Sometimes, working with international companies and banks means understanding the theory behind the practice. The most common theories include globalization, internal business, and finance theory.
- Globalization: Globalization theory describes how individuals, firms, and governments interact globally, enabling cross-border business operations and collaboration with international banking systems.
- International Business Theory: This involves commercial transactions between two or more countries, including resource leveraging, selling goods, and providing services across national borders. Companies typically have different codes for each country of operation and work with banks from various countries.
- Modern Portfolio Theory (MPT): MPT recommends diversifying investments to optimize returns and minimize risk. This applies to business management by spreading risk with multiple company codes or overseas bank relations.
- Product Life-Cycle Theory: This theory outlines the stages of a product's lifespan, from conception to retirement. In the maturity phase, companies seek new markets to maintain growth, expanding into different countries with new codes and banks.
- Exchange Rate Theory: This theory explains how currency values compare. Companies working in multiple countries must manage exchange rate risk, often working with different banks.
- Institutional Theory: Companies must comply with local rules and regulations to gain legitimacy and survive. Expanding into a new country may require creating a new company code and working with local banks to comply with local norms.
These theories and concepts demonstrate the business's need to diversify operations globally using different company codes and overseas bank relations.
A company code is a unique key that classifies an independent accounting entity in an organization. In other words, it is the smallest organizational unit for which a complete, self-contained set of accounts can be drawn up for purposes of external reporting. For instance, a multinational firm may have different company codes for each of its foreign and domestic subsidiaries.
This allows for detailed accounting and reporting for each distinct entity, even when they belong to the same overall organization. And not only is it important to work with different company codes or with banks, but it's even more crucial to report these data in a careful and detailed manner in order to improve your own business.
