International Finance Paper
Many companies today have decided to take their business into the international marketplace. Costco is a company that has successfully entered the international marketplace with warehouses in several countries around the world. When Costco opened warehouses international it had to take into consideration Global banking and the risk it would have with the different exchange rates. Another issue that also had to be taken into consideration would be the different regulations that each country brings with it. Team B has taken a look at all issues and will show how they affect Costco. Global Investment Banking Process
Costco opened their first store in 1976 in San Diego, California and became incorporated in 1983 after merging with The Price Company. Today the organization operates 557 warehouses which includes 406 of these warehouses in the United States and Puerto Rico, 77 in Canada, 21 in the United Kingdom, seven in Korea, six in Taiwan, nine in Japan and another 31 warehouses in Mexico (Costco Wholesale, 2009). Costco is a dominant club operator in many countries and have locations not only in the United States but they operate in nine Canadian Provinces, Puerto Rico, Mexico, United Kingdom, Japan, Korea, Taiwan and in the near future Australia. The Taiwan locations are through a 55%-owned subsidiary and the Japan and Mexico locations are through a 50%-owned joint venture (Costco Wholesale, 2009). Costco was able to begin offering stock to the public on December 5, 1985 and opens the first Canadian warehouse in Burnaby, British Columbia. By 1992 Costco opened a warehouse in Mexico City, 1993 a warehouse opening in the United Kingdom in West Thurrock, Essex, England, 1994 Asia followed with a warehouse in Seoul, Korea. The first warehouse in Taiwan, in Kaohsiung in 1997, and a Japan warehouse in Hisayama in 1999. The company’s most recent store opening in the foreign market was on July 7, 2009 in Sin Masato, Japan (Costco Wholesale, 2009). The company relies primarily on the United States and Canadian financial and operational performance as these sectors represent 92% of the company’s operating income. The company’s international operations of the business could become a larger part of the stability of Costco contingent on several factors such as political conditions, economic conditions, regulatory constraints, currency regulations, currency exchange rates, monetary and fiscal policies, laws and regulations, foreign trade, and foreign government. Other issues that are risky to Costco are the adverse taxes and managing the international operations (Costco Wholesale, 2009). The company has reported an increase of $27 million of interest income because of the cash and cash equivalents from short-term investing and the increase in the earnings of the investment in Mexico the 50%-owned joint venture. “ The Company’s investments in the Costco Mexico joint venture and in other unconsolidated joint ventures that are less than majority owned are accounted for under the equity method” (Costco Wholesale, 2009, p. 36). The company invested $15 million into the Costco Mexico location and the partner who also is a 50%-owned joint venture also contributed the same amount to the investment (Costco Wholesale, 2009). The company’s Japanese subsidiary has a 10-year loan in the amount of $27.6 million and this investment has a variable rate of interest in Yen. In addition to this loan, interest on this loan is due semi-annually in June and December. Lastly, Costco has the majority of their foreign exchange contracts wholly-owned by the United Kingdom subsidiary so that the company could hedge the United States dollar merchandise inventory purchases (Costco Wholesale, 2009). Regulatory Bodies and Financial Decisions
When discussing regulatory bodies and how these affect financial decision making most will look at regulatory bodies as a headache for the individual and the business. Understanding the...
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