Global Marketing Strategies

Contents

TASK 1 2
1.0. INTRODUCTION 3
2.0. HOW CREDIT CRUNCH WILL AFFECT INTERNATIONAL BUSINESS? 4
3.0. RECOMMENDATIONS TO OVERCOME THIS CREDIT CRUNCH 6
4.0. CONCLUSION 7
5.0. BIBLIOGRAPHY 8

TASK 1

Discuss the likely effects to international/global business by the recent credit crunch. Suggest ways to overcome these problems.

1.0. INTRODUCTION

Credit crunch is an economic downturn, when the world experiences a credit crisis. It is caused by declining value in real estate and by defaulting loans, arising from contraction in the supply of credit.

A credit crunch is a [sudden] reduction in the availability of liquidity in the financial markets ( i.e. loans or credit) resulting in a sudden increase in the cost of obtaining a loan from financial institutions(Pearson, M. 2008)
The United States of America banks had extended loans for purchase of homes to “risky” clients and this resulted in loan defaults in mortgages but soon spread to the rest of the market both in the United States of America and in the rest of the world.

2.0. HOW CREDIT CRUNCH WILL AFFECT INTERNATIONAL BUSINESS?

The credit crunch affects international business in many ways as described below:

1.0. High Interest rates- the credit crunch has resulted in high interest rates and high cost of borrowing. This affects businesses as the cost of re-financing or diversifying a business increases. Businesses with large debt see high cost of servicing this debt and it escalates until the business is not able to continue operating profitably;
2.0. Lack of Cash Flow - Most businesses are experiencing a lack of cash flow from business operations due to two primary reasons. First, customers of the business have cut spending in light of the recession, causing the cash flow coming into the business to slow down. Because of this lack of