国际财务管理第一章:概论
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Conflicts with the MNC Goal
• For corporations with shareholders who differ from their managers, a conflict of goal can exist -the agency problem. • Agency costs are normally larger for MNCs than for purely domestic firms. * The scattering of distant subsidiaries. * The different culture background of subsidiary managers. 5 * The sheer size of the MNC.
Chapter 1
Multinational Financial Management: An Overview
Pre-class Discussion
• What is the appropriate definition of an MNC (Multinational Corporations)? • Why does an MNC expand internationally? • What are the risks of an MNC which expands internationally? • Why must purely domestic firms be concerned about the international environment? 2
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3、International Business Methods
There are several methods by which firms can conduct international business. * International trade is a relatively conservative approach involving exporting and / or importing. The internet facilitate international trade by enabling firms to advertise and manage orders through their websites.
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International Business Methods
* Joint ventures Firms may also penetrate foreign markets by engaging in a joint venture ( joint ownership and operation ) with firms that reside in those markets. * AБайду номын сангаасquisitions of existing operations in foreign countries allow firms to quickly gain control over foreign operations as well as a share of the foreign market.
Inventory and Accounts Receivables Management at Subsidiary A
Inventory and Accounts Receivables Management at Subsidiary B
Financing at Subsidiary A
Capital Expenditures at Subsidiary A
Capital Expenditures at Subsidiary B 7
Financing at Subsidiary B
Exhibit 1.2 Decentralized Multinational Financial Management
Cash Management at Subsidiary A Financial Managers of Subsidiary A Financial Managers of Subsidiary B Cash Management at Subsidiary B
Inventory and Accounts Receivable Management at Subsidiary A
Inventory and Accounts Receivable Management at Subsidiary B
Financing at Subsidiary A
Capital Expenditures at Subsidiary A
or
Firm’s foreign business declines as its competitive advantages are eliminated ④b
Firm establishes foreign subsidiary to establish presence in foreign country and possibly to reduce costs ③
(The International Product Life Cycle: Exhibit 1.3)
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Exhibit 1.3 International Product Life Cycle
Firm creates product to accommodate local demand ① Firm exports product to accommodate foreign demand ② Firm differentiates product from competitors and /or expands product line in foreign country ④a
Conflicts with the MNC Goal
• The magnitude of agency costs can vary with the management style of the MNC.
( Exhibit 1.1 & Exhibit 1.2)
* A centralized management style reduces agency costs. * A decentralized style gives more control to those managers who are closer to the subsidiary’s operations and environment, yet may result in higher agency costs.
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International Business Methods
* Licensing (许可) allows a firm to provide its technology in exchange for fees or some other benefit. * Franchising ( 特许经营) obligates a firm to provide a specialized sales or service strategy, support assistance, and possibly an initial investment in exchange for periodic fees.
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2、Theories of International Business
Why are firms motivated to expand their business internationally?
* Theory of Comparative Advantage Specialization by countries can increase production efficiency. * Imperfect Markets Theory The markets for the various resources used in production are “imperfect”.
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Theories of International Business
Why are firms motivated to expand their business internationally? * Product Cycle Theory As a firm matures, it may recognize additional opportunities outside its home country.
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1、Goal of the MNC
• The commonly accepted goal of an MNC is to maximize shareholder wealth. • We will focus on MNCs that are based in the United States and that wholly own their foreign subsidiaries.
Objectives
This chapter provides a background on the goals of an MNC and the potential risks and returns from engaging in international business. The specific objectives are : • to identify the main goal of the MNC and conflicts with that goal; • to describe the key theories that justify international business; • to explain the common methods used to conduct international business.