Why would a firm want to become a multinational Essay Example for Free

Why would a firm want to become a multinational Essay Let’s be clear about what we mean by a multinational. This is a firm that extends beyond the borders of an individual nation and operates with affiliates and branches in at least two countries. A multinational organizes phases for producing goods and services to sell in different countries. For example, many car companies have mastered the so-called international segmentation of production, which works like this: A Toyota vehicle assembled in San Antonio may have been designed at the Toyota design center in Australia; the vehicle’s aluminum-wheel components may have been produced in Delta, British Columbia; and its other components may have been produced in yet another location. Other multinationals replicate entire production processes in different countries. Consider Coca-Cola. If you are visiting Poland, the Coke you drink probably was produced in a plant in Lodz, Poland, not in the United States, although the brand and the company hail from the U. S. International business scholars and economists have observed that firms become multinationals to exploit three broadly defined sets of advantages. The first is ownership advantage. Multinational firms usually develop and own proprietary technology (the Coca-Cola formula is patented and kept extremely secret) or widely recognized brands (such as Ferrari) that other competitors cannot use. Multinationals often are technological leaders and invest heavily in developing new products, processes and brands, while usually keeping them confidential and protected by intellectual property rights. Maintaining stronger protection of these elements helps firms enjoy greater profits from innovation. Second, consider localization advantage. Multinationals usually try to build facilities that produce and sell their products in locations near the consumer (the Polish consumers of Coke in our example). This helps reduce transportation costs or helps the company fit in better with local tastes and needs. Proximity to demand also helps firms adapt their products and services to different markets. At the same time, they also may take advantage of lower production costs (for example, labor costs, energy, sometimes even lower environmental standards) or more abundant production factors, such as expert engineering or greater raw materials). For example, the Polish affiliate of Coca-Cola also owns bottling plants in the Beskidy Mountains region of Poland, which is rich in mineral water for making other beverages. Finally, multinationals want to internalize the e benefits from owning a particular technology, brand, expertise or patents that they find too risky or unprofitable to rent or license to other firms. Enforcing international contracts can be costly or ineffective in countries in which the rule of law is weak and court procedures are long and inefficient. In these cases, the company also may risk losing its ownership advantage, which it has created at a substantial cost.

Dinner vs. Instant Message :: Personal Narrative Writing

Dinner vs. Instant Message I can remember sitting at my boyfriend's house, while he took part in Teen Chat , an online chatroom that he had recently become addicted to . He's being awful quiet and I am getting annoyed at the chronic pounding at the keyboard and the spontaneous giggles coming from him that pop out of nowhere. Here I am watching some dumb movie on HBO with his cat "Whiskey" coughing louder and louder until I finally get his attention. "Hey babe, you wanna type?" Did I want to type? No, I didn't want to type! You promised me Chilis! We were supposed to go out! "I guess,"I said. Anything to get some attention here. I wandered over to the damn machine to see what his fuss was about. Ok, I admit it, I was amazed that he could be a part of ten conversations at one time. There were about fifteen people in the chat room, talking about everything from sports to some stuff that I would like to think of myself too much of a lady to mention. "This is dumb, you WOULD want to be a part of this!" I said totally aggarvated that he could be subject to some of the things they were talking about. "Babe, WE'RE talking about baseball!" I guess he was right and I noticed that about five people acted as if they knew him before he even entered the chat room. I asked him how he knew these select few. "This is Ryan," he would say, "He is taking some of the same classes as me at CFCC, this girl's name is Jessica, she's from Tennessee, she just IM's me to talk sometimes." Wow. Friends online? Now this was starting to intrigue me. I mean how many of my friends could I communicate with? No phone bills or waiting three or four days to receive outdated letters. Now the meeting new people thing seemed a bit ridiculous, though he would beg to differ. But, whether I cared for it or not, there was a whole community online and he's meeting more people as I sit beside him holding Whiskey in my PJ's, watching the walls in his empty living room. He had always tried to get me to type on this thing and say hello. Finally, the next time, I did. "Say something," he would tell me. I wasn't surprised or disappointed to see that my simple "hello" was completely ignored.

Australian cultural identity shaping family patterns Essay

A family is generally defined as â€Å"a group of persons directly linked by kin connections, the adult members of which assume responsibility for caring for children† (Giddens, 2006:206). One may be strike by the academic formality as well as the appropriateness of the definition. However it is noteworthy that such definition is by no means strict or obligatory in research. There are individuals or groups who have different perceptions of what constitutes a family (or what is a family). The definition is a departure from the traditional definition of a family. The development of family patterns is henceforth congruent with the development of family definitions (Giddens, 2006:211). According to its old definition, a family is â€Å"composed of mother, father, and children. † Giddens et al (2003) defended the modified definition by pointing out that, generally, family structures in most societies are composed of adult members and children (not necessary the earlier conception of father and mother). Hence, operationalization of the definition of family in applied research becomes possible (ideal type definitions). They also noted that the definition of family is highly dependent on prevalent family patterns and structures; that is, defined by culture and time. Hence, Giddens et al (2003) defined family patterns and structures as â€Å"institutions or routines† and â€Å"reproduce familiar forms of social life† (p. 131). These â€Å"institutions or routines† of family life can be generally explained by his theory of structuration. Structuration means studying patterns and ways in which societies are produced and replicated in smaller social units like the family. Once the society determined the â€Å"plausible† ways of achieving a particular societal goal, it becomes reinforced in other institutions, including the family. Hence, societal values and its adherence to singular or multiplicity of ethnic identity gives form and structure to other institutions in the society. It is noteworthy that an independent variable of structuration is time. One may juxtapose that different societal institutions existed in different time frames. What can be considered a normal family in one point in time may significantly differ from past perceptions. This proves that structuration is highly dependent on the prevailing cultural values and goals, as well as the so-called â€Å"cultural identity† (ethnicity). In our case, it can be proven that the adherence of Australian culture to a multiplicity of identity and values can greatly affect family patterns and activities. Australian Multiculturalism Identity What does it mean to be an Australian? This is a highly complex question that needs an equally sophisticated answer. It can be said that Australian cultural identity is a mixture of different cultures and worldviews. For one, Aborigines in Australia were able to establish permanent homes in the continent centuries before the coming of the British. When the British came, they transformed Australia into a penal colony, and then into a state fashioned after Great Britain. The aborigines were casted away by the new â€Å"owners. † The British introduced a series of assimilation laws that called for granting of Australian citizenship to Europeans (who were living in Australia for at least 10 years and of British descent) – the aborigines were ignored initially. Many of these â€Å"citizens regarded themselves as Australians. They also considered Australia as their natural homeland. Hence, what we call today as Australian culture and identity were initially derived from British culture – songs, literature, poetry, and architecture (language perhaps is the most clear indicator). However, the adherence of Australian identity to British ways changed as European migration to the country increased at the latter half of the 19th century. Almost a third of the population of Australia at that time was non-British European descent. This created a problem for the Commonwealth of Australia. The problem lies in the redefinition of Australian culture and identity. However, because of the First World War and the preoccupation of the Australian government in addressing its trade deficits, the problem had been totally ignored. Until recently, social scientists found out that Australia is a â€Å"hotspot† of different cultures; a kind of melting spot. The general sense of this geo-cultural definition of Australia is: Australian culture and identity is a multiplicity of different cultures, bringing forth an increasing diversity of institutional patterns, under the guidance of an open society (Holton, 1997). Three things can be derived from this definition. First Australian culture and identity is the result of cultural interaction of different ethnic groups. Second, this cultural multiplicity brings forth different institutional patterns. Lastly, â€Å"openness† is the operative word of Australian society. Hence, â€Å"it has sometimes been claimed that Australia’s national identity is not as strong as the national identity of countries that have experienced the trauma of invasion and civil war. While it is true that events of this kind have often been major reference points in the consolidation of a sense of national identity, they are not by any means the only processes by which identity emerge† (Holton, 1997: URL cited). This can be explained from a survey conducted by the National Social Science study entitled â€Å"National Identity: What Does It Take To Be â€Å"Truly Australian. † About 72% of the respondents said that feeling Australian was a very important factor in being an Australian (as against 23% who said that it was fairly important). Another 67% said that having an Australian citizenship was a very important factor in being an Australian (as against 23 % who said that it was fairly important). The heading above connotes that though most people in Australia regard themselves as Australian, they engaged themselves in pattern of livings (including family patterns and structures) based on their ethnicities (ethnic origin). Hence, there is therefore the need to find the commonalities of these cultures so as to enumerate the characteristics of Australian culture and to determine whether ethnicity, class distinction, or sexual preferences determines Australian family patterns. Herein are the characteristics of Australian culture: 1) open (that is, permeable to immigrants), 2) permits assimilation and at times amalgamation (the difference between the two will not be discussed), 3) adherence to the Western principle and value of liberalism, and 4) highly adaptive. When one says that a society is open, it generally means that such society is highly permeable to migrants as well as to innovation. It is wholly the opposite of a conservative society. When one says that a society permits assimilation, it generally means that the society is willing to incorporate individual cultural tastes and preferences into its own system. Liberalism is a Western invention. Adherence to liberalism means that individual rights and freedoms are protected by the state. The individual is left open in its own development. Being highly adaptive is generally the result of being open. Because innovation is the operative word of an open society, any changes in its system would correspond to a major shift on its means procurement (AGIL framework of Talcott Parsons), that is, the means of achieving societal goals.

Study And Analysis Of Intesa Sanpaolo Bank Finance Essay - Free Essay Example

Sample details Pages: 9 Words: 2768 Downloads: 2 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? The purpose of Pillar 3 ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã‚ Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬ market discipline is to complement the minimum capital requirements (Pillar 1) and the supervisory review process (Pillar 2). The Basel Committee on Banking Supervision (The Committee) aims to encourage market discipline by developing a set of disclosure requirements which will allow market participants to assess key pieces of information on the scope of application, capital, risk exposures, risk assessment processes, and hence the capital adequacy of the institution. The Committee believes that such disclosures have particular relevance under the Framework, where reliance on internal methodologies gives banks more discretion in assessing capital requirements (BIS,2011). The Committee is aware that supervisors have different powers available to them to achieve the disclosure requirements. Market discipline can contribute to a safe and sound banking environment, and supervisors require firms to operate in a safe and sound manner. Under safety and soundness grounds, supervisors could require banks to disclose information. Alternatively, supervisors have the authority to require banks to provide information in regulatory reports. Some supervisors could make some or all of the information in these reports publicly available. Further, there are a number of existing mechanisms by which supervisors may enforce requirements. These vary from country to country and range from moral suasion through dialogue with the banks management (in order to change the latters behavior), to reprimands or financial penalties. The nature of the exact measures used will depend on the legal powers of the supervisor and the seriousness of the disclosure deficiency. However, it i s not intended that direct additional capital requirements would be a response to non-disclosure (BIS,2011). Don’t waste time! Our writers will create an original "Study And Analysis Of Intesa Sanpaolo Bank Finance Essay" essay for you Create order Intesa Sanpaolo is an Italian bank that strictly adheres to the norms of transparency and has all its reports publicly disclosed. Therefore, this work is dedicated to the analysis of its risk profile using the documentation from the year 2010. Main calculations and figures were analyzed according to Basel 2 Pillar 3 requirements. In the end the summary of the risk profile is presented. Background of the company Intesa Sanpaolo  is a banking group resulting from the merger between  Banca Intesa  and  Sanpaolo IMI  based in  Turin,  Italy. It has clear leadership in the  Italian market  and a minor but growing international presence focused on Central-Eastern Europe and the Mediterranean basin (77% of the banks revenue (97.7% from Europe) and 86% of all loans to customers come from business in Italy).  When it was formed in 2007 it overtook  Unicredit Group  as the largest bank in Italy with 13 million customers and  $690 billion worth of assets.  By 2010 its assets had grown to  $877.66 billion 26th highest among all of the worlds companies (Wikipedia, 2011). Risk Management In 2009 group acquisitions included a 30% interest in business info company MF Honyvem, and an increased stake in  Alitalia  up to 33.3%. Even though the bank was rumored to have been working with the government to keep Air France from acquiring a stake in Alitalia Air France eventually acquired a 25% interest in Intesa Sanpaolo Group. Policies relating to risk acceptance are defined by the Parent Companys Management Bodies, Supervisory Board and Management Board, with support from specific Committees (particularly, the Group Risk Governance Committee), and the Chief Risk Officer, who reports directly to the Chief Executive Officer (Intesa Sanpaolo, 2010). The Parent Company is in charge of overall direction, management and control of risks, whereas Group companies that generate credit and/or financial risks operate within the assigned autonomy limits and have their own control structures. A service agreement governs the risk control activities performed by the Parent Companys functions on behalf of the main subsidiaries. These functions report directly to the subsidiarys Management Bodies. The risk measurement and management tools together define a risk-monitoring framework at Group level, capable of assessing the risks assumed by the Group from a regulatory and economic point of view. The level of absorption of economic capital, defined as the maximum unexpected loss that could be borne by the Group over a period of one year, is a key measure for determining the Groups financial structure, risk appetite and for guiding operations, ensuring a balance between risks assumed and shareholder returns. It is estimated on the basis of the current situation and also as a forecast, based on the Budget assumptions and projected economic scenario under ordinary and stress conditions (Intesa Sanpaolo, 2010). The capital position forms the basis for the business reporting and is submitted quarterly to the Group Risk Governance Committee, the Management Board and the Control Committee, as part of the Groups Risks Tableau de Bord. Risk hedging, given the nature, frequency and potential impact of the risk, is based on a constant balance between mitigation/hedging action, control procedures/processes and capital protection measures (Saita, 2007). Credit risk management The Groups strategies, powers and rules for the granting and management of loans are aimed at: Achieving the goal of sustainable growth of lending operations consistent with the risk appetite and value creation; Diversifying the portfolio, limiting the concentration of exposures on single counterparties/groups, single economic sectors or geographical areas; Efficiently selecting economic groups and individual borrowers through a thorough analysis of their creditworthiness aimed at limiting the risk of insolvency; Privileging lending of a commercial nature or intended for new investments in production, provided that they are sustainable, over those of a merely financial nature; Constantly monitoring relationships, through the use of both T procedures and systematic surveillance of positions, that show irregularities with the aim of detecting any symptoms of performance deterioration in a timely manner. The Intesa Sanpaolo Group has developed a set of techniques and tools for credit risk measurement and management which ensures analytical control over the quality of loans to customers and financial institutions, and loans subject to country risk. In particular, with respect to loans to customers, risk is measured using internal rating models which change according to the segment to which the counterparty belongs (Intesa Sanpaolo, 2010). Market risks management The quantification of trading risks is based on daily VaR of the trading portfolios of Intesa Sanpaolo and Banca IMI, which represent the main portion of the Groups market risks, to adverse market movements of the following risk factors: Interest rates; Equity and market indices; Investment funds; Foreign exchange rates; Implied volatilities; Spreads in credit default swaps (CDSs); Spreads in bond issues; Correlation instruments; Dividend derivatives; Asset-backed securities (ABSs); Commodities. Some of the other Group subsidiaries hold smaller trading portfolios with a marginal risk (around 4% of the Groups overall risk). In particular, the risk factors of the international subsidiaries trading books are interest rates and foreign exchange rates, both relating to linear pay-offs. For some of the risk factors indicated above, the Supervisory Authority has validated the internal models for the reporting of the capital absorptions of both Intesa Sanpaolo and Banca IMI. In particular, the validated risk profiles for market risks are: (i) generic on debt securities and generic/specific on equities for Intesa Sanpaolo and Banca IMI, (ii) position risk on quotas of funds underlying CPPI (Constant Proportion Portfolio Insurance) products for Banca IMI, (iii) optional risk and specific risk for the CDS portfolio for Intesa Sanpaolo, (iv) position risk on dividend derivatives (Intesa Sanpaolo 2010). From the second quarter of 2010, the validated risk profiles were extended to commodity risk for Banca IMI, the only legal entity of the Group authorized to hold open positions in commodities. The analysis of market risk profiles relative to the trading book uses various quantitative indicators and VaR is the most important. Since VaR is a synthetic indicator which does not fully identify all types of potential loss, risk management has been enriched with other measures, in particular simulation measures for the quantification of risks from illiquid parameters (dividends, correlation, ABS, hedge funds).VaR estimates are calculated daily based on simulations of historical time-series, a 99% confidence level and 1-day holding period. The following paragraphs provide the estimates and evolution of VaR, defined as the sum of VaR and of the simulation on illiquid parameters, for the trading book of Intesa Sanpaolo and Banca IMI. In the third quarter of 2010, market risks generated by Intesa Sanpaolo and Banca IMI increased with respect to the averages for the second quarter of 2010. The average VaR for the period totaled 43.4 million euro. Daily VaR of the trading book for Intesa Sanpaolo and Banca IMI Source: Intesa Sanpaolo, 2010 In the first nine months of 2010, market risks generated by Intesa Sanpaolo and Banca IMI decreased with respect to the averages for 2009. The average VaR for the period totaled 38.5 million euro. Source: Intesa Sanpaolo, 2010 For Intesa Sanpaolo and Banca IMI, the breakdown of risk profile in the third quarter of 2010 with regard to the various factors shows the prevalence of the hedge fund risk, which accounted for 48% of total VaR; for Banca IMI, credit spread risk was the most significant, representing 50% of total VaR. Contribution of risk factors to overall VaR Source: Intesa Sanpaolo 2010 The level of risk remained high in the third quarter of 2010 due to the increased volatility of the spreads in government issues, following the worsening of the Greek crisis and the related contagion effect on Eurozone countries. Source: Intesa Sanpaolo, 2010 Risk control with regard to the trading activity of Intesa Sanpaolo and Banca IMI also uses scenario analyses and stress tests. The impact on the income statement of selected scenarios relating to the evolution of stock prices, interest rates, credit spreads, foreign exchange rates and commodity prices at the end of September is summarized as follows: on stock market positions, a bullish scenario, that is a 5% increase in stock prices with a simultaneous 10% decrease in volatility would have led to a 17 million euro loss; on interest rate exposures, a parallel +25 basis point shift in the yield curve would have led to a 26 million euro loss, whereas a parallel -25 basis point shift would have led to a 33 million euro gain; on exposures sensitive to credit spread fluctuations, a 25 basis point widening in spreads would have led to an 85 million euro loss, 6 million euro of which due to structured credit products (SCP), whereas a 25 basis point tightening of the spreads would have led to an 86 million euro gain, 6 million euro of which due to SCPs; on foreign exchange exposures (main position on Euro/USD), the portfolio would have recorded a 4 million euro gain in the event of exchange depreciation (-10%). The loss in the event of foreign exchange appreciation (+10%) would have been 1 million euro; lastly, on commodity exposures a 6 million euro loss would have been recorded had there been a 50% increase in prices . Source: Intesa Sanpaolo, 2010 Market risk originated by the banking book arises primarily in the Parent Company and in the other main Group companies that carry out retail and corporate banking. The banking book also includes exposure to market risks deriving from the equity investments in listed companies not fully consolidated, mostly held by the Parent Company and by Equiter, IMI Investimenti and Private Equity International. The following methods are used to measure financial risks of the Groups banking book: Value at Risk (VaR); Sensitivity analysis. Value at Risk is calculated as the maximum potential loss in the portfolios market value that could be recorded over a 10-day holding period with a 99% confidence level (parametric VaR). Shift sensitivity analysis quantifies the change in value of a financial portfolio resulting from adverse movements in the main risk factors (interest rate, foreign exchange, equity). For interest rate risk, an adverse movement is defined as a parallel and uniform shift of  ±100 basis points of the interest rate curve. The measurements include an estimate of the prepayment effect and of the risk originated by customer demand loans and deposits. Furthermore, sensitivity of the interest margin is measured by quantifying the impact on net interest income of a parallel and instantaneous shock in the interest rate curve of  ±100 basis points, over a period of 12 months. This measure highlights the effect of variations in interest rates on the portfolio being measured, excluding assumptions on future changes in the mix of assets and liabilities and, therefore, it cannot be considered a predictor of the future levels of the interest margin (Galai, 1999). Notes to the Basel 2 Pillar 3 disclosure The regulations governing the drafting of the Pillar 3 Basel 2 disclosure require credit institutions to adopt a formal policy to meet the minimum public disclosure requirements and to put procedures in place that enable them to assess its adequacy, also in terms of its verification and frequency. To this end, the Supervisory Board of the Parent Company Intesa Sanpaolo has approved a specific document Guidelines on Pillar 3 disclosure. This document sets out the duties and responsibilities of the Corporate Bodies and the various Group departments involved in the different stages of the process governing this disclosure. Given its public importance, this document is for approval to the competent Corporate Bodies by the Manager responsible for preparing the Companys financial reports. This document is therefore subject to the related certification. As a consequence, the pillar 3 Basel 2disclosure is subject to the checks and controls established in the Groups Guidelines for administrative and financial governance. In particular, the internal contr ol system, for accounting and financial information is designed to ensure the ongoing verification of the adequacy and effective implementation of the administrative and accounting procedures at Group level (BIS,2011). Capital Ratios as at 30 September 2010 Source: Intesa Sanpaolo, 2010 All capital ratios improved compared to 31 December 2009. The total capital ratio stood at 12.5%, while the Groups Tier 1 ratio was 8.9%. The ratio of Tier 1 capital net of preferred shares to risk-weighted assets (Core Tier 1) was 7.7%. The improvement in ratios compared to 31 December 2009 was the result not only of ordinary operations, but also of the sale of the securities services business and the application of the internal approach to determine capital requirements for residential mortgages for private individuals following authorization from the Bank of Italy. The acquisition of the Monte dei Paschi di Siena branches and the purchase of 50% of Intesa Vita had a negative impact (Intesa Sanpaolo, 2010). Capital Adequacy In general terms, the group-level capital requirement is calculated as the sum of the individual requirements of the individual companies that make up the Banking group, net of exposures arising from intragroup relations included in the calculation of credit, counterparty and settlement risk. In addition to the Total capital ratio referred to above, other more rigorous ratios are also used to assess capital base soundness: the Tier 1 capital ratio, represented by the ratio between Tier 1 capital and risk weighted assets. Source: Intesa Sanpaolo Summary Operations in the first half of 2010 continued to be shaped by a focus on those factors that the market considers important in the current scenario of instability: solidity, liquidity and risk profile. In terms of solidity, Intesa Sanpaolo which has not turned to the market or government aid is among those banking groups that best weathered the crisis of 2008 at the international level. Even in the current difficult scenario, the Group has an adequate capital base, and one of the lowest leverages when compared with the main international competitors: the ratio of total tangible shareholders equity to total tangible assets was 4.4% at the end of June. Considering the use, effective as of 30 June 2010, of the internal approach for determining the credit risk requirement relating to the regulatory segment of residential mortgages for private individuals, at the end of the first half of the year the Core Tier 1 ratio came to 7.7%, the Tier 1 ratio to 8.9% and the total capital ratio to 12.2%. Pursuant to the requirements of Pillar 2 of the Basel II Accord, capital adequacy has also been measured from the management perspective. The results of the ICAAP (internal capital adequacy assessment) process confirm the Groups sound capital base: the financial resources available ensure, with adequate margins, coverage of all current and prospective risks, also in stress conditions. The business model adopted by Intesa Sanpaolo also continues to ensure strong control of liquidity risk, largely thanks to the high contribution of retail funding to total funding sources. The stability of this source of funding, especially in the form of demand deposits and bonds, continues to represent one of the Groups main strengths. Intesa Sanpaolo has adequate liquidity reserves, consisting of a high amount of eligible assets a large proportion also being highly liquid and overnight loans through repurchase agreements renewed continuously, financed through short-term liabilities in the money market. The amount of these funds is established to cover the Banks full operational requirements for a long period, also in the event of a sudden crisis in the wholesale market (money market and bond market).