CFIN (with Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
5th Edition
ISBN: 9781305661653
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 1, Problem 17PROB
Summary Introduction
To determine: the advantages and disadvantages of the ownership structure of “closed” companies in comparison to that of “open” companies
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Assume that an U.S. firm wants to engage in international business without making a major investment in the foreign country. Which method is LEAST appropriate in this situation?
A.
licensing
B.
acquisition of an existing firm in the foreign country
C.
exporting
D.
franchising
How is multinational financial management different from financial management as practicedby a firm that has no direct contacts with foreignfirms or customers? What special problems andchallenges do multinational firms face? Whatfactors cause companies to “go multinational”?
As for the outsourcing of multinational companies, please talk about the language and cultural differences, as well as the political risks that complicate the financial management of multinational companies.
Chapter 1 Solutions
CFIN (with Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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- Which of the following is not a reason for U.S. firms operating in foreign markets? A.Better economic and political environment (in the U.S.) B.Less expensive labor C.Tax incentives D. To achieve international diversificationarrow_forwardEntry modes for entering new countries vary in their degree of control. What does control mean? O The degree of risk a firm has in its foreign activities The degree of ownership a firm has in its foreign activities O The degree of profits a firm has in its foreign activities O The degree of influence a firm has in its foreign activitiesarrow_forwardThe complexity posed by differences in the cultural, political, legal, and economic environments creates a so-called “liability of foreignness.” This idea holds that foreign companies, because of their poorer familiarity with local conditions, incur additional costs. In theory, the liability of foreignness makes IB activity too expensive. In practice, companies offset this liability by capitalizing on their unique advantages as well as selecting the mode of international business that best reflects their resource profile and risk tolerance--Always in the effort toward minimizing the intrinsic higher costs of international operations. The higher costs of international operations, executives point out, are driven by things as varied as the cost of legally establishing businesses, real estate costs, customs duties, and translation costs. Managing these costs is complicated by the report that _53_______%___ of global CEOs are concerned about the impact of __bribery and…arrow_forward
- a. According to the OLI paradigm, foreign direct investment is explained by three conditions (ownership advantages, location advantages and internalization). Examine the factors that influence firms to locate subsidiaries close to markets. b. Managers of multinational enterprises are advised to take advantage of their home region institutions such as the European Union. Assume you are the manager of a multinational enterprise in Belgium. Why is the institutional framework created by the EU pivotal for business? c.arrow_forwardThe form of entry strategy into international operations that offers the lowest level of control would be :- franchising. licensing. joint venture. exporting.arrow_forwardQuestion 2 The Liability of Foreigness (LOF) is the inherent disadvantage of foreign firms experience in host countries because of their non-native status. Assume that you are the owner of a small and reasonable profitable firm,would you consider expanding oversea? Elaborate your point of view by relate with the issues of foreign market entryarrow_forward
- 1. What impact would harmonization of national accounting standards have on international businesses? 2. Are U.S. firms at a competitive disadvantage because they cannot use accounting reserves as German firms do?arrow_forwardHow important of international trade (imports and exports) to the world economy? What accounting issues arise for a company as a result of engaging in international trade (imports and exports)? Why might a company be interested in investing in an operation in a foreign country (foreign direct investment)?arrow_forwardWhich one of the following is likely discouraging foreign direct investmen (FDI) in one country? A. The foreign firm would produce a good which is currently not available in the host country. B. The foreign firm intends to partner with the local firms of the host country. C. The foreign firm's products are similar with the local firms of the host country. D. The foreign firm is able to compete in the market of the host country. Clear my choicearrow_forward
- Why do firmsexpand into other countries?arrow_forwardWhy do businesses decide to acquire other businesses? How do they decide to divest parts of their business? What are the risks and benefits of conducting business internationally?arrow_forwardReasons that a company might choose to acquire a business in a foreign country include all of the following except: Take advantage of free trade agreements Purchase local customer loyalty Local management understands local ing-hiet equatitionsarrow_forward
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