The Southeastern Oklahoma State University (Southeastern) online Master of Business Administration (MBA) with a Concentration 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 generally as financial “liberalization” or, in specific terms, capital account liberalization or trade 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 in global context due to 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, the evolution of ecommerce 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) and the World Bank 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 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.
International Trade Matters for Modern Business
According to Global X, foreign sales accounted for roughly 40% of revenue for S&P 500 companies in 2022. Notably, information technology companies relied on foreign markets for about 58% of company sales that year. Foreign trade is an important driver for large, multinational companies.
But multinationals are just the tip of the iceberg in international trade. According to the U.S. Census Bureau, over 97% of American companies that exported in 2021 are small- to medium-sized businesses (under 500 employees). This sector of small- to medium-sized companies is an essential driver of job creation in America.
Free trade between nations is often highly desirable for companies based in the United States, assuming trade agreements are fair, with no heavy tariffs or trade imbalances. However, numerous factors like economic and supply chain volatility spurred by the COVID-19 pandemic, tariff wars, periods of instability of the U.S. dollar, inflation and political or social movements can dramatically impact and complexify global trade and revenue.
For instance, FactSet reports S&P 500 companies that generate more than 50% of their revenue outside the U.S. saw earnings and revenue declines in Q1 of 2023 while companies that generate more than 50% of their revenue inside the U.S. saw increases during the same period. Myriad economic, social and technological factors can contribute to such market shifts, like the expansion of eCommerce during and following the pandemic driving Amazon’s continued revenue growth inside the U.S.
Thus, professionals working in international finance must have a firm grasp on the complexities of foreign trade, currency exchange, supply chains and more, all while monitoring and understanding the implications of global events and issues. Navigating the waters of international finance is certainly not a simple matter.
The Future for Today’s Students
What this portends for prospective MBA students interested in this area is a future in a challenging, high-demand and 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 Southeastern’s online MBA with a Concentration in Finance program.