Multinational financial management 7th CH16

THE PROCESS OF OVERSEAS EXPANSION II.. DESIGNING A GLOBAL EXPANSION STRATEGY... THE PROCESS OF OVERSEAS EXPANSION I.. THE PROCESS OF OVERSEAS EXPANSION 2.. THE PROCESS OF OVERSEAS EXPA

Multinational Financial

Management

Alan Shapiro

7th Edition

J.Wiley & Sons

Power Points by

CHAPTER 16

CORPORATE

STRATEGY AND

FOREIGN DIRECT

INVESTMENT

CHAPTER OVERVIEW:

I THE PROCESS OF OVERSEAS EXPANSION

II THEORY OF THE MULITNATIONAL

CORPORATION

II THE STRATEGY OF MULTINATIONAL

ENTERPRISE

III DESIGNING A GLOBAL EXPANSION

STRATEGY

I THE PROCESS OF

OVERSEAS EXPANSION

I METHODS TO GO GLOBAL

A Exporting:

preferred market entry strategy

1 Advantages:

low cost low risk learning opportunity

THE PROCESS OF OVERSEAS

EXPANSION

2 Disadvantages

inability to realize full sales potential

3 Use of:

a Foreign agents

b Sales subsidiaries

c Distribution system

THE PROCESS OF OVERSEAS

EXPANSION

B OVERSEAS PRODUCTION

greater commitment to the local market

1 Advantages:

a Increased sales

b Supply stability

c Control

d Comprehensive service

THE PROCESS OF OVERSEAS EXPANSION

2 Question:

create or acquire

3 Acquisition

allows speedy transfer of unused parent skills;

used more by small firms.

THE PROCESS OF OVERSEAS

EXPANSION

C LICENSING

-local firm agrees to

produce for a fee.

1 Advantages:

a Minimum investment

b Faster market entry

c Less risk

THE PROCESS OF OVERSEAS EXPANSION

licensing:

a Low cash flow

b Quality standards

c New competitor

II THE THEORY OF THE

MULTINATIONAL CORPORATION

I THE THEORY OF THE MULTINATIONAL

CORPORATION

A The MNC as an Oligopolist: Why FDI?

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

III THE STRATEGY OF THE MNC

I THE STRATEGY OF THE MNC

A Three strategies:

1 That of the Innovation-based MNC

THE STRATEGY OF THE MNC

Three Strategies (con’t)

2 That of 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

IV DESIGNING A GLOBAL

EXPANSION STRATEGY

I A GLOBAL EXPANSION STRATEGY

A Five Necessary Elements:

1 Awareness of profitable investments

-building competitive advantage

2 Selecting a mode of entry

-evaluate systematically

DESIGNING A GLOBAL

EXPANSION STRATEGY

A Five Necessary Elements (con’t)

3 Adjusting the Effectiveness of the

Entry Mode

- continual auditing

4 Using appropriate evaluation criteria

DESIGNING A GLOBAL

EXPANSION STRATEGY

5 Estimating the longevity of

competitive advantage:

a Develop competitive strength

transferable overseas

b Not easily duplicated