International Finance - 3 DAYS DUE
vzan0903
ch161.pptMultinational 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 MULITNATIONAL CORPORATION
II. THE STRATEGY OF MULTINATIONAL ENTERPRISE
III. DESIGNING A GLOBAL EXPANSION STRATEGY
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
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
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
THE PROCESS OF OVERSEAS EXPANSION
2. Question:
create or acquire
3. 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.
1. Advantages:
a. Minimum investment
b. Faster market entry
c. Less risk
THE PROCESS OF OVERSEAS EXPANSION
2. 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?
1. When is FDI justified?
2. Internalization
3. Market Integration
a. Vertical
b. Horizontal
THE THEORY OF THE MULTINATIONAL CORPORATION
B. Financial Market Imperfections
1. Hypothesis
2. Diversification Effect of the MNC
III. THE STRATEGY OF THE MNC
I. THE STRATEGY OF THE MNC
A. Three strategies:
1. That of the Innovation-based MNC
THE STRATEGY OF THE MNC
Three Strategies (con’t)
2. That of the mature MNC
a. the importance of economies of
scale and
b. economies of scope
THE STRATEGY OF THE MNC
3. The senescent MNC
a. global scanning capability
b. the role of rationalization and
integration.
THE STRATEGY OF THE MNC
4. FDI and Survival
a. Cost reduction
b. Economies of scale
c. Multiple sourcing
d. Keeping domestic customers
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
DESIGNING A GLOBAL EXPANSION STRATEGY
A. Five Necessary Elements (con’t)
3. Adjusting the Effectiveness of the Entry Mode
- continual auditing
4. Using appropriate evaluation criteria
DESIGNING A GLOBAL EXPANSION STRATEGY
5. Estimating the longevity of competitive advantage:
a. Develop competitive strength
transferable overseas.
b. Not easily duplicated
