1 / 25

MULTINATIONAL FINANCIAL MANAGEMENT

MULTINATIONAL FINANCIAL MANAGEMENT. Alan C. Shapiro Sixth Edition POWER POINT LECTURES: J. F. GRECO, Ph.D. California State University, Fullerton. CHAPTER 1 Introduction: Multinational Enterprise and Multinational Financial Management. CHAPTER OVERVIEW:

Jims
Download Presentation

MULTINATIONAL FINANCIAL MANAGEMENT

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. MULTINATIONAL FINANCIAL MANAGEMENT Alan C. Shapiro Sixth Edition POWER POINT LECTURES: J. F. GRECO, Ph.D. California State University, Fullerton

  2. CHAPTER 1Introduction: Multinational Enterprise and Multinational Financial Management • CHAPTER OVERVIEW: Part I. The Rise of the Multinational Corporation Part II. Multinational Financial Management: Theory and Practice

  3. PART I.THE RISE OF THE MULTINATIONAL CORPORATION I. The MNC: Definition • a company with production and distribution facilities in more than one country.

  4. THE RISE OF THE MULTINATIONAL CORPORATION B. Traditional Economic Theory 1. Classical Theory: a. Smith, Ricardo b. Comparative Advantage: macroeconomic differences

  5. THE RISE OF THE MULTINATIONAL CORPORATION 2. MNC supercedes theory relating to: a. mobility of factors b. different costs/skills between nations

  6. THE RISE OF THE MULTINATIONAL CORPORATION C. EVOLUTION OF THE MNC • Reasons to Go Global: 1. raw materials 2. markets 3. minimize costs of production

  7. THE RISE OF THE MULTINATIONAL CORPORATION • RAW MATERIAL SEEKERS • exploit markets in other countries • historically first to appear • modern-day counterparts • Anaconda Copper • Standard Oil

  8. THE RISE OF THE MULTINATIONAL CORPORATION • MARKET SEEKERS • produce and sell in foreign markets • heavy foreign-direct investors • representative firms: • IBM • Nestle • Levi Strauss

  9. THE RISE OF THE MULTINATIONAL CORPORATION • COST MINIMIZERS • seek lower-cost production abroad • motive: to remain cost competitive • representative firms: • Texas Instruments • Atari • Zenith

  10. THE RISE OF THE MULTINATIONAL CORPORATION II. THE PROCESS OF OVERSEAS EXPANSION A. Exporting: • preferred market entry strategy 1. Advantages: low cost low risk learning opportunity

  11. THE RISE OF THE MULTINATIONAL CORPORATION 2. Disadvantages inability to realize full sales potential 3. Use of: a. Foreign agents b. Sales subsidiaries c. Distribution system

  12. THE RISE OF THE MULTINATIONAL CORPORATION B. OVERSEAS PRODUCTION • greater commitment to the local market 1. Advantages: a. Increased sales b. Supply stability c. Control d. Comprehensive service

  13. THE RISE OF THE MULTINATIONAL CORPORATION 2. Question: create or acquire 3. Acquisition -allows speedy transfer of unused parent skills; -used more by small firms.

  14. THE RISE OF THE MULTINATIONALCORPORATION C. LICENSING -local firm agrees to produce for a fee. 1. Advantages: a. Minimum investment b. Faster market entry c. Less risk

  15. THE RISE OF THE MULTINATIONAL CORPORATION 2. Disadvantages of licensing: a. Low cash flow b. Quality standards c. New competitor

  16. THE RISE OF THE MULTINATIONAL CORPORATION D. THE MNC: A BEHAVIORAL VIEW 1. State of mind: committed to producing, undertaking investment and marketing, and financing globally.

  17. THE RISE OF THE MULTINATIONAL CORPORATION E. THE GLOBAL MANAGER 1. Understands political and economic differences; 2. Searches for most cost- effective suppliers; 3. Evaluates changes on value of the firm.

  18. PART II.MULTINATIONAL FINANCIAL MANAGEMENT: THEORY AND PRACTICE I. THE MULTINATIONAL FINANCIAL SYSTEM A. Main Objective of MNC: Maximize shareholder wealth B. Other Objectives Reflect Ability to Link: via affiliate transfer mechanisms

  19. THEORY AND PRACTICE C. Mode of Transfer: Reflects freedom to select a variety of financial channels. D. Timing Flexibility: Most MNC have some flexibility in timing of fund flows.

  20. THEORY AND PRACTICE E. Value The ability to avoid national taxes has led to controversy.

  21. THEORY AND PRACTICE II. FUNCTIONS OF FINANCIAL MANAGEMENT A. Two Basic Functions: 1. Financing 2. Investing

  22. THEORY AND PRACTICE B. Additional Factors Facing the MNC Executive 1. Political risk 2. Economic risk

  23. THEORY AND PRACTICE III. THEORETICAL FOUNDATIONS A. Useful Concepts from Financial Economics: 1. Arbitrage 2. Market Efficiency 3. Capital Asset Pricing

  24. THEORY AND PRACTICE B. Importance of Total Risk 1. Adverse Impact lower sales and higher costs 2. Justifies hedging activities of MNC 3. Diversification reduces risk

  25. THEORY AND PRACTICE IV. THE GLOBAL FINANCIAL MARKET PLACE A. Interlinkage by Computers B. Market Acts as A Global Referendum Process: Currencies may rise or fall

More Related