Reference no: EM133193167

MB701 International Management of Finance - Buckinghamshire New University

Assignment task
Multi-HardwarePlc is a UK listed company that manufactures and sell high quality building materials to various customers, both corporate and individuals within the domestic market. Recent unfavourable events have meant that the directors must rethink the company's strategic position within the market in order to survive competition from within the UK and from foreign competitors.

In the last six years, company has enjoyed success in sales, profitability, increased share price and dividend pay-outsdue to less competition in the UK market.

In 2020, the UK government lifted the ban on foreign competition in the UK hardware market resulting in an increased competition from European Union, India and China.As a result of this, there is a huge influx of both quality and cheap building materials from the European Union, India andChina which has now brought business to a tragic head. Both the share price and profitabilityhave been on the decline for the first time in the history of Multi-Hardware Plc. In the last 6 months, gross profit has declined by 50% over the same period last year and the trend is expected to continue into the foreseeable future if no serious robust action is taken to reposition itself in the hardware market.

At the last strategic meeting of the Board of Directors, it was decided that the way forward is to extend its trading business internationally using two investment options below.

Option 1:
Relocating the production plant to India where the cost of labour is a third of that of the United Kingdom. The products from India will then be sold both in the local market and abroad. The lower cost of sales and access to foreign market as well as UK market meant that the company could increase profitability and maintain their competitive position.

1. Continue production in the UK but investing further in plant and machinery that can produce both high quality products as before, and produce cheap products to compete with the foreign competitors who sell cheap products mainly in the UK market.

The directors recognise that if they do trade abroad, they may have to use appropriate financial instruments to protect their investments against foreign exchange risks.

Adopting any of the above options will involve a huge investment in capital. Assume that both projects have a positive Net Present Value.

Required:
Question 1. Critically discuss THREE investment appraisal methods that can be used by Multi-Hardware Plcto arrive at the decision to invest in any of the two options above. You may use assumed figures for illustration.

Question 2. Discuss in detail, THREE methods that can be adopted by Multi-Hardware Plc in protecting their investments abroad against foreign exchange risks.

Question 3. Critically discuss, giving real examples, the Strategic, Financial, Ethical and the regulatory implications of relocating the manufacturing plant to India.

Question 4. Note that marks will be awarded for Structure. Structure includes the orderly presentation of relevant material and the extent of research evidenced by the appropriateness and adequacy of in-text referencing and bibliography. There must be a Cover Page and Contents Page, paragraphs of Introduction and conclusion and pages must be numbered.

Learning outcome 1: Critically review the methods available to a company to establish itself and trade successfully in the international market.
Learning outcome 2: Evaluate and compare the financial instruments used by multinational corporations to minimise risk and maximise shareholder returns

Task requirements:

From your report you will obtain marks for the following:

1. Identification of three investment appraisal options (definitions, explanations, illustrations, benefits and the shortcomings). You will be required to make up your own figures and use that as an illustration.

2. Identification, definitions, explanations, illustration, benefits and problems of using any three of the methods for protecting a company against foreign exchange risks.

3. For each of the options given in the case study, you are required to discuss in detail, the implications of the factors listed, giving specific recent examples.

All discussions must make reference to Multi-Hardware Plc and specific examples from relocation to India.

4. Note that marks will be awarded for Structure. Structure includes the orderly presentation of relevant material and the extent of research evidenced by the appropriateness and adequacy of in-text referencing and bibliography. There must be a Cover Page and Contents Page, paragraphs of Introduction and conclusion and pages must be numbered.

Attachment:- International Management of Finance.rar