International finance case study Essay Example | Topics and Well Written Essays - 2500 words

International finance possibility study - Essay ExampleThe will help the federation gain competitive advantage everyplace the global competitors. Though these benefits will exist but the company will face some financial issues that will be discussed in this report.Ruritania is a politically stable and economically developing country, but the notes of the country is not very stable. Four years ago, when the Crown, Ruritanias gold, was allowed to float freely by the government, at that place was a large drop in its value. In the past, the Crown had a centrally managed exchange rate. This caused the gold to have a fixed rate against the abroad currencies. The value of the currency dropped sharply when it was allowed to float freely in the foreign market. This is the evidence that a very low demand for the Crown existed in the foreign market. A floating exchange rate is self-correcting, as it fixes the exchange rate according to its demand.Although the currency has shown stabil ity now, but there is a risk of a drop in currency value in the future. This would cause the imports for the company to get expensive. If the company decides to purchase anything from foreign market, it will have to pay high costs. If the company is importing raw material from another country, the price of the raw material will go up and the company will lose out. The final product of the company will also be priced high because of the higher cost of raw material. This will cause the local competitors to gain a higher market share because they will be offering lower prices.The Crown faces risk in the worldwide market right now because only one and a half year has passed since it has been stable against the major international currencies. Eighteen months is not a very long period to determine the stability of currency of a country. Therefore this lack of a hard currency will restrict the ability of the company to import raw material from the headquarters in UK.The country