1. Multinational Financial Management Alan Shapiro 7th Edition J
Multinational Financial Management Alan Shapiro 7th Edition J.Wiley & Sons
Power Points by
Joseph F. Greco, Ph.D.
California State University, Fullerton

2. CORPORATE STRATEGY AND FOREIGN DIRECT INVESTMENT
CHAPTER 16
CORPORATE STRATEGY AND FOREIGN DIRECT INVESTMENT

3. 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

4. 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

5. 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

6. 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

7. THE PROCESS OF OVERSEAS EXPANSION
2. Question:
create or acquire
3. Acquisition
allows speedy transfer of unused parent skills;
used more by small firms.

8. 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

9. THE PROCESS OF OVERSEAS EXPANSION
2. Disadvantages of licensing:
a. Low cash flow
b. Quality standards
c. New competitor

10. II. 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

11. THE THEORY OF THE MULTINATIONAL CORPORATION
B. Financial Market Imperfections
1. Hypothesis
2. Diversification Effect of the MNC

12. III. THE STRATEGY OF THE MNC
A. Three strategies:
That of the Innovation-based MNC

13. 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

14. THE STRATEGY OF THE MNC 3. The senescent MNC
a. global scanning capability
b. the role of rationalization and
integration.

15. THE STRATEGY OF THE MNC 4. FDI and Survival a. Cost reduction
b. Economies of scale
c. Multiple sourcing
d. Keeping domestic customers

16. 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

17. 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

18. DESIGNING A GLOBAL EXPANSION STRATEGY
5. Estimating the longevity of competitive advantage:
a. Develop competitive strength
transferable overseas.
b. Not easily duplicated