Multinational Financial Management Alan Shapiro 7th Edition J.Wiley

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Multinational Financial Management Alan
Shapiro7th Edition J.Wiley Sons

• Power Points by
• Joseph F. Greco, Ph.D.
• California State University, Fullerton

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CHAPTER 16

• CORPORATE STRATEGY AND FOREIGN DIRECT INVESTMENT

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CHAPTER OVERVIEW

• I. THE PROCESS OF OVERSEAS EXPANSION
• II. THEORY OF THE MULITNATIONAL CORPORATION
• II. THE STRATEGY OF MULTINATIONAL ENTERPRISE
• III. DESIGNING A GLOBAL EXPANSION STRATEGY

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I. THE PROCESS OF OVERSEAS
EXPANSION

• I. METHODS TO GO GLOBAL
• A. Exporting
• preferred market entry strategy
• 1. Advantages
• low cost
• low risk
• learning opportunity

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THE PROCESS OF OVERSEAS EXPANSION

• 2. Disadvantages
• inability to realize full sales potential
• 3. Use of
• a. Foreign agents
• b. Sales subsidiaries
• c. Distribution system

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THE PROCESS OF OVERSEAS EXPANSION

• B. OVERSEAS PRODUCTION
• greater commitment to the local market
• 1. Advantages
• a. Increased sales
• b. Supply stability
• c. Control
• d. Comprehensive service

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THE PROCESS OF OVERSEAS EXPANSION

• 2. Question
• create or acquire
• 3. Acquisition
• allows speedy transfer of unused
  parent skills
• used more by small firms.

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THE PROCESS OF OVERSEAS EXPANSION

• C. LICENSING
• -local firm agrees to produce for a fee.
• 1. Advantages
• a. Minimum investment
• b. Faster market entry
• c. Less risk

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THE PROCESS OF OVERSEAS EXPANSION

• 2. Disadvantages of licensing
• a. Low cash flow
• b. Quality standards
• c. New competitor

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II. THE THEORY OF THE MULTINATIONAL CORPORATION

• I. THE THEORY OF THE MULTINATIONAL CORPORATION
• A. The MNC as an Oligopolist Why FDI?
• 1. When is FDI justified?
• 2. Internalization
• 3. Market Integration
• a. Vertical
• b. Horizontal

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THE THEORY OF THE MULTINATIONAL CORPORATION

• B. Financial Market Imperfections
• 1. Hypothesis
• 2. Diversification Effect of the MNC

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III. THE STRATEGY OF THE MNC

• I. THE STRATEGY OF THE MNC
• A. Three strategies
• 1. That of the Innovation-based MNC

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THE STRATEGY OF THE MNC

• Three Strategies (cont)
• 2. That of the mature MNC
• a. the importance of economies of
• scale and
• b. economies of scope

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THE STRATEGY OF THE MNC

• 3. The senescent MNC
• a. global scanning capability
• b. the role of rationalization and
• integration.

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THE STRATEGY OF THE MNC

• 4. FDI and Survival
• a. Cost reduction
• b. Economies of scale
• c. Multiple sourcing
• d. Keeping domestic customers

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IV. DESIGNING A GLOBAL EXPANSION STRATEGY

• I. A GLOBAL EXPANSION STRATEGY
• A. Five Necessary Elements
• 1. Awareness of profitable investments
• -building competitive advantage
• 2. Selecting a mode of entry
• -evaluate systematically

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DESIGNING A GLOBAL EXPANSION STRATEGY

• A. Five Necessary Elements (cont)
• 3. Adjusting the Effectiveness of the
  Entry Mode
• - continual auditing
• 4. Using appropriate evaluation criteria

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DESIGNING A GLOBAL EXPANSION STRATEGY

• 5. Estimating the longevity of competitive
  advantage
• a. Develop competitive strength
• transferable overseas.
• b. Not easily duplicated