Multinational Financial

Management
Alan Shapiro
9th Edition
J.Wiley & Sons

Power Points by
Joseph F. Greco, Ph.D.
California State University, Fullerton

CHAPTER 1

Introduction

PART 1 THE RISE OF THE

MULTINATIONAL CORPORATION
I. The MNC: A Definition

a company with production and distribution

facilities in more than one country.

with a parent company located in the home country

at least five or six foreign subsidiaries

THE RISE OF THE

MULTINATIONAL CORPORATION
The MNCs Evolution
Reasons to Go Global:
1. More raw materials
2. New markets
3. Minimize costs of
production

THE RISE OF THE

MULTINATIONAL CORPORATION
RAW MATERIAL SEEKERS
exploit markets in other countries
historically first to appear
modern-day counterparts
British Petroleum
Exxon

THE RISE OF THE

MULTINATIONAL CORPORATION
MARKET SEEKERS
Produce and sell in foreign markets
Have heavy foreign direct investors
Represented today by firms such as:
IBM
MacDonalds
Nestle
Levi Strauss

THE RISE OF THE

MULTINATIONAL CORPORATION
COST MINIMIZERS
seek lower-cost production abroad
Their motive: to remain cost competitive
Represented today by firms such as:

Texas Instruments
Intel
Seagate Technology
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THE PROCESS OF OVERSEAS

EXPANSION
I. OVERVIEW:
A. Informal Exporting
B. Sales Subsidiary
C. Creation of Distribution System
B. Overseas Production
C. Licensing

THE PROCESS OF OVERSEAS

EXPANSION
A. Exporting
1. Minimal cost and risks
2. Low profits
3. Get to know the market

THE PROCESS OF OVERSEAS

EXPANSION
B. Sales Subsidiary
1. local office
2. greater customer service
3. increased communication

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THE PROCESS OF OVERSEAS

EXPANSION
C. Creation of a Distribution System
1. new service facilities set up
2. create a warehouse system
3. marketing activities within a companys
own distribution system

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THE PROCESS OF OVERSEAS

EXPANSION
D. Overseas Production
1. realize full sales potential
2. keep abreast of market developments
3. fill orders faster
4. greatest risk to the company with greatest
potential for profit

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THE PROCESS OF OVERSEAS

EXPANSION
D. Licensing
1. Alternative to setting up local production
2. Less risk than setting up local production
3. Relatively lower cash flow
4. Faster market entry time
5. Maintaining quality standards may be a
problem
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