International Investment Portfolio for Mexis Corporation

Investments in Mexis Corporation’s Worldwide Portfolio

Elizabeth Jacobs must incorporate some investments in Mexis Corporation’s worldwide portfolio for investment in the case study. Elizabeth’s manager delegated the job because there is a need to diversify their activities and instruments in order to remain relevant to a bigger market. Some of the important considerations she can consider in this regard include transaction costs in various regions, currency risks, and the liquidity stake. Elizabeth must analyze these issues in order to assess the risks to the foreign capital market as well as the potential benefits to the firm.

Differences in Transaction Costs in Various Regions

Firstly, the differences in the levels of development within regions as well as the economic stability can make the transaction costs on various items to vary. Therefore, there is need to understand the nature of the expenses in the foreign market that one considers investing their capital. The move is critical since one can be able to determine the operational costs and profit margins. In developing and underdeveloped regions, the cost tends to be high which is as facilitated by the brokerage commission in the international market. In this regard, the profits in business are minimal.

Currency Risk in Foreign Investment

Secondly, the currency risk also matters in investing in a different area since its stability defines that of the firm too. The reason is that the currency can inform a company such as Mexis regarding making long-term or short-term plans hence creating an efficient budget. Investing in countries that have unstable currency or once that is weak can make a company predict the potential losses and other effects to their business interests, hence developing contingency plans to gain most out of the venture.

Liquidity Risk and Short-Term Financial Demands

The last issue is about liquidity risk regarding meeting the short-term financial demands. In this regard, Elizabeth can be able to calculate the nature of capital and assets required for operational purposes and if the profits can sustain the business. In a scenario where the risk of the company not able to meet the financial demands of the short term needs or a conversion of a security/asset can lead to a reduction in the capital of the business, then the firm is likely to run bankrupt.

Considerations for Investment

Some of the alternatives that Elizabeth can consider include the geographical location, political stability, government policies of individual states, and other entry barriers such as licensing (Moltke, 2017). The location can indicate the nature of growth in the market and the preference of certain commodities. The stability of the state security, as well as the policies, helps to indicate the requirements of entry into a market and strategies to blend into a new one.

Solution: Tailored Investments for Mexis Corporation

As a solution, Elizabeth needs to consider the potential areas for investing, the needs of the clients in various regions, currency stability, policies of different government bodies, and the cost of operations (Moltke, 2017). Through considering this, the individual can be able to come up with competent portfolio for Mexis Corporation in various sectors in the word that is tailored to a region’s conditions. Also, Elizabeth needs to include other international investment tools such as through equity, cash, bonds, mutual funds, commodities, real estate, and investing in small businesses having the presence in the regions of interest (Finance Zacks, 2017). The tools can increase the benefits to the enterprise.

Conclusion: Enhancing Business Profitability through Diversification

In conclusion, Elizabeth can consider the guidelines of the risks of currency, liquidity and the transaction costs as a basis of the creating more investment for the enterprise’s portfolio. Through alternatives such as geographical regions and the market needs, Elizabeth can come up with tailored investments which can respond directly to client wants. Also, using the security market as a tool for risk assessment, Elizabeth can be able to plot the risks against the returns of the securities in which the beta value must be either one or below this market average (“Security Market Line,” 2017). The tool is important since diversification cannot be a solution to some of the risks (Faulkenberry, 2017). Lastly, the purpose of diversification stratagem is to enhance the profitability of the business and effective management of its securities through the increase in economies of scale.

References

Faulkenberry, K. (2017). Portfolio Diversification Definition and Purpose - Arbor Asset Allocation Model Portfolio (AAAMP) Value Blog. Arbor Asset Allocation Model Portfolio (AAAMP) Value Blog. Retrieved 8 July 2017, from http://www.arborinvestmentplanner.com/portfolio-diversification-definition-and-purpose/

Finance Zacks. (2017). Types of Investment Instruments. Finance.zacks.com. Retrieved 8 July 2017, from http://finance.zacks.com/types-investment-instruments-1682.html

Moltke, K. (2017). An International Investment Regime? Issues of Sustainability. Retrieved 8 July 2017, from https://www.iisd.org/pdf/investment.pdf

Security Market Line, SML. (2017). Financial Management Pro. Retrieved 8 July 2017, from http://financialmanagementpro.com/security-market-line-sml/