Multinational financial management 7th CH16

Multinational Financial Management Alan Shapiro 7th Edition J.Wiley & Sons Power Points by Joseph F Greco, Ph.D California State University, Fullerton CHAPTER 16 CORPORATE STRATEGY AND FOREIGN DIRECT INVESTMENT CHAPTER OVERVIEW: I THE PROCESS OF OVERSEAS EXPANSION II THEORY OF THE CORPORATION MULITNATIONAL II THE STRATEGY OF MULTINATIONAL ENTERPRISE III DESIGNING A GLOBAL STRATEGY EXPANSION I THE PROCESS OF OVERSEAS EXPANSION I METHODS TO GO GLOBAL A Exporting: preferred market entry strategy Advantages: low cost low risk learning opportunity THE PROCESS OF OVERSEAS EXPANSION Disadvantages inability to realize full sales Use potential of: a Foreign agents b Sales subsidiaries c Distribution system THE PROCESS OF OVERSEAS EXPANSION B OVERSEAS PRODUCTION a b c d greater commitment to the local market Advantages: Increased sales Supply stability Control Comprehensive service THE PROCESS OF OVERSEAS EXPANSION Question: create or acquire Acquisition allows speedy transfer of unused parent skills; used more by small firms THE PROCESS OF OVERSEAS EXPANSION C LICENSING -local firm agrees to produce for a fee Advantages: a Minimum investment b Faster market entry c Less risk THE PROCESS OF OVERSEAS EXPANSION Disadvantages of licensing: a Low cash flow b Quality standards c New competitor II THE THEORY OF THE MULTINATIONAL CORPORATION I THE THEORY OF THE MULTINATIONAL CORPORATION A The MNC as an Oligopolist: Why FDI? When is FDI justified? Internalization Market Integration a Vertical b Horizontal 10 THE THEORY OF THE MULTINATIONAL CORPORATION B Financial Market Imperfections Hypothesis Diversification Effect of the MNC 11 III THE STRATEGY OF THE MNC I THE STRATEGY OF THE MNC A Three strategies: That of the Innovation-based MNC 12 THE STRATEGY OF THE MNC Three Strategies (con’t) That of the mature MNC a the importance of economies of scale and b economies of scope 13 THE STRATEGY OF THE MNC The senescent MNC a global scanning capability b the role of rationalization and integration 14 THE STRATEGY OF THE MNC FDI and Survival a Cost reduction b Economies of scale c Multiple sourcing d Keeping domestic customers 15 IV DESIGNING A GLOBAL EXPANSION STRATEGY I A GLOBAL EXPANSION STRATEGY A Five Necessary Elements: Awareness of profitable investments -building competitive advantage Selecting a mode of entry -evaluate systematically 16 DESIGNING A GLOBAL EXPANSION STRATEGY A Five Necessary Elements (con’t) Adjusting the Effectiveness of the Entry Mode - continual auditing Using appropriate evaluation criteria 17 DESIGNING A GLOBAL EXPANSION STRATEGY Estimating the longevity of competitive advantage: a Develop competitive strength transferable overseas b Not easily duplicated 18 ... Low cash flow b Quality standards c New competitor II THE THEORY OF THE MULTINATIONAL CORPORATION I THE THEORY OF THE MULTINATIONAL CORPORATION A The MNC as an Oligopolist: Why FDI? When is FDI... justified? Internalization Market Integration a Vertical b Horizontal 10 THE THEORY OF THE MULTINATIONAL CORPORATION B Financial Market Imperfections Hypothesis Diversification Effect of the MNC 11 III... THE PROCESS OF OVERSEAS EXPANSION II THEORY OF THE CORPORATION MULITNATIONAL II THE STRATEGY OF MULTINATIONAL ENTERPRISE III DESIGNING A GLOBAL STRATEGY EXPANSION I THE PROCESS OF OVERSEAS EXPANSION