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ACCT2542 - 1 Executive Summary This report is on Foster's...

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1. Executive Summary This report is on Foster's Group Limited which is a global business. The headquarters of this business is 77 Southbank Boulevard, Southbank, Victoria 3006 Australia 1 . This business’s primary function is the production and distribution of alcoholic and non- alcoholic beverages. Foster's Group Limited is made up of four operating divisions each with their own specialised areas. This gives Foster's Group Limited the ability to coordinate a wide range of resources to reach its goal of offering a premium range of products. 2. Business Activities Foster's Group Limited operates in the United Kingdom, Europe, the United States and Asia Pacific and its products are sold in more than 155 countries worldwide. This wide range of locations helps Fosters remain diverse and also take advantage of scale economies in production 2 . Fosters’ sale of Australian Leisure and Hospitality Group and the Lensworth property division in 2003 and 2004 respectively marked the businesses shift to a pure multi- beverage organisation. Using capital from this sale Foster's Group Limited extend its range of market leading brands. These brands include Victoria Bitter, Beringer, Lindemans, Wolf Blass, Carlton Draught, Penfolds and The Black Douglas. The 2005 acquisition of Southcorp expanded Fosters range of wine labels and helped diversify Fosters product range. 3. Influences on Fosters in the global market 3.1 Financial a) Currency fluctuations Fosters operates in many countries and therefore needs to use multiple currencies. These currencies rise and fall in value, these fluctuations can affect the value of a firm’s foreign assets and liabilities as well as operational costs. This can impact on the decisions made by the business when choosing a source of funds and raw materials as well as the scale of production. Fosters is largely protected from currency fluctuations because of its large scale of production and the diverse range of currencies it uses to trade. For instance Fosters substantial trading in the United States and Australia means any decreased value in one would be mean an increase in the other. b) Interest Rates Interest rates represent the cost of borrowing money locally. Low interest rates encourage growth while high rates discourage it. Businesses will always look to borrow at the cheapest rate, however when borrowing internationally interest rates must also be taken into account as the value of currency can change. 1 http://www.fosters.com.au/about/contact_details.htm 2 https://www.fosters.com.au/investors/docs/2006ABAREConferencepJamesLovell.pdf Page 7
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This factor has little influence on Fosters which raises most of its capital through equity finance. Although equity finance does not require an interest to be paid it can require a dividend (percentage of profits earned) annually to be returned to the investor or the retention of profits. This form of financing protects Fosters from changing interest rates but can prove expensive if the business chooses not to retain profits.
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