...CHAPTER 1 SUGGESTED ANSWERS TO CHAPTER 1 QUESTIONS 1.a. What are the various categories of multinational firms? ANSWER. Raw materials seekers, market seekers, and cost minimizers. b. What is the motivation for international expansion of firms within each category? ANSWER. The raw materials seekers go abroad to exploit the raw materials that can be found there. It just happens that nature didn't place all natural resources domestically. Market seekers go overseas to produce and sell in foreign markets. The cost minimizers invest in lower-cost production sites overseas in order to remain cost competitive both at home and abroad. In all cases, the firms involved recognize that the world is larger than the home country and provides opportunities to gain additional supplies, sell more products or find lower cost sources of production. 2.a. How does foreign competition limit the prices that domestic companies can charge and the wages and benefits that workers can demand? ANSWER. As domestic producers raise their prices, customers begin substituting less expensive goods and services supplied by foreign producers. The likelihood of losing sales limits the prices that domestic firms can charge. Foreign competition also acts to limit the wages and benefits that workers can demand. If workers demand more money, firms have two choices. Acquiesce in these demands or fight them. Absent foreign competition, the cost of acquiescence is relatively low, particularly if the industry is unionized...
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...Student's name Instructor's name Course name Date Human Resource Management in Multinational Organizations A Preliminary Research on Self-Initiated Expatriation as Compared to Assigned Expatriation Human resource management in multinational organizations is complex due to the cross-cultural and international aspects related to its nature. This article examines the phenomenon of 'expatriation': choosing to leave one's own country in order to live or work in another, usually for a long period of time. Multinational organizations require a certain level of staff relocation in order to improve their knowledge of emerging markets as well as maximizing their talent resources. In addition to assigned expatriates, meaning those moving to another country following an assignment from their workplace, the article refers to "self-initiated expatriates, meaning people who choose to move to another country on their own. Human resource needs for both kinds of expatriates are unique, and may differ from each other. Self-initiated expatriates may exhibit more motivation to live in a different country and uproot their family for a long period of time, and this motivation may facilitate an easier transition, therefore being less demanding for the human resource management (Mo and Jian-Ming 170-172) Workplace flexibility and the changing nature of work: an introduction This paper examines articles referring to how the changes in the work environment require flexibility on behalf...
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...By Mashell Chapeyama Effects of globalization in Zimbabwe Zimbabwe, like other countries, has been affected by globalization. The first thing is that the welfare of the people in the country improved. There is good medication that is coming from other countries. During drought periods we get food from as far as America. China has been contributing also to the country. A lot of funds have been donated to the country. This fund was used to assist in education. So many children are now learning in the country. The life expectancy of the people has also improved due to medication and good food that is coming from other countries. There has been an improvement in the development of the country. We have received new technology from other countries that have led to economic growth. For example, in Zimbabwe about fifty percent of our fuel now comes from bio-sources. Fuel is now being made from plants. This has led to the creation of employment. The rate of employment has increased of late. New technology has flowed in the country. We are now able to use solar energy, wind energy and hydropower due to globalization. Due to globalization the political system has changed in my country. We have now adopted democratic type of governance. This is as a result of the influence of organizations such as United Nations. Regional blocks also emphasize on the need to be democratic in governance. One negative impact has been that of environmental degradation. Due to demand of products by other...
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...Goals of the MNC • Maximize shareholder wealth – Problems encountered in meeting goals: 1) Agency problems larger for MNCs than purely domestic firms because: a) monitoring more difficult because of geographic distance b) different cultures c) MNC size d) subsidiary managers may maximize the value of their subsidiary but not of the MNC as a whole 2) Centralized vs. decentralized management a) centralized reduces agency costs because it gives parent more control; downside is that local managers may be better informed b) decentralized management increases agency costs but may result in better decisions c) Internet may facilitate monitoring of foreign subsidiaries 3) Corporate control used to reduce agency problems a) executive compensation with stock b) threat of hostile takeover c) monitoring by large shareholders – Constraints encountered in meeting goals 1) Environmental - other countries may be tougher (e.g., pollution controls) 2) Regulatory - e.g., currency convertibility, remittance of profits, etc. 3) Ethical - e.g., bribes may be more acceptable in other countries Theories of International Business • Theory of Comparative Advantage – countries specialize in the production of goods they can produce with relative efficiency and trade for other products • Imperfect Markets Theory – factors of production (labor and other resources) are immobile. • Firms can capitalize on imperfect markets by...
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...Theory TERM PAPER Leadership for Diversity Management in Multinational Organizations Spring 2008 Introduction The objective of this paper is to emphasize the role of a leader in solving issues related to diversity management that challenge multinational organizations in the era of globalization. Shehata (2004) defines globalization as an increasing interconnectedness that involves “deepened and accelerated movement of information, capital, and people across the planet” (para. 6). The globalization process has been occurring for a number of centuries but its unprecedented growth in the twenty first century is altering the global economy and causing tremendous changes in the management and conduct of business and organizations. Globalization requires multinational organizations to eliminate borders and barriers of trade between nations resulting in a shift in traditional patterns of investment, production, distribution and trade. Due to elimination of geographical boundaries, multinational organizations face some unique cross-cultural people management challenges that can be addressed by effective diversity management initiatives. In this paper, I will present solutions to such unique issues from a hypothetical leader’s perspective. In the first section of the paper, I will explain the concept of diversity management through a thorough literature review, and propose an effective leadership style that can...
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...in the form of a wholly owned subsidiary in a foreign country, it is sometimes referred to as “greenfield” or de novo (new) investment. The primary reason for the use of wholly owned subsidiaries is a desire by the MNC for total control and the belief that managerial efficiency will be better without outside partners. Due to the sole ownership, it has been found that profits can be higher with this venture and that there are clearer communications and shared visions. However, there are some drawbacks. Typically, wholly owned subsidiaries face a high risk with such a large investment in one area and are not very efficient with entering multiple countries or markets. This can also lead to low international integration or multinational involvement. Furthermore, host countries often feel that the MNC is trying to gain economic control by setting up local operations but refusing to include local partners. Some countries are concerned that the MNC will drive out local enterprises as opposed to helping develop them. In dealing with these concerns, many newly developing countries prohibit wholly owned subsidiaries. Another drawback is that home-country unions sometimes oppose the creation of foreign subsidiaries, which they see as an attempt to “export jobs,” particularly when the MNC exports goods to another country and then decides to set up manufacturing...
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...Chapter 17 Multinational Financial Management Learning Objectives After reading this chapter, students should be able to: ◆ Define the term “multinational corporation” and identify 7 primary reasons why firms go international. ◆ List 5 major factors that distinguish financial management in firms operating entirely within a single country from those that operate in several different countries. ◆ Briefly explain the following terms: international monetary system, exchange rate, spot exchange rate, forward exchange rate, fixed exchange rate, floating exchange rate, devaluation/revaluation of a currency, depreciation/appreciation of a currency, soft currency, and hard currency. ◆ Identify the different types of exchange rate systems. ◆ Distinguish between direct and indirect quotations, and American and European term quotations, and calculate cross rates between any two currencies. ◆ Differentiate between spot and forward rates, and explain what it means for a forward currency to sell at a discount or premium. ◆ Briefly explain the concept of interest rate parity and write the corresponding equation. ◆ Briefly explain the concept of purchasing power parity and write the corresponding equation. ◆ Explain the implications of relative inflation rates, or rates of inflation in foreign countries compared with that in the home country, on interest rates, exchange rates, and on multinational financial decisions. ◆ Distinguish between foreign...
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...Fundamentals of Multinational Finance, 4e (Moffett) Chapter 1 Current Multinational Challenges and the Global Economy Multiple Choice and True/ False Questions 1.1 The Global Financial Marketplace 1) Which of the following firms are NOT considered to be multinational enterprises (MNEs) even if they have operations in more than one country? A) for-profit companies B) not-for-profit organizations C) non-government organizations (NGOs) D) all of the above may be considered MNEs Answer: D Diff: 1 Topic: 1.1 The Global Financial Marketplace Skill: Recognition 2) "BRIC" is a term coined in 2001 to refer to a group of countries at about the same stage of advanced economic development. The BRIC countries are ________. A) Belgium, Romania, Italy, and Canada B) Brazil, Russia, India, and China C) Britain, Romania, Israel, and Colombia D) Brazil, Russia, Italy, and Chile Answer: B Diff: 1 Topic: 1.1 The Global Financial Marketplace Skill: Recognition 3) According to the authors, which of the following groups or securities are at the "heart" to the global capital markets? A) debt securities issued by governments B) bank loans and corporate bons C) equity securities D) derivative securities Answer: A Diff: 1 Topic: 1.1 The Global Financial Marketplace Skill: Recognition 4) ________ are the largest markets in the world. A) United States equity markets B) European debt markets C) Global currency markets D) Chinese export markets Answer:...
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...of issues for all types of companies, and particularly for multinationals. One of the key points in the readings was that there needs to be a change in strategy. Many multinationals had a tight approach to their strategy using a more focused strategy. These companies now must adapt and loosen their strategy to a more broad approach. Selling to a specific market segment may no longer be the key, but rather offering products to not only high end markets but to lower markets as well. Companies also need to look at threats to new entrants. Many companies viewed Chine as a major competitor but were not focused on companies in China as competitors. With China and India being responsible for so much of the world’s GDP, many of the multinational companies there should be viewed as intense competitors along with the current competitors the company already has. Multinational companies also must add more diversity into their management ranks. With many companies beginning to open major offices and even a second headquarter in other countries; they must add a mix of diversity into their management. With that comes the need to find better ways to communicate with diverse employees. Since many people decide to ignore a person because they are having trouble understanding their accent, other ways of communication must established. This can be done by using chat rooms and bulletin boards over the Web. Multinationals may also need to refocus their attention back to their home...
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...Conditions in Russia and Their Effect . . . . Kouznetsov and Jones CONDITIONS IN RUSSIA AND THEIR EFFECTS ON ENTRY MODE DECISIONS OF MULTINATIONAL MANUFACTURING ENTERPRISES: A QUALITATIVE STUDY IDENTIFYING ISSUES FOR FURTHER RESEARCH IN THE AREA OF COUNTRY CONDITIONS AND THEIR IMPACT ON ENTRY MODE ALEX KOUZNETSOV, Melbourne Institute of Technology ASHELEY JONES, Melbourne Institute of Technology This study examines entry modes employed by foreign multinational manufacturing enterprises (MMEs) when entering Russia. This exploratory study focuses on country-specific conditions associated with the chosen entry mode - an important component in the consideration of overall entry strategy. Information from field studies representing 18 manufacturers – 10 directly manufacturing in Russia and 8 selling their products in Russia via representative/sales offices – was obtained by means of personal interviews with senior management in Moscow and constituted the primary qualitative data. Research questions are posed for further examination of conditions in Russia and the effects of such conditions on the entry mode decisions of MMEs. The study finds economic conditions to be the only important determinant of entry modes for large multinational manufacturing companies investing in Russia with other country factors playing no role in their choices. INTRODUCTION With the expansion of global business activity, the ability to analyze the key characteristics of potential...
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...Question 1 Multinational enterprise (MNE) can be defined as a company in which it has facilities as well as other assets in one or more countries other than their home country. These companies usually have offices and/or factories in various countries where a centralized headquarters is used for global management. Trade union is an association consisting of members whereby their membership is has to be made up of mainly workers. Protecting and improving the interests of its members in the workplace is one of the trade union’s aims. Most of the trade unions are independent of any employer. Nevertheless, trade unions attempt to develop close working affiliations with employers. This can occasionally take the form of a partnership agreement between the trade union and the employer that categorizes their common interests and objectives. The purposes of trade unions are to negotiate agreements with employers on conditions and pay, discuss main changes to the office such as great scale unemployment, concerns with employers, discuss their members, complement their members in grievance and disciplinary meetings, deliver their affiliates with legal and financial advice and provide education facilities and certain consumer benefits such as discounted insurance. Four characteristics of Multinational Enterprise (MNE) that give trade union cause for concern are labor negotiations, offshore outsourcing or offshoring, insourcing and the actions of...
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...Document Type CPI Primary Subject CPI Secondary Subject Geographic Terms How Local Companies Keep Multinationals at Bay Harvard Business Review Online Bhattacharya, Arindam K. Michael, David C. NA Harvard Business Review, March 2008 NA Article Economics International Trade; ; ; Malaysia; Others Abstract To win in the world’s fastest-growing markets, transnational giants have to compete with increasingly sophisticated homegrown champions. It isn’t easy. Centre for Policy Initiatives (CPI) Pusat Initiatif Polisi http://www.cpiasia.org How Local Companies Keep Multinationals at Bay http://harvardbusinessonline.hbsp.harvard.edu.neptune.wou.edu.my/hb... ADVERTISEMENT Arindam K. Bhattacharya (bhattacharya.arindam@bcg.com) is a Delhi-based partner and managing director, and David C. Michael (michael.david@bcg.com) is a Beijing-based senior partner and managing director, of the Boston Consulting Group. FEATURE How Local Companies Keep Multinationals at Bay To win in the world’s fastest-growing markets, transnational giants have to compete with increasingly sophisticated homegrown champions. It isn’t easy. by Arindam K. Bhattacharya and David C. Michael Since the late 1970s, governments on every continent have allowed the winds of global competition to blow through their economies. As policy makers have lowered tariff barriers and permitted foreign investments, multinational companies have rushed into those countries. U.S., European, and Japanese giants, it initially...
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...Multinational corporation From Wikipedia, the free encyclopedia A multinational corporation (MNC) or multinational enterprise (MNE)[1] are organizations that own or control production or services facilities in one or more countries other than the home country.[2] For example, when a corporation that is registered in more than one country or that has operations in more than one country may be attributed as MNC. Usually, it is a large corporation which both produces and sells goods or services in various countries.[3] It can also be referred to as an international corporation or "transnational corporation". They play an important role in globalization. Arguably, the first multinational business organization was the Knights Templar, founded in 1120.[4][5][6] After that came the British East India Company in 1600[7] and then the Dutch East India Company, founded March 20, 1602, which would become the largest company in the world for nearly 200 years.[8] Contents [hide] 1 Conflict of laws 2 Transnational corporations 3 Criticism of multinationals 4 See also 5 References 6 External links Conflict of laws[edit] Main article: Conflict of laws Conflict of laws is a set of procedural rules that determines which legal system and which jurisdiction applies to a given dispute. The term conflict of laws itself originates from situations where the ultimate outcome of a legal dispute depended upon which law applied, and the common law court's manner of resolving the conflict...
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...Multinational corporations Table of contents Preface 4 1. Introduction; General meaning of MNC 4 2. Ranking multinationals 5 3. Entry of Multinational corporation into new markets, 6 4. Three Stages of Evolution 7 5. Motives for Foreign Direct Investment (FDI) 9 6. The comparison of MNC and TNC 11 7. What are the benefits and problems that MNCs face? 11 8. What are the Russian companies that achieve the multinational status? 13 Conclusion 14 Bibliography 14 Appendix 15 Preface We would like to consider the most interesting topic concerning the multinational corporations. If we called it like that, it means that company made a great success in the market, it operate in several foreign countries. In this mini-course work we will investigate more detailed the structure and strategies of MNCs. In the first part we will look through the history of MNCs. The history, in general, is to be considered as an essential part of every project in order everyone may compare the development of the particular sphere. Next part will show us the statistical data of MNCs, where we will recognize all the most reputable companies from the different industries, such as BMW, Nike, Lego, etc. We cannot leave a side the point of entry into the new market. There it will be explained the strategies of MNCs, such as mergering, joint venture and sequential market entries. Also we will consider investing into the particular companies, weather it is risky or not and the motives...
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...Promoting unsustainable agriculture Environmental pollution 9. Using consumerism to ‘eradicate’ poverty Taking public space/barring imagination Collaboration with oppressive regimes Hypocritical Health Campaign induced by Self-Interest Excessive Pay Management 1. Promoting consumerism Unilever spends a lot of energy and money on marketing and commercialisation of consumer products all over the world (‘Paint the World Yellow’ – the Lipton marketing campaign which provide everything with the Lipton Logo, from surfboards to Chevrolets—was a tremendous success, according to Unilever. It created a much bigger Lipton Logo awareness amongst consumers.) Since the Northern consumer market is saturated (so not much room left for expansion of market shares) Unilever aims at maximising the processing of food, which means adding value to ‘improve’ products and then charge more for these products. Unilever changes the product only slightly (e.g. strawberry toothpaste), or just changes the visual language in order to sell exactly the same product. Naturally this process involves heavy advertising. Many of the ‘improved’ products are basically useless, and there is no demand for them (the demand is being manufactured by the multinationals themselves). In short, Unilever tries to bring as many products as possible to the market without asking itself the question ‘is there a real need for the products we produce?’ Since the majority of people in the South still go hungry every day, there...
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