1 Multinational Financial Management Alan Shapiro 10 th Edition John Wiley & Sons, Inc. PowerPoints by Joseph F. Greco, Ph.D. California State University, Fullerton

CHAPTER 16 Corporate Strategy and Foreign Direct Investment

THE THEORY OF THE MULTINATIONAL CORPORATION I.THE THEORY OF THE MULTINATIONAL CORPORATION A.The MNC as an Oligopolist: 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

THE STRATEGY OF THE MNC II.THE STRATEGY OF THE MNC A.Three strategies: 1. The Innovation-based MNC

THE STRATEGY OF THE MNC Strategies (con’t) 2.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

DESIGNING A GLOBAL EXPANSION STRATEGY III.HOW TO DESIGN A GLOBAL EXPANSION STRATEGY There are 5 Necessary Elements

DESIGNING A GLOBAL EXPANSION STRATEGY A. 5 Necessary Elements 1. Awareness of profitable investments -building competitive advantage 2. Selecting a mode of entry -evaluate systematically 3. Adjusting the Effectiveness of the Entry Mode - continual auditing

DESIGNING A GLOBAL EXPANSION STRATEGY A.5 Necessary Elements (con’t) 4. Using appropriate evaluation criteria 5. Estimating the longevity of competitive advantage: a. Develop competitive strength transferable overseas. b. Not easily duplicated

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