国际财务管理第一章：概论

4
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
14
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.
16
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)
13
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.
15
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.
11
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”.
12
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.
3
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.