Upload
annapurna-vasireddy
View
226
Download
0
Embed Size (px)
Citation preview
7/31/2019 IFM- Chapter 1
1/22
International Financial
ManagementCourse Code:B242
Term-IV
1
7/31/2019 IFM- Chapter 1
2/22
Introduction
Unit-I
2
7/31/2019 IFM- Chapter 1
3/22
IFM Vs FM
Foreign Exchange
Political risk and
Expanded Opportunity set
3
7/31/2019 IFM- Chapter 1
4/22
MNC
An enterprise that owns and controlsproduction or service facilitiesoutside the country in which it is
based.
MNC Groups
4
Ethnocentric
Polycentric
Geocentric
7/31/2019 IFM- Chapter 1
5/22
MNC s
Ethnocentric: Home-market oriented
Distinction between Domestic andglobal operations
Polycentric : Host-market oriented
Caters to the demand of the host
country Geocentric : Balance between home
market and host market
5
7/31/2019 IFM- Chapter 1
6/22
MNC Vs TNCMulti
NationalCompany
Decision Making :Normally decentralized
Activities of the Firm:
Not strongly co-ordinated
Transnational
Company
Centralized
Perfectly controlledand co-ordinated to
achieve globalcompetitiveness.
6
7/31/2019 IFM- Chapter 1
7/22
No. of MNCs in the world
889,416 multinational companies(MNCs) around the world
82,053 parent corporations and807,363 affiliates.
(WIR-2009)
7
7/31/2019 IFM- Chapter 1
8/22
8
Overview
Why Firms Pursue International Business
How Firms Engage in InternationalBusiness
7/31/2019 IFM- Chapter 1
9/22
9
Managing the MNC
Management and Agency Problems
a. Parent Control
b. Corporate ControlHow Sarbanes-Oxley
(SOX-2002)Improved MNCs
Corporate Governance
7/31/2019 IFM- Chapter 1
10/22
10
Why Firms Pursue InternationalBusiness
1. Theory of Comparative Advantage
2. Imperfect Markets Theory
3. Product Cycle Theory
7/31/2019 IFM- Chapter 1
11/22
Comparative Advantage
Technological advantage-US andJapan-large Producers of computercomponents
Ex: Oracle , IBM , Intel
Cost of basic labour- advantageJamaica ,Mexico and South Korea-Agricultural and Handmade goods
Comparative Advantage allows firmsto penetrate foreign markets
11
7/31/2019 IFM- Chapter 1
12/22
Imperfect Markets Theory
Perfect Markets-no internationaltrade
Imperfect trade-allows Internationaltrade
Ex:Nike
12
7/31/2019 IFM- Chapter 1
13/22
13
Insert chart page 7 Exhibit 1.2
International Product Life Cycles
7/31/2019 IFM- Chapter 1
14/22
14
How Firms Engage in International
Business
1. International Trade(Exporting)
2. Licensing
3. Franchising4. Joint Ventures
5. Acquisition of Existing Operations
6. Establishing New Foreign Subsidiaries
7/31/2019 IFM- Chapter 1
15/22
15
How Firms Engage in InternationalBusiness
Summary of Methods by Risk
Degrees of Risk to MNC
FDIFranchising
andJoint Ventures
ForeignAcquisitions
NewForeignSubsidiaries
MOSTRISK
LEASTRISK
7/31/2019 IFM- Chapter 1
16/22
Web links
www.unctad.org/wir/
UNCTAD: United Nations Conferenceon Trade and Development
Provides a broad coverage of crossborder investment activities byMNCs.
World Investment Report-2011
(WIR-2011)(WIR-2012)
16
http://www.unctad.org/wir/http://www.unctad.org/wir/7/31/2019 IFM- Chapter 1
17/22
Assignment-I Worlds Biggest 10 Companies-
2012,2011,2010,2009 Total no. of MNCs in the world
Top 10 most profitable companies in
the world
Top 10 fastest growers
Top 10 biggest employers
Top 20 of the largest MNCs rankedby the size of foreign assets
Best countries to invest17
7/31/2019 IFM- Chapter 1
18/22
Internet Exercise
Visit the corporate website ofNokia, one of the most popularMNC in the world.
From the annual report study thegeographical diversification of itssales and revenues, no. of
subsidiaries, no. of countriesexporting to, imports of thatcompany, Head quarters etc.
18
7/31/2019 IFM- Chapter 1
19/22
Case Study
Decision to expand internationally:
Blades ,Inc
19
7/31/2019 IFM- Chapter 1
20/22
Research
Destination Bangladesh:
Arvind Mills
20
7/31/2019 IFM- Chapter 1
21/22
Assignment-II
Select a country and analyze thatcountrys balance of payments for 8to 12 years, subject to the
availability of data. The analysismust include BOP Summary(Statistical data on Current account
balance, Capital account balance ,Official Reserve account balance andOverall Balance of Payments in US
Dollars).21
7/31/2019 IFM- Chapter 1
22/22
The report should also focus on thefollowing issues :
Identify the relationship between Current
account balance and the exchange rate ofthe selected country(same period-8-12yrs)
Financial position of the selected countryin the IMF
Currency composition of the Worldsforeign exchange reserves and countrys
per cent of total for the current year22