STOCK, financial, currency markets

A financial market is a market in which people and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds, and commodities include precious metals or agricultural goods. It includes the stock and currency markets.

Stock Markets are the means through which securities are bought and sold. The appearance of formal stock markets and professional intermediation resulted from the supply of, demand for and turnover in transferable securities.

The largest, most active and best organized markets were established in Western Europe and the United States.

Members of stock exchanges drew up rules to protect their own interests and to facilitate the business.

Investors were interested in a far wider range of securities³ than those issued by local enterprises. Increasingly, these local exchanges were integrated into local markets.

The rapid development of communications allowed stock exchanges to attract orders more easily from all over the country and subsequently leading to the creation of a world market for securities.

Potential investors, insurance companies, pension funds, governments and corporate enterprises see securities as a cheap and convenient means of finance.

Investors need complete and reliable information about stocks and markets.

Any one country’s currency is a legal tender only within its national boundaries. To trade beyond these boundaries involves exchange of monies. The terms on which one currency will exchange against another are referred to as rate of exchange.

Currencies can be bought or sold in the Foreign Exchange Market.

The Market performs two major functions: it facilitates the foreign exchange needs it enables individuals, corporations and governments to obtain a desired currency mix of their portfolios.

Foreign exchange departments of large commercial banks are linked across the world through a sophisticated network of communication systems. The market consists of three major sectors: the spot market, the forward and futures markets and the currency options market.

Fiscal management

Financial policy is a very complex notion covering measures aimed at working out basic concepts, major guidelines, goals and objectives, as well as at creating an adequate financial mechanism and at directing financial activities of a country.

Financial policy is based on strategic guidelines which set long-term and medium-term prospects for using financial resources and ensure attainment of major economic targets and solution of goals in the social sphere.

Over the past two decades financial problems have exacerbated the world over. Public debts have reached unsustainable levels in a growing number of industrial countries. This development and its results – higher interest rates, lower investment, and slower growth in living standards – have stimulated efforts by policymakers to find solutions to swollen budget deficits.

Central to these solutions is fiscal policy. Fiscal policy is the policy adopted by a government for raising revenue to meet expenditure.
Financial stabilization is the principles, institutional arrangements, information flows, and techniques that govern the budget process and define fiscal relation between levels of government.

Fiscal federalism, which is the system of taxation and public expenditure in which revenue-raising powers and control over expenditure are vested in various levels of government1 within a nation, ranging from the national government to the smallest unit of local government.

INTERNATIONAL MANAGEMENT

The economic independence of nations fosters the growth of multina­tional firms that conduct business on a global scale where markets are more important than political boundaries. Managers operating in an international environment deal with a variety of unique challenges growing out of such factors as politics, economics, and cultures.

Each foreign country is different from all other countries where a firm might do business. So, when the first consideration of a company is to get established in a foreign country it is the environment's current state that gets more attention. It has to learn local laws, customs, and languages. It must leam to deal with foreign patterns of economic growth, investment, and infla­tion. The company must also concern itself with various aspects of interna­tional trade, such as the value of a country's currency relative to other curren­cies (the foreign - exchange rate) and its balance of payments, as well as ex­tent of controls on imports and exports, on foreign investors.

Equally important is the multinational company's ability to choose the right strategy and organization applicable to individual companies operating in the international business arena. There are four strategies involved in in­ternational management. They include globalization, rationalization, national responsiveness, and the multifocal approach. Whether or not these strategies are implemented depends on a company's size and the number of countries in which it operates.

Firms that wish to expand into a foreign country must also assess its political stability, political risks inherent in particular countries. Developed countries tend to be relatively stable from a political and an economic stand­point, while less developed countries may be more susceptible to political strife. Governments may come and go or may decide to nationalize compa­nies.

Individuals searching for careers in the field of international manage­ment will find numerous opportunities available to them. The field is becom­ing a specialty of its own. Virtually every management textbook being used in business curricula today has at least one chapter devoted entirely to inter­national management. Colleges and universities are offering degrees ranging from associates to Ph.D.s in the field. As more and more companies enter the international business arena, the number of management opportunities will grow.

International Marketing

International marketing is marketing products and SERVICES to customers outside a company’s home country. It is important to both businesses and countries and involves a variety of strategy issues, laws, and other considerations. International marketing is as old as civilization. Almost any issue of National Geographic Magazine will include a story about trade, whether it concerns an ancient sailing ship being raised from the ocean bottom or travel along centuries-old trails where merchants carried goods from one civilization to another. International trade exists and has existed for a variety of reasons, including access to products not available domestically, COMPARATIVE ADVANTAGE among producers in one country, foreign DEMAND, saturation of domestic demand, and technological advantage.

International marketing takes place when a business directs its products and services toward consumers in a country other than the one in which it is located. While the overall concept of marketing is the same worldwide, the environment within which the marketing plan is implemented can be dramatically different from region to region. Common marketing concerns—such as input costs, price, advertising, and distribution—are likely to differ dramatically in the countries in which a firm elects to market its goods or services. Business consultants thus contend that the key to successful international marketing for any business—whether a multinational corporation or a small entrepreneurial venture—is the ability to adapt, manage, and coordinate an intelligent plan in an unfamiliar (and sometimes unstable) foreign environment.

RISK MANAGEMENT

Risk management is activity directed towards the assessing and monitoring of risks. It is a logical process or approach that seeks to eliminate or at least minimize the level of risk associated with a business operation. Es­sentially, the process identifies any type of situation that could result in dam­age to any resource within the possession of the company, including person­nel, then take steps to correct factors that are highly likely to result in that damage.

At the core of effective risk management strategies is the desire to find ways to manage the degree of uncertainty that exists within any business en­terprise. The first step in the process has to do with evaluating the utilization of resources as they current stand. This step involves understanding the logi­cal flow of the production process and how it relates to the successful manu­facturing of goods and services for sale to consumers. Once there is a solid grasp of how the organization functions, it is then possible to move on to re­fining that process with an eye toward managing that uncertainty factor.

Once the business model is understood, it is possible to identify spe­cific risks that are present throughout the production process, including the delivery of goods and services to buyers. As those risks are identified, they are analyzed for ways to alter the process so that the end result is still achieved, but the degree of risk is minimized or removed altogether. Risk management may be an extremely complicated process or require nothing more than making a few minor adjustments.

Risk management not only seeks to minimize the potential for injury to employees, but also reduces the opportunity for money and other forms of finance to be abused or utilized ineffectively. By making sure that all re­sources are utilized in a manner that is safe, logical, and efficient, the profit margin for the company will increase and everyone associated with the com­pany is motivated to continue production.

Risk management normally requires the support of owners and the management team in order to refine the overall operation and achieve the lowest degree of risk possible.