There are various factors on which MNCs or international business depends and one of the major factors is financial markets, or better way of saying is efficient and effective international financial markets. Effective and efficient international financial markets are crucial not only for the largest MNCs in the world but also for the small- and medium- sized enterprises.

MNCs rely on international financial markets because these companies must be aware of how their foreign competitors will be affected by movements in exchange rates, foreign interest rates, labor costs and inflation. These factors highly affect the economic policies of a firm.After getting a basic idea what does international business look like and how it is connected with international financial markets, it is logical to go deeper into understanding of these markets. International Financial Markets Mishkin F.

S. in his book states that "many economists view markets as an ideal mechanism for allocating recourses". Having analyzed several close definitions of financial markets (Madura & Fox, (2007) and Mishkin, (1989)) we determined financial markets as markets in which funds are transferred from those who have excess funds available (lenders) to those who have a shortage (borrowers). Funds could be channelled through direct or indirect finance. Direct finance assumes that there are no intermediaries between borrowers and lenders in financial markets (Mishkin, 1989).

Financial markets play a crucial role in economy and there are several reasons for that. First of all they help individuals with investment opportunities to capitalize on funds from persons who don't have such opportunities. Secondly, they improve the wealth-being of customers by permitting them to time their purchases. As a result financial markets, which are operating efficiently, contribute to higher production and efficiency of the overall economy, hence the economic welfare of everyone in the society. (Mishkin, 1989).Frederic Mishkin in his book suggested several classifications of financial markets according to their structure.

Thus, we can distinguish Debt and Equity Markets (two main ways of raising capital, through issuing a debt instrument such as a bond or a mortgage or by issuing equities such as common stock), Primary and Secondary Markets (the initial selling of the new issues of a security to a buyers takes place at the Primary market they could be than resold on the Secondary market) Exchanges and over-the-country Markets (we can distinguish organized markets or exchanges and unorganized ones or over-the-country markets) Money and Capital Markets (short-term debt instruments are traded on the Money market, long-term debt and equity instruments are traded on the Capital market). (Mishkin, 1989)The development of international business and emerge of Multinational Corporations contributed greatly into the expansion of international financial markets. The main reason behind this was that investors and creditors discovered that they could generate more money and transfer their financial risks by speculating on foreign country's favourable economic conditions. (Madura & Fox, 2007) Today we can single out five main international arenas for investors and creditors to operate, namely:1.

International bond market 2. International stock market 3. Foreign exchange market - "The trading of currencies and bank deposits denominated in particular currency takes place in the foreign exchange market" (Mishkin, 1989) The main purpose of the foreign exchange market is to facilitate international trade and financial transactions. This is achieved by allowing currencies to be exchanged. This market is organized as over-the-country market and is heavily regulated by government which sharply distinguishes it from any other market. The reason behind that is simple the change of the currency effects on all good's prices denominated in that currency).

(Madura ; Fox, 2007)4. International money market 5. International credit market Below, there are specific examples of how particular forms of international business such as export/import and FDI can be influenced by financial markets. How currency fluctuations affect importers and exporters In current scenario, there is a huge volatility in FX markets.

This volatility can work against both, an importer and an exporter.Importers: If a payment in a foreign currency has to be made at a future date. There is no way to guarantee that the price in the currency market will be the same in the future; it is quite possible that the price will move against the company, making the payment cost more and reducing margin for the importer. On the other hand, the market can also move in a business' favour, making the payment cost less in terms of their home currency.

Exporters: Generally, firms that export goods to other countries benefit when their home currency depreciates, since their products become cheaper in other countries. Firms that import from other countries benefit when their currency becomes stronger, since it enables them to purchase more. If an export/import company conducts business in a volatile market, it is exposed to a higher degree of currency rate risk. Sudden changes can be disastrous for a company that does not plan ahead by detracting from its bottom line. Foreign Direct Investment "Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations.

It does not include foreign investment into the stock markets." (About.com)One of the best examples of FDI is the evolution of Nike Inc. In 1962 Phil Knight, a business student at Stanford's business school had a better idea on how a US firm could use Japanese technology to break the German dominance of the athletic shoe industry in the United States.

Knight signed an agreement with a Japanese company Unitsuka Tiger Shoe Company to produce shoes in Japan and sold it in US under the name Blue Ribbon Sports (BRS).In 1972, Knight exported his shoes to various countries like Canada, Australia. He licensed factories in Taiwan and Korea to produce athletic shoes and then sold in Asian countries. In 1978, BRS became Nike Inc. and began to export shoes to various parts of Europe (Nike.com).

As a result of exporting and FDI, Nike's international sales reached $1 billion by 1992 and were about $6 billion by 2008 (Findarticles.com). In our opinion, Nike achieved the above figures because of investing in different financial markets across the globe. Has it been a poor economy in say, Korea or Taiwan, it could not have managed to sell its products in Asian countries.

Hence, it is very much true that the one of major factors in success of Nike was efficient and effective financial markets.