Deck 1: Globalization and the Multinational Corporation

Question 1

Define globalization. How has it proceeded in trade in goods and services versus capital markets

Answer 1

Globalization:
Globalization is a process of expansion in which countries are eventually connected to and integrated with the rest of countries, corporations, and people all over the world through technology, products, travel, companies, within the terms of their economic, political and social activities. Globalization has proceeded in its way of trade and finance respectively through the process of trade in goods and Trade Markets such as capital, financial, money etc.
Globalization has proceeded in trade in goods and services versus capital markets in the following manner:
Globalization through Trade of goods and services happened through countries by reducing trade barriers unilaterally with the help of Trade liberalizations by formation of regional arrangements such as European Union and also through multilateral action within the context of GAAT.
Globalization through capital markets happened with the abolition of capital controls and globalizing financial markets with the trade of derivative securities worldwide in which the underlying assets and their prices are traded such as commodities, exchange rates, etc.

Question 2

Go to UNCTADstat at http://unctadstat.unctad.org.Update the data in Exhibit 1.6 on cross-border mergers and acquisitions for the most recent years.

Answer 2

NO ANSWER

Question 3

Describe fours ways that a company can supply its products to a foreign country. How do they differ

Answer 3

The following are ways in which the companies can supply their products to foreign countries.
1. Exporting:
It is a way through which goods are transferred from home country to host country. However, the types of exporting include direct exporting, Intra corporate exporting, and indirect exporting.
a) Direct Exporting means selling of products in foreign country through its distribution arrangements
b) Indirect exporting means exporting the products either in their original form or in a modified form through another domestic company.
c) Intra corporate transfers means selling the products of a home country company to its affiliated company in host country.
2. Licensing :
In this type the domestic manufacturer leases the right to use its intellectual property such as technology, work methods, patents, copy rights,brandnames,trademarks etc to a manufacturer in a foreign country for a fee which otherwise can also be called as Royalty.
3. Franchising:
It is also a form of licensing; in this type an independent organization called franchisee operates the business under the name of another company called franchisor.
4.
The MNC's can also supply their products to foreign countries through special modes like Contract manufacturing, Management contracts, Business process outsourcing and Turnkey projects.
a) Through Contract manufacturing the companies outsource entire part of manufacturing and concentrate upon the marketing operations.
b) Through Business process out sourcing the MNC's outsource their non-core business process to a manufacturing denied outside provider through long-term contracting.
c) Through Management contracts one company provides managerial assistance, technical assistance and specialized services to the other for a certain agreed period in return for monetary compensation.
d) Through Turnkey projects the firms enter in to a contract under which a firm agrees to fully design, construct, and equip a manufacturing facility and turn the project over to a remunerator when it is ready for operation.
5. Foreign Direct Investment: This type includes FDI without alliances and FDI with alliances.
a) FDI without alliances:
Under this category the firms Invest money directly and establishes manufacturing in other country.
b) FDI with alliances:
Under this category two companies join hands together in order to align their distinctive and different strengths stronger.

Question 4

Go to the IMF's Web site at www.imf.org and download the 2011 World Economic Outlook. Pick your favorite country and determine if this is a good time to invest in it or not.

Question 5

What is a greenfield investment

Question 6

Go to the WTO's Web site at www.wto.org and determine which goods or services are the sources of trade disputes between countries this year

Question 7

What percentage ownership typically defines FDI

Question 8

What is agency theory How does corporate governance address the issues raised by agency theory

Question 9

Why is ownership more concentrated in developing countries than in developed countries

Question 10

What is the IMF What is its role in the world economy

Question 11

What is the World Bank What is its role in the world economy

Question 12

What are the major multilateral development banks

Question 13

What is the WTO What is its role in the world economy

Question 14

What is an institutional investor Along with individual investors, what do they determine

Question 15

What are anti-globalists

Question 16

Go to the Web site of your favorite multinational firm and determine where it operates throughout the world. How many employees does it have worldwide Has it done any interesting cross-border mergers and acquisitions during the past year

Question 17

Who are Ante and Freedy Handel How do their views on the world economy differ