Introduction
This research involves an investigation of General Motors company’s overseas operations and includes areas such as organization’s investments, exchange rates for the foreign country, capital markets and currency restrictions among others. General Motors Company, GM takes part in the design manufacture and sale of various types of vehicles, trucks as well as automobile parts. This company also engages in the provision of services of finance via through General Motors Financial Company, Inc. The segments for operation of this company include GM Europe, GM North America as well as GM International (Davis, 2012).
Organization’s investments
This company was able to make its initial investment in a car sharing startup in China as a way of reshaping the provision of its products and services as it tried to spread across the globe. General Motor has also been able to make considerable progress in terms of cooperation within various Chinese companies to explore its ride-sharing market. The investments made by globally by this automaker organization especially in China has just been a way of searching for new opportunities for expansion and broadening of its customer base. Part of GM’s investments has been able to involve the acquisition of a mechanism and technology that has played a major role in sharing drive experiences with their customers in most markets around the globe. Just like, several other major automakers around the world, GM has been able to make steps and achievements towards collaborating with various technology companies in China. This has been one of the ways that the company is bringing together to help them share market as well as sharing threats, especially through a traditional car ownership model. A few years ago, GM was able to make investments valued at more than $500 million in companies such as Lyft and others (Davis, 2012).
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Capital markets
A couple of years ago, US government was able to bail out General Motors, which was a crucial step towards the recovery of the company’s capital market as well as the general automotive industry. This was because GM had previously experiences stability challenges that had seen the capital and capital markets drying up for most players in the automotive industry. For this company, the capital market comprises two basic markets, which are equity and debt. Equity involves more expenses in comparison to debt especially in situations characterized by low rates of interests. On the other hand, debt is regarded as less expensive because of the tax considerations involved. However, such debt required paying even when the company is experiencing financial difficulties. As such, the debt part of capital market for GM is associated with more risks in comparison to equity with regard to the claims that may be placed on future revenues for the company. In this respect, GM has the tendency of having lower ratings of credit due to its higher advantage. Moreover, the company has the tendency of having lower valuation because higher risks often translate into high capital costs. In the cost of its investment in international markets and particularly China, GM has been able to a market strategy based on capital structure whose main objective is arrive at an optimal structure of capital and find a desirable balance off equity and debt as components of capital market. GM has been able to adopt this strategy due to the absence of other options that are viable in assisting the growth of its operations (Cabral, 2000).
Exchange rates
The foreign operations of GM in China are largely affected by the economic policies and exchange rates developed by the Chinese economy. For most investors including GM, the Chinese policies on exchange rates are considered as the epicenter of considerable shifts experienced at the level of global economy over the last couple of years. This shift involves global commerce, prices of different commodities and fluctuations in stock market as well as changes in the levels of foreign exchange. Being a key player in matters of trade in the Asia economy, which is increasingly becoming dynamic, Chinese currency and its exchange rates have continually faced changing roles both regionally and internationally. The operations of GM in the China have to be cognizant of the struggles that have been faced by Chinese currency and the associated exchange rates as it experienced evolutions an emerging market to become one of the central players with regard to the global economy. The Chinese economy has previously been subjected to decisions on policy that have often transmitted shockwaves through various global markets. Gradual evolution and alterations in the Chinese policies on foreign exchange have played a critical role in easing its rank as one of the leading economies around the world while at the same time trying to promote its currency as a reserve currency around the globe (Eiteman et al., 2016).
Currency restrictions
The success of operations of GM in China is partly predicated on kind of currency restrictions imposed on foreign investors. To succeed in China, GM and other multinational corporations must adjust their operations to follow the local policies and regulatory requirements that pertain to currency restrictions. However, GM has to be careful not to follow the currency restriction requirements in China at the expense of its global standards and best internationally accepted practices. China is increasingly changing thus the challenges and opportunities facing foreign companies such as GM are changing. As such, currency restrictions play a critical role in regulating various sectors especially the ones in which foreign companies tend to operate. Such restrictions also ensure that foreign investments are regulated accordingly and in a manner, that business is effectively carried out in the Chinese market. In this regard, foreign companies are forced to function under foreign-exchange regulations that are similar to export and import regulations for quotas, licensing and duties. Recently, China has made a move to enforce policies on closed capital account where individuals, banks, and companies may not be able to transfer money out of the country or inside the country without compliance with strict regulations and rules. Such moves associated with currency restriction have the tendency of influencing the nature of business activities carried out by GM in the Chinese market. Regulation of the foreign exchange flow in and out of a country significantly influences the setting of exchange rates especially for foreign investors (Samson and Daft, 2011).
Teaching other small-business owners to break into this lucrative overseas market
Having acquired substantial knowledge in relation to their operation in overseas market especially the Chinese market, the management at GM is able to teach and train various business-owners ways in which to break that particular market. The management could mobilize resources within its reach and ability and use them to organize training programs and sessions for entrepreneurs and small business owners. Alternatively, the management could just organize the training and teaching programs and have the business owners seeking training to finance the programs. Based on its broad understanding of the Chinese market, the GM management would be better placed to educate small-business owner regarding the kind of challenges they are likely to encounter. To this extent, the business owners are able to prepare adequately on how to address such challenges. Overcoming and taking advantage of the differences existing between the business owners and their competitors in the Chinese market is another area on which the GM management can choose to focus when it comes to using their knowledge in teaching small business owners. In this regard, such business will learn about useful and effective strategies that are required for them to leverage on their edge in the market. Another area of focus by the management in teaching involves government policies and regulations for foreign investors and ways in which they can be effectively addressed. In this case, the small business owners need to understand that they need to learn ways of responding to trade barriers and other government requirements for them to break into this lucrative overseas market (Davila et al., 2007).
Particularly, the Chinese government welcomes different forms of foreign investment including those done by small business owners. China has managed to sustain a higher rate of economic growth and achieved the broadening as well as widening of its domestic market due to its positive attitude towards foreign investment. This move has managed to assist China in raising the level of its attractiveness to foreign investors. Nonetheless, it is important to note that China is also keen on ensuring the existence of a level playing field for all the competitors that come on board as investors. The management could also teach other small-business owners that in the course of trying to break into the Chinese market, they is need for them to be familiar with capital markets, currency restrictions and exchange rates among other policies that govern foreign investment in this market. This knowledge will enable them to address a wide range of challenges associated with the present climate of China’s investment market. It is important for the small business owners seeking to make entry into this market to be more conversant with some of the industrial regulations and policies that are meant to offer protection to state-owned corporations and promote domestic companies. There are also equity caps as well several restrictions usually imposed on foreign investment that are important for consideration by the management in training the small business owners. Such information will assist them in understanding their rights even though the legal system may prove to be unreliable (Eiteman et al., 2016).
Types of research for the small business in making best decision on financing the company
It would be necessary for small businesses to carry out extensive research when it comes to some of the most appropriate ways of arriving at best decisions with regard to financing the company. In this regard, it would be prudent for the small business to research about equity and the manner in which it could be useful as a source of finance for the company. Essentially, business owners who make the decision to use equity as one of the methods of financing their company turn over a portion of the ownership stake in the business to investors in return for financial support. A broad research on equity will enable business owners to establish the benefits and challenges associated with deciding to adopt it. According to Samson and Daft (2011), the use of equity as a source of financing for small businesses is beneficial in the sense that the business owner is usually not under any obligation to repay or refund the investors involved in funding the business.
However, it is important to note that the making of this decision has a downside in the sense that the business owner would be expected to surrender a portion of his or her business’ ownership to the investor. The implication of such a decision is that the business owner will not have the full control over the business especially when it comes to arriving at critical choices and decisions in the business. Eiteman et al. (2016) identified various sources of financing for small business, which included self-funding, Bootstrapping as well as family and friends among others. Another area of research that would be important for consideration by small business in relation to making the best decision on financing for the company is angel investment. Angel investment involves individuals who are typically affluent and have made the decision to invest in different business. Some of these individuals are always willing and able to invest in small businesses once they are convinced that it is something in which it is worth investing. The observations made by Davila et al. (2007) indicate that angel investors are increasingly coming up with various investment groups that help in spreading the risks involved in making business investments.
Various methods for financing international trade
In financing international trade, there are various methods involved such as the bill of exchange where the process if collections of trade is started by the bank belonging to the exporter. In the case, the seller avails the required shipping documents via a system of banking together with some drafts indicating the shipment value. Additionally, the exporter writes a payment demand used presenting instructions to the importer concerning the amount of money that should be paid at a future date. The other method used in financing international trade is that of cash-in-advance where the importer is expected to make an upfront payment in relation to the orders that he or she makes (Eiteman et al., 2016).
One notable feature about this method is that it eliminates the risks involved in transactions from made by the exporter. Moreover, this method makes it more difficult for the exporter to sustain any competition in the market. The hallmarks of this technique include electronic systems of payment such as payments through wire transfer and use of credit cards for payments. Use of terms of open account is another method for financing international trade with more considerable involvement by financial services organization and banks. The options of finance that exist in this particular method often influences transactions carried out at the phase of post-shipping. Under this method, additional categories involve debt reduction, letters of credit and documentary collections (Samson and Daft, 2011).
Recommendation
Based on the information located above, the owner of the small business should take the international leap. This is because the taking the international leap presents a myriad of opportunities not just for additional investment but also for growth and expansion into other countries and regions. Such kind of opportunities would not be available for this particular business without taking an international leap to venture in a different market environment internationally. Nevertheless, it is strongly recommended that the business carefully observe the conditions addressed above in relation to making investments and entries into new international markets. This step will ensure that the business is timely and adequately prepared to comply with the necessary regulations and policy frameworks that may be enforced by the concerned government. Additionally, this step would be crucial in ensuring that the business is in a better position to surmount the challenges and competitions that are likely to come its way.
Conclusion
In summing up, a company or business that seeks to go to the extent of making an international venture needs to start by carrying an in-depth research and a comprehensive study on various issues of market operation. Such issues should include capital markets, possible investments opportunities, currency restrictions and exchange rates for the foreign country among others. Moreover, it is critical for the business to carry out effective research to understand the appropriate ways that can used in financing the company.
References
Cabral, L. M. B. (2010). Introduction to industrial organization . Cambridge, Mass. [u.a.: MIT Press.
Davila, T., Epstein, M. J., & Shelton, R. D. (2007). The creative enterprise: Managing innovative organizations and people . Westport, CT: Praeger.
Davis, M. W. R. (2012). General Motors: A photographic history . Charleston, S.C: Arcadia Pub.
Eiteman, D. K., Stonehill, A. I., & Moffett, M. H. (2016). Multinational Business Finance, Global Edition . Harlow, United Kingdom: Pearson
Samson, D., & Daft, R. L. (2011). Management . South Melbourne, Vic: Cengage Learning.
