Finance D 1-4 Essay Example | Topics and Well Written Essays - 750 words

Finance D 1-4 - Essay Example In situations where a company is highly dependent on international sales the firm must utilize advanced financial tools such as hedging in order to diminish the exchange rate risk. Hedging is protecting a long position in one asset while being short in another in order to reduce overall risk (Teweles & Bradley & Teweles, 1992, p.537). A country such as Afghanistan is a third world country / developing economy with major problems for potential investors from United States or any other G8 developed nation. In the case of the United States the current War on Terror declared by George Bush Jr. created a cultural barrier for American companies to penetrate this market due to resentment from the population against anything that is American. In general terms the civil warfare that continues in this nation due to the Holy War makes it a security risk for any company due to suicidal bombers and other Para-military activity. The economic state of this country is weak, thus its citizen have a lack of purchasing power. Three countries that should be targeted by United States corporation as foreign direct investment opportunities are India, United Kingdom and Japan. India has the second largest population in the world after China with over one billion inhabitants. The size of the market is huge which is a good characteristic. Another thing that makes India attractive is the educational level among the population which is good and the fact that the country has an establish infrastructure to export professional services via a telecommuting system. A second country that is good target for international expansion of American firms is the United Kingdom. The monetary unit of the UK, the pound, is one of the strongest units in the world. The culture of the UK is very assimilated with the US culture which is a very good factor. The United Kingdom has a population of 60,776,238