The Corporate Control Of Your Business

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hapter 1 a. Discuss the corporate control of your business. Explain why your business in Mexico is exposed to agency problems. There are many reasons that our business in Mexico is exposed to agency problems. With our company being an MNC, it would be hard for our managers and top executives to keep track of what is going on in Mexico at our language school. Another agency problem is that our company could face is that our employees might not follow the standards and uniformity by which we in the US abide. These two agency problems could in turn have a negative impact on shareholder wealth. b. Assume that you have been approached by a competitor in Mexico to engage in a joint venture. The competitor would provide the classroom facilities (so you would not need to rent classroom space) while your employees would teach the classes. You and the competitor would split the profits. Discuss how your potential return and your risk would change if you pursue the joint venture. If we entered in a joint venture as a company, both our risk and potential return would be reduced. We would reduce our risk because by sharing profits with our newly found partner, we would have less money that is dependent on the exchange rate of the Mexican peso. Additionally, the partnership that we would form would alleviate costs because our partner would provide a classroom to our company. This would decrease our risk because we would not need to pay for rent, eliminating an expense. Since
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