Presentation on theme: "Multinational Financial Management Alan Shapiro 7th Edition J"— Presentation transcript:
1 Multinational Financial Management Alan Shapiro 7th Edition J Multinational Financial Management Alan Shapiro 7th Edition J.Wiley & SonsPower Points byJoseph F. Greco, Ph.D.California State University, Fullerton
2 CHAPTER 1Introduction: Multinational Enterprise and Multinational Financial Management
3 CHAPTER OVERVIEW: I. The Rise of the Multinational Corporation II. The Internationalization of Business and FinanceIII. Multinational Financial Management: Theory and Practice
4 PART 1 THE RISE OF THE MULTINATIONAL CORPORATION I. The MNC: Definitiona company with production and distribution facilities in more than one country.
5 THE RISE OF THE MULTINATIONAL CORPORATION A. Forces Changing Global MarketsMassive deregulationCollapse of communismPrivatizations of state-owned industriesRevolution in information technologyWave of M&AEmergence of free market policiesRise of Big Emerging Markets (BEMs)
6 THE RISE OF THE MULTINATIONAL CORPORATION B. Prime Transmitter of Competitive Forces in the Global Economy:The MNC emphases group performance such asGlobal coordinated allocation of resourcesMarket – entry strategyOwnership of foreign operationsProduction, marketing and financial activities
7 THE RISE OF THE MULTINATIONAL CORPORATION C. EVOLUTION OF THE MNCReasons to Go Global:1. More raw materials2. New markets3. Minimize costs of production
8 THE RISE OF THE MULTINATIONAL CORPORATION RAW MATERIAL SEEKERSexploit markets in other countrieshistorically first to appearmodern-day counterpartsBritish PetroleumExxon
9 THE RISE OF THE MULTINATIONAL CORPORATION MARKET SEEKERSproduce and sell in foreign marketsheavy foreign direct investorsrepresentative firms:IBMMacDonald’sNestleLevi Strauss
10 THE RISE OF THE MULTINATIONAL CORPORATION COST MINIMIZERSseek lower-cost production abroadmotive: to remain cost competitiveTexas InstrumentsIntelSeagate Technology
11 THE RISE OF THE MULTINATIONAL CORPORATION D. THE MNC: A BEHAVIORAL VIEW1. State of mind:committed to producing,undertaking investment and marketing, and financing globally.
12 THE RISE OF THE MULTINATIONAL CORPORATION E. THE GLOBAL MANAGER1. Understands political andeconomic differences;2. Searches for most cost-effective suppliers;3. Evaluates changes on value of the firm.
13 Part II The Internationalization of Business and Finance I. GlobalizationA. Political and Labor Union Concerns
14 The Internationalization of Business and Finance B. Consequences of Global CompetitionAcceleration of the global economy
15 PART III. MULTINATIONAL FINANCIAL MANAGEMENT: THEORY AND PRACTICE I. THE MULTINATIONAL FINANCIAL SYSTEMA. Main Objective of MNC:Maximize shareholder wealthB. Other Objectives Reflect Ability to Link:via affiliate transfer mechanisms
16 THEORY AND PRACTICE C. Mode of Transfer: Reflects freedom to select a variety of financial channels.D. Timing Flexibility:Most MNC have some flexibility in timing of fund flows.
17 THEORY AND PRACTICEE. ValueThe ability to avoid national taxes has led to controversy.
18 THEORY AND PRACTICE II. FUNCTIONS OF FINANCIAL MANAGEMENT A. Two Basic Functions:1. Financing2. Investing
19 THEORY AND PRACTICE B. Additional Factors Facing the MNC Executive 1. Political risk2. Economic risk
20 THEORY AND PRACTICE III. THEORETICAL FOUNDATIONS A. Useful Concepts from Financial Economics:1. Arbitrage2. Market Efficiency3. Capital Asset Pricing
21 THEORY AND PRACTICE B. Importance of Total Risk 1. Adverse Impact lower sales and higher costs2. Justifies hedging activities of MNC3. Diversification reduces risk
22 THEORY AND PRACTICE IV. THE GLOBAL FINANCIAL MARKET PLACE A. Inter-linkage by ComputersB. Market Acts as A GlobalReferendum Process:Currencies may rise or fall