. Hedging 1. Given your exposure to exchange rate risk, explain how you could use forward contracts to hedge. 2. Explain how you could use currency options to hedge your exposure. Using Futures Quotes Go to https://www.cmegroup.com/. Determine the prevailing futures price of the main foreign currency for your business. Go to http://www.oanda.com and determine the prevailing spot rate. Would you hedge any transactions for your business based on the futures price relative to the spot rate. Denominating Receivables in U.S. Dollars Recall that it was assumed that your receivables would be denominated in the foreign currency of concern. For this question only, assume that you could switch your pricing policy so that the receivables would be denominated in dollars instead of the foreign currency. How would this switch affect the transaction exposure and the economic exposure of your business? Explain the conditions that could still cause the performance of your business to be affected by exchange rate movements.

Summarize the major conclusions of running your own MNC. Discuss the competitive status of your MNC and also the major risk/problems of the company. Discuss the implications and limitations of your management strategies. Also list the references that you cite in your project.