Student’s Name
Instructor’s Name
Class Name
Date
Cultural Barriers
Apart from the distinctive nature and culture of different people from different nations, there are other significant barriers to international trade that came with globalization. Smart Design being a product company, is likely to face various government regulations when exploring international markets. Many governments impose extra levies on global companies to protect the local firms from unfavorable competition. These levies range from high taxation to importation duties and quotas, among others. The barriers will directly affect production in the European markets with cost factors not marching the parent company in the US, thus, minimal returns on investments.
Additionally, the challenges of currency devaluation are bound to happen, considering the different currencies used in the international markets. It will undoubtedly derail the companies’ quest for expansion, considering the losses incurred on monetary exchange. Smart Design will be forced to operate in specific international markets with a relatively efficient and stable currency that can be valued on the global stage. Another barrier likely to be faced on the international front is the involvement of local content in manufacturing. Many countries are implementing the domestic content requirement in trade to ensure raw materials are sourced from the country. It is to ensure the local business is being promoted, which serves to benefit the local economy. However, in the case of Smart Design, not all products can be sourced locally. Ted Booth explains the need to have a chip in almost all products for functionality purposes (Booth and Whitehall 2). Unfortunately, not all countries can assemble chips locally.
Business Approach Overseas
The European Union is famed for being overprotective when it comes to international trade. Restrictions are always imposed to protect the local trade and ensure the costs of imported goods are always factored. Through the different regional groupings, the EU provides the member states to adopt its trade policies in a bid to limit international firms’ involvement. Basing on these facts, the Smart Design approach to the European nations should be reconsidered with mergers and acquisitions. Mergers embrace the ideas of local firms’ involvement in trade, hence restricting the restrictions on the foreign company (Calipha, Tarba, and Brock 9). The Asian market is also significant to Smart Designs’ sustainable development. Its strategic presence in South Korea is commendable. However, China and India with high populations are also significant. With India’s approach to international trade, which involves devaluing currencies, Smart Design should embrace the need to acquire a local firm or merge with one to avoid incurring high costs. Furthermore, market access and preference for local products have affected international firms’ quest to enter China’s markets thus the need of embracing mergers. Additionally, with its presence in South Korea, the firm can use its relevance in Asian countries to market its products far beyond the borders. Limited restrictions concerning importation taxes and government regulations are likely to be imposed considering the firms’ involvement in South Korea
Purpose of Financial Plan
Most firms have embraced business with advanced planning methods to ascertain sustainable development and ensure returns on investments are always guaranteed. Through the financial team, a firm can forecast its future income and expenses concerning previous periods’ operations and future expectations of consumers. Financial planning has been embraced in almost all if not every company with an eye for future existence hence its significance. Financial planning involves ascertaining sales for a certain period and ensuring profits are obtained from the sales. For most companies, profit is considered an essential approach to growth and ensuring expenses are catered for.
Additionally, the purchase of assets or investing further can offer a new path to increasing returns. Planning helps in ensuring risk factors are reduced significantly. To guarantee a smooth running in the future, current financial plans should be well crafted, which even facilitates general reserves for excessive profits. Accountability is guaranteed in the cash inflow and outflows, thus following the growth trail and ascertaining the cause of a drop in profits may be quickly figured. It ensures every person working in the company portrays the highest level of integrity and embraces the need for an increase in output generation. Ascertaining the capital structure through financial planning gives the business a competitive edge in the market, considering many firms are equally trading in the same products. Planning ensures the firm is always a step ahead of its peers in ensuring extra costs are determined and avoided.
References
Booth, Ted, and Whitehall, Richard. Smart Design: Life is in the Details (2012) The Art
Institute of Pittsburgh- Online Division
Calipha, Rachel & Tarba, Shlomo & Brock, David. Mergers and acquisitions: A Review of
Phases, Motives, and Success Factors. Advances in Mergers & Acquisitions. (2010) 9. 1
-24. 10.1108/S1479-361X (2010)0000009004.