Technon has identified several major needs and expectations in terms of international and trade finance banking...

 

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Technon has identified several major needs and expectations in terms of international and trade finance banking products and services. In addition to extending additional credit in support of planned international expansion, the Company seeks to establish a relationship with a financial institution that understands the challenges of a SME expanding its international reach. The company expects to deal in both import and export transactions, in a combination of documentary letter of credit and open account transactions. Its primary markets will be the United States, China, India and possibly a foray into the European Union through Ireland. Technon requires significant support in terms of advisory services and transactional 'hand-holding', and wishes to control overall banking costs, while ensuring access to adequate financing-including pre-export financing, as well as the option to offer competitive financing options to its overseas buyers. The Decision Factors You are a consultant retained to advise the CFO of Technon in terms of the financial aspects of the Company's international activities. Consider the company and its business, probable nature of its international activities over the medium term, specific transactional needs, as well as the three candidate banks and their respective offerings. Case Study Discussion Questions 1. There are two major schools of thought relative to the establishment and management of international banking (trade finance) relationships with financial institutions. One approach suggests that domestic banking and international banking ought to be kept distinct and separate, to minimize risk to the company, and to ensure that no single financial institution has excessive leverage against a company. The second approach suggests that an integration and holistic approach be taken, where a company establishes a one-stop shop relationship with its bankers. Which approach is best suited to Technon? 2. What should the primary decision drivers be for Technon at this stage of its evolution? 3. Articulate the case in favour of each bank as a potential service provider to Technon. Note one. negative characteristic. 4. Select the recommended solution for Technon. Technon has identified several major needs and expectations in terms of international and trade finance banking products and services. In addition to extending additional credit in support of planned international expansion, the Company seeks to establish a relationship with a financial institution that understands the challenges of a SME expanding its international reach. The company expects to deal in both import and export transactions, in a combination of documentary letter of credit and open account transactions. Its primary markets will be the United States, China, India and possibly a foray into the European Union through Ireland. Technon requires significant support in terms of advisory services and transactional 'hand-holding', and wishes to control overall banking costs, while ensuring access to adequate financing-including pre-export financing, as well as the option to offer competitive financing options to its overseas buyers. The Decision Factors You are a consultant retained to advise the CFO of Technon in terms of the financial aspects of the Company's international activities. Consider the company and its business, probable nature of its international activities over the medium term, specific transactional needs, as well as the three candidate banks and their respective offerings. Case Study Discussion Questions 1. There are two major schools of thought relative to the establishment and management of international banking (trade finance) relationships with financial institutions. One approach suggests that domestic banking and international banking ought to be kept distinct and separate, to minimize risk to the company, and to ensure that no single financial institution has excessive leverage against a company. The second approach suggests that an integration and holistic approach be taken, where a company establishes a one-stop shop relationship with its bankers. Which approach is best suited to Technon? 2. What should the primary decision drivers be for Technon at this stage of its evolution? 3. Articulate the case in favour of each bank as a potential service provider to Technon. Note one. negative characteristic. 4. Select the recommended solution for Technon.

Answer rating: 100% (QA)

ANSWER 1 The most appropriate approach for Technon would be to establish a onestop shop relationship with its bankers This would allow the company to ... View the full answer