VICTORIA CLOTHING LTD (VCL) You have been appointed as an advisor to a renowned clothing distributor (VCL) in Australia (a fictitious company). The corporation holds a portfolio of well-known clothing brands that are protected by international patent law. The company currently engages in export and import activities using a well-linked international network of agents. The company's product is distributed in North America, the United Kingdom and a few Asian countries through its own retailing network. This network is operated by its subsidiaries established in those countries (USA, Canada, the United Kingdom, India, and Thailand). The recent global economics down turns has had a severe impact on both the firm's operations and cash flow conditions. The firm's capacity to manage its cash flow positions has been hampered in particular by the considerable volatility of the local currency value in the foreign exchange market. In light of this, the corporation has opted to rethink its foreign trade and financial strategy. On this back ground, VCL requests your aid in refining their present foreign currency transaction strategy as a specialist in international finance and banking. The firm currently invoices its exports in the currencies of its trading partners. Its foreign suppliers usually invoice in United State dollars. VCL is allowed four months to settle their suppliers invoices. Its foreign buyers have been given 60 days to settle their invoices. The fluctuation of foreign currency values against the AUD has forced the company to re-think its export invoicing policy. Because the company's overseas suppliers issue invoices in USD, the marketing manager advises utilising USD as the company's trading currency. Nonetheless, the production manager emphasised that invoicing both export and import in AUD would assist the company in eliminating all potential foreign exchange risks. The company's management has asked you to assess the strengths and drawbacks of all available options for dealing with the negative impact of currency fluctuations. The company now sources clothing materials from Thailand and India. According to a feasibility analysis performed last year, building a manufacturing facility in India would provide a significant cost benefit. Therefore, VCL plans to establish a new production facility in India through. For this purpose, a separate two subsidiary will be formed in India. The new facilities will be used to expand the distribution to Europe. Alternately, the marketing manager suggest to open a buying offices in India and sourcing clothing from small local producers. He stated that such a plan will assist the corporation in reducing its capital commitment on foreign investments. VCLs policy is to review the cash flow situation of all its subsidiaries every three months and remit any excess cash balances to the head office in Australia. Currently, excess cash is transferred any time whenever the foreign subsidiaries' cash balances exceed the allowed limit. Consequently, the parent company in Australia transfers cash to the subsidiaries when they are in short of cash.

Question:

Explain how the international presence of VCL is advantageous in managing risk and raising capital for the future development of the company.