C AS E 1

C HAPTER S 1 Q UES TIO N S

C HAPTER 2 PRO BLEMS

International FinanceGroup Presentation

Case 1: The Debate Over Outsourcing

1. What are the pros and cons of outsourcing?

PRO’s CON’s

Lower costs via cheaper labor Increase productivity Flexibility – Economies of scale Creating jobs Technology / knowledge transfer

Losing jobs in the short run (1%) Risk of IP infringement Limits quick response to market

changes Loss of control

Case 1: The Debate Over Outsourcing

2. How does outsourcing affect US producers and consumers?

Consumers: Cheaper goods and servicesLanguage Barrier/CommunicationQuality discrepancies (inconsistency)

Case 1: The Debate Over Outsourcing

2. (cont.)

Producers:Lowers costFocus on your core competenciesImprove productivity Improves competitiveness (cheaper product

cost)Innovation/TechnologyLoss of control

Case 1: The Debate Over Outsourcing

3. What is the likely long-term impact of outsourcing on American jobs?

• Retraining/Further Education• Investing in continuing education will lead to a more educated

and capable workforce in key strategic industries

• Improves the standard of living

• Increases productivity

Case 1: The Debate Over Outsourcing

4. Several states are contemplating legislation to ban outsourcing of government work to foreign firms. What would be the likely consequences of such legislation?

• Higher cost of providing services• Inefficient allocation of taxpayer funds• Jobs “saved” – short run• Losing focus on core competencies

Case 1: The Debate Over Outsourcing

Conclusion: Is Outsourcing Good ?

While there are pro’s and con’s to outsourcing, outsourcing clearly benefits domestic and multinational firms in terms of productivity and competitiveness.

In the long run, improves the global economy and standard of living world wide by focusing a country on industries with a comparative advantage.

QUESTION 3 ,4

Chapter 1 :Introduction – The Multinational

Enterprise and Financial Management

Chapter 1 Questions

3. Elaborate on the benefits of a proactive approach to globalization and global competition.

Predict the future consumer taste.More choices/variety for customersFirst mover advantageEconomies of scale; increased productivityEfficient allocation of resources Countries can predict employment trends.

Chapter 1 Questions

“ Companies today operate within a global market place and can ignore this fact only at their peril”

- Jack Welch

i.e. Survival of the Fittest

Chapter 1 Questions

4. What are the various reasons for the emergence of multinational firms?

Market seeking- (new markets/gain market share)Cost minimization- (economies of scale, cheap

labor)Knowledge seeking – (new technology/processes) Keeping domestic customers – (follow customers)Exploiting financial market imperfectionsDiversificationCloser to raw materials

PROBLEM 2 , 3

Chapter 2 : The Determination of Exchange

Rates

Chapter 2 Problems

2. In 2002, one dollar bought ¥125. In 2006 it bought about ¥115.

a) What was the dollar value of the yen in 2002? 1 ¥ = $0.008 (or 0.8 ¢) US

What was the yen’s dollar value in 2006? 1 ¥ = $0.008696 (or 0.87 ¢) US

Chapter 2 Problems

b) By what percent has the yen risen in value between 2002 and 2006?

8.7% increase in value

c) By what percent has the dollar fallen in value between 2002 and 2006?

8% decrease in value

Chapter 2 Problems

3. On February 1, the euro is worth 1.2966. By May 1st it has moved to $1.3634.

a) By what percent has the euro appreciated or depreciated against the dollar during this period? 5.15 % appreciation in the value of the euro

b) By what percent has the dollar appreciated or depreciated against the euro during this period?

4.9% depreciation in the value of the dollar

QUESTIONS -OR- COMMENTS

Thank You