Essays on The Risks That Vibrant Limited Will Be Exposed to Case Study

Download full paperFile format: .doc, available for editing

The paper 'The Risks That Vibrant Limited Will Be Exposed to" is a good example of a finance and accounting case study. Companies find it advantageous to transform into multinationals as this enlarges their markets while enabling them to become more competitive by harnessing the advantages that exist in the new markets. However, entering a foreign market has its share of challenges. First, the company has to contend with the uncertainties of the new political environment it enters in. then there is the problem of foreign currency exposure risks emanating from operating in different currencies.

In this regard, this report is aimed at analyzing the decision by Vibrant limited a Canadian company to acquire Pharma limited a Japan-based company. In this regard, various foreign currency exposure risks emanating from the acquisition have been discussed including translation exposure, transaction exposure as well as operating exposure risk. In addition, the issue of political risk has been examined. The paper then suggests how Vibrant limited might be able to manage the above risks in a bid to ensure their decision becomes fruitful.

It is concluded that though the decision to operate internationally is advantageous for vibrant limited, there is a need to put up measures of managing the risks identified. Otherwise, the company may fail to achieve its objectives of moving into Japan. Letter of transmittal 15th September 2014 The Management, Vibrant Pharmaceuticals Limited 35-425642, Brighton 15th Street, Edmonton, Canada. Dear sir/Madam RE: ACQUISITION OF PHARMA LIMITED JAPAN On behalf of Rising Star Consultants, I present the following report regarding the potential acquisition of Pharma Pharmaceuticals Limited Japan by Vibrant limited. The decision to enter the Japanese market is a good one given the exciting nature of the Japanese market as well as the potential expansion of our marketing base which would result in more revenue and hence increased profitability.

However, as we enter this market, we need to be well informed of the political risks that exist in the new market and hence convince ourselves that they are manageable. By virtue of operating in two currencies, we will also be exposed to foreign currency risks including transaction, operating and translation currency risks (Maurice, 2005). If unfavorable, all these risks have the potential of eating into our profitability hence watering down our objective of venturing the Japanese market.

As such, the report recommends that the company comes up with appropriate measures of identifying, measuring and managing the risks so as to ensure our success in the new market. Thank you for giving me the opportunity to prepare and present this report to you. It is hoped that it will help you make a more informed decision when venturing into the new market. Please contact us if there is a need for more information.

We look forward to working with you in other future projects. Sincerely, Krieger Colbey, President and CEO. Acquisition of Galaxy Pharma Ltd by Vibrant Ltd Introduction Vibrant Ltd which is a Canadian company intends to acquire Galaxy Pharma based in Japan. Both companies are pharmaceutical companies. This acquisition has a number of advantages for Vibrant limited mainly because it is expected to widen Vibrant Limited’ s market which could see it make more sales and hence profits. However, the transaction also exposes the company to a number of risks including political risk given that these are two different companies with different political systems as well as a different culture.

As such, it calls for an evaluation of Japan’ s political environment in a bid to determine the appropriateness of their business environment and whether there are any government policies that might hinder their venturing into the new market. The transaction also exposes the Canadian company to various forms of currency risks including transaction exposure, translation exposure as well as operation exposure. These currency risks are attributed to the fact that Pharma Company reports its accounts in terms of Japanese Yen while Vibrant Company operates in terms of Canadian dollars.

It means that the transaction will involve exchange two types of currencies while their operations will still be conducted in the two currencies despite the fact that the financial results will have to be reported using the currency of the parent company. As such, the transaction will involve the above currency risks as stated. Thus, this paper is aimed at evaluating the entire transaction in regard to the potential risks it exposes Vibrant limited to as well as how Vibrant Company can mitigate the risks.

References

:

Stephen, D&, Stephen, P2014, Foreign currency risk management practices in U.S multinationals, Journal of Applied Business Research, vol.13, no. 2, pp.73-85.

Maurice, D2005, International Finance, New York, Rutledge.

Kirt, C2012, Multinational finance: Evaluating opportunities, costs and risks of operations, New York, John Wiley & Sons.

Wang, P2005, The economics of foreign exchange and global finance, Berlin, Springer.

John, C2014, Understanding and managing political risk, London, Rutledge.

Nicholas, S2014, What risks do organizations face when engaging in international finance activities, Retrieved on 15th September 2014, from;

http://www.investopedia.com/ask/answers/06/internationalfinancerisks.asp

Whitaker, L2004, The challenges of going global, Financial management, vol. 95, no. 2, pp. 88-97.

Jabez, D2010, Management of multinational corporations, New York, Wiley.

Alan, S2009, Multinationals financial management, London, Rutledge.

Josephine, M2008, International business finance, Sydney, Prentice Hall.

Download full paperFile format: .doc, available for editing
Contact Us