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Navigating the International Finance Waters

The Southeastern Oklahoma State University online Master of Business Administration with an emphasis in Finance includes a critically important course in International Finance Management. This course focuses on the financial aspects of managing multinational firms -- a discipline with excellent career potential. Topics include foreign trade flows, foreign capital flows, determinants of currency exchange rates, forecasting currency exchange rates, arbitrage, the use of derivatives to manage exchange rate risk, and raising and investing long-term funds internationally.

The economies of the world, especially developed nations and emerging economies, are now working toward globalization. Their doors are open to doing business with one another, a concept known in international finance as "liberalization."

Four Decades of Dramatic Change

The study of international finance reveals a dramatically less dynamic operating environment just a few decades ago. National borders were far more important to economics and business in the 1980s, when the United States was the largest consumer market in the world. American companies prospered simply by focusing on the domestic market.

Most international business occurred in close geographical proximity, with some exceptions in the major imports and exports of the world's leading economies, including the U.S., Germany and Japan. American tobacco, Japanese electronics and German automobiles were highly sought after. China and other Asian economies began to rise because of low cost labor. One of the most significant catalysts in international finance had yet to emerge -- the internet.

International Finance Today

Throughout the intervening decades from World War II to the end of the 20th century, international trade steadily increased. The growth trajectory of liberalization took a sharp upward turn in the new millennium, with the trade value of all goods and services doubling from 2005 to 2015. Corporations began to find new ways of overcoming trade barriers, including different currencies, values and political situations. They were aided by the internet, advances in supply chain and logistics, dramatic progress in transportation and telecommunications technologies, and the increased accessibility and lower costs of these services.

Concurrent with technological progress, financial movements and innovations to enable trade started to emerge. International trade agreements like the General Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA) and entities like the World Trade Organization (WTO) promoted international trade and provided a regulatory environment to promote trust between trading partners.

Cross-border stock listings, international mutual funds, currency derivatives and multi-currency bonds gave liberalization the push toward what we now describe as a globalized economy. The objectives of all of these advancements from a business perspective were to enable broader investment in businesses, drive shareholder wealth, and benefit other stakeholders, primarily employees, vendors and customers. From a governmental perspective, the objective was to create a sustainable environment for global trade by promoting free trade.

Foreign sales accounted for 44 percent of revenue for S&P 500 companies in 2016, due to growing consumer economies around the world. But multinationals are just the tip of the iceberg in international trade; 98 percent of American companies that export are small and medium-sized businesses, which have become the primary driver of job creation in America.

Free trade between nations is generally highly desirable for companies based in the United States, assuming trade agreements are fair, with no heavy tariffs or trade imbalances. However, we have yet to realize the full potential of international trade and finance, largely because the rate of liberalization has outpaced the influx rate of MBAs into this field.

The Future for Today's Students

What this portends for prospective MBA students interested in this area is a future in a high-demand, high-reward career. If you choose this path, your career options may include becoming a financial analyst, financial manager or securities sales agent. You could work your way into commercial banking, investment banking, hedge funds or venture capital. Starting salaries and expected career income are relatively high, making an MBA focused on finance and international finance an excellent career investment.

Learn more about the Southeastern Oklahoma State University online Master of Business Administration with an emphasis in Finance.


Sources:

eFinanceManagement: International Finance Management

Forbes: Financial Career Options

Our World in Data: International Trade

PR Newswire: S&P 500 Foreign Sales at 44.3%, Lowest Level Since 2006

International Trade Administration: Profile of U.S. Exporters Highlights Contributions of Small- and Medium-Sized Businesses

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