Global Financial Management

Running head : GLOBAL FINANCIAL MANAGEMENT

Introduction

The European Union , with a population of over 500 million people in 27 European countries and a combined economy that generated a GDP of 18 .39 trillion in 2008 , presents a perfect opportunity for an American MNC planning to expand into foreign markets (IMF , 2009 . Multinational companies (MNC 's ) operate optimally in markets where they have a comparative advantage . Large populations with high levels of disposal income and liberalized economic systems , encourage trade and expansion HYPERLINK "http /en .wikipedia .org /wiki /Charles_Emrys_Smith " \o "Charles Emrys

Smith " Smith , 2007 . Financial transactions conducted in a common currency simplify sales and purchases of goods and services Considering these factors , Acme should acquire JEL Industries as part of its entry strategy to the European Union market

Some of the benefits of selecting this firm include cheaper costs of production due to the free movement of resources across bs . Labor and materials can relocate anywhere without the imposition of additional tariffs or duties ( HYPERLINK "http /en .wikipedia .org /wiki /Charles_Emrys_Smith " \o "Charles Emrys Smith " Smith , 2007 . The adoption of uniform standards by the EU contributes to lower production costs than those faced in market with different product specifications . With regard to sourcing of supplies the firm will benefit from preferential treaties signed between the union and other trading blocs . Such arrangements will give the firm a price advantage over other players in the industry operating outside the union

A major disadvantage of acquiring a firm operating in the EU...