International Expansion Strategies

Benjamin Simpson is a director of ‘Luxury Chocolates Ltd’ based in the North West of England. The company currently manufactures and distributes a wide range of handmade chocolates to retail outlets around the UK.

With the fall in the value of the Pound this has led to increased costs of imports such as cocoa and other food products. This in turn has impacted on retail prices in general. Furthermore, people’s disposable income in the UK has been reduced and there is an increased focus on healthy eating. All of this has meant that the sales of expensive, high end chocolates and confectionary are declining. To prevent any further decline in sales, Luxury Chocolates Ltd is considering expanding into the international market.

As a financial expert, you have been asked to provide the company with specialised support. You are required to research the chocolate and confectionary industry in both the UK and overseas. The company would like you to supply information that will allow them to consider the financial implications of trading internationally.

Task 1 – Presentation with supporting notes

You need to produce a presentation with supporting notes for the board members of Luxury Chocolates Ltd. You will detail the evolution of international accounting standards and the potential impacts of the international financial environment on decision making. You must:

      • • describe and assess the objectives of developing International Accounting Standards.

      • • Identify and explain the relevant International Accounting Standards which are applied to specific financial situations such as the
            • • valuation of inventory

            • • valuation of non-current assets

            • • application of accounting concepts and conventions

        • • examine the key features of international finance and the major institutions involved in the international financial environment.

      Extension activities:

      To gain a merit grade you must prepare an information sheet to support your presentation. This will help the Board to understand the consequences of the evolution of international accounting standards,

      Using a business organisation of your choice:

          • • evaluate the implications of introducing specified International Accounting Standards for a named organisation.

        LO1 AC 1.1, 1.2

        LO2 AC 2.1, 1M1

        Task 2 – Financial Report

        In addition the Board has asked for a report, in which you must:

            • • discuss the effect on financial statements of the application of specified International Accounting Standards.

            • • assess the contribution of international financial markets and financial instruments as sources of finance.

            • • analyse the exchange rate market and the importance of exchange rates to an organisation.

          LO1 AC 1.3

          LO2 AC 2.2, 2.3

          Task 3 – Case Study Paper

          Two members of the Board have expressed an interest in learning more about capital requirements of a multinational organisation. Benjamin has asked you to produce a case study, based on your research, for circulation to all board members. The case study must:

              • • determine the capital requirements of a multinational enterprise

              • • evaluate the contribution of financial theory in developing capital structures in the context of a multinational enterprise.

            Extension activities:

            To gain a merit grade you are required to provide additional sections to your case study where you:

                • evaluate foreign exchange management using forward contracts, currency futures, currency options and money market hedge.
                      • • Assess the planning, monitoring and management of short term assets for a named multinational enterprise of your choice.

                To gain a distinction grade you are required to provide additional sections to your booklet where you:

                    • • evaluate interest rate management using swaps, forward rate agreement and guarantees and interest rate options

                    • • evaluate working capital management strategies and their consequences for a named multinational enterprise of your choice.

                  LO3 AC 3.1, 3.2

                  2M1

                  2D1

                  3M1

                  3D1

                  Task 4 – Information Sheet

                  Benjamin has asked you to prepare an information sheet entitled ‘Approaches to International Financial Management’ for the Head of Finance.

                  The information sheet must include:

                      • • an analysis of the micro-environmental and macro-environmental factors influencing international financial management decision making.

                      • • an analysis of international merger, acquisition and investment policies and their relevance for international financial management

                    Extension activities:

                    To gain a merit grade you must include the following in your information sheet:

                        • • an assessment of the influence of foreign government fiscal and monetary policies for global financial flows.

                      To gain a distinction grade you must include the following in your information sheet:

                          • • an evaluation of the benefit and risks of cross-border mergers and acquisitions for international financial management.

                        LO4 AC 4.1, 4.2

                        4M1

                        4D1

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