international financial management

Topics: Investment, Mexico, Foreign direct investment Pages: 15 (4147 words) Published: December 3, 2013
The Case of GKN PLC. : Discussion of investment in Mexico

ThanatipNa nakornStudent ID. 500338970
QianLiuStudent ID. 500325225
YuchenLiStudent ID. 500343056
Sifan ChenStudent ID. 500339457

International Financial Management (ASB-4805)

Professor Lynn Hodgkinson

8th November 2013

School of Business (London Centre)
Bangor University

Contents
Page
Introduction2
Company’s backgrounds3
Investment in Mexico3
Inherent risk analyses
Political risk3
Economic risk4
Social risk4
Technological risk4
Advantages and Disadvantages of Three strategies
Licensing local companies4
Taking over an existing companies5
Setting up a completely new company6
Mexico economic positions in recent years
Inflation7
Changes in exchange rates7
Mexico corporate governance and corruption rankings and the likely political risk involved. Corporate governance8
Political Risk and corruption ranking8
Mexico`s current levels of inward foreign direct investment activity12 Managing economic and translation exposure12
Trends in the costs of debt for the previous year and the change in Mexico’ share price indices Costs of debt13
Stocks market13
Impose tariffs13
Mexico credit rating14
Conclusion15

Abstract
This paper presents the finding of possibility of investment in foreign country for GKN PLC, which is the United Kingdom based company. This company conducts business as the manufacturer of automotive and aerospace parts; they intend to pursue a globalisation agenda. The findings are based on selected country, Mexico, which is whether to invest under three strategies, licensing local companies, taking over existing companies or setting up completely new company. This report offers the tools and some useful discussions to determine the proper investment which comprise of PEST analysis to identify inherent risks, advantages and disadvantages of three strategies analysis and discussions of financial and economic circumstances in Mexico.

Introduction
Investment in globalisation is the trend that many organisation try to expand their business. Besides, selecting the focused country, the most critical issue that the management teams need to consider is the conformation of investment. Nevertheless, there are three key strategies, licensing local companies, taking over existing companies and setting up completely new company which is necessary to be analysis before making decision.

This report presents the critical analysis under circumstance of globalisation agenda of the GKN PLC., which is the company registered under the United Kingdom law and listed in London stock exchange. The destination of investment is Mexico, therefore the discussion of strategies and financial and economic issues are shown in this report. To implicate the best solution for investment from those 3 strategies, the work exhibit advantages and disadvantages of each. Also, this paper applies PEST analysis to indicate inherent risks that might be occur in Mexico. Some related discussions are also offered including, inflation, changes in exchange rates, corporate governance, corruption ranking, levels of inward foreign direct investment activity, possible effects of translation and economic exposure, trends in cost of debt in Mexico, impose tariffs and Mexico’s credit ranking. This report is conducted under the knowledge of international financial management field.

1. Company’s backgrounds
GKN is a British’s company which is listed on London stock exchange and is a constituent of the FTSE 100 Index. They are a global engineering group which design, manufacture and service systems and components of automotive and aerospace for the world’s manufacturers. GKN have four main divisions namely, GKN driveline, GKN powder metallurgy, GKN...

References: HAGELIN, N. and PRAMBORG, B., (2006) Empirical evidence concerning incentives to hedge transaction and translation exposures. Journal of Multinational Financial Management, 16(2), pp. 142-159.
KIM, S. and WU, E. (2008). Sovereign credit ratings, capital flows and financial sector development in emerging markets. Emerging Markets Review, 9(1), pp. 17-39.
Table 1.1(2013): OECD Facebook statistics. For explanatory notes, see OECD Facebook (online) Available from: http://www.oecd-ilibrary.org/economics/country-statistical-profile-mexico_20752288-table-mex (Accessed 17 Oct. 2013)
Chong, A., and Silanes, F.L
Miller and Lael, L. (2001) Mexico Country, Intl Business Pubns USA
Corruption Perceptions Index (2012) (online) Available from: http://www.transparency.org/cpi2012/results (Accessed 17 Oct
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