1. Working Capital Management Def: Managing of Current Assets & Liabilities : Flow Prospective: Managing the location of liquid funds to find both the currency in which liquid funds are held and country where such funds are placed n Tax Structure n Exchange Rate n Liquidity consideration n Import Restrictions n Political and social consideration n Rate of return for excess cash investment n Inconvertibility of the fund n Exchange control n Conversion Blockage n Heavy withholding TAX ON FOREIGN INCOME, DIVIDEND,ROYALTY, AND OTHER RESTRICTION FOR REMITTANCE OF THE FUND. MENU

2. International Fund Transfer n Recovering funds from affiliate without piquing host country’s sensitivity with a large Dividend drain n Allocation of a large overhead from parent to an affiliate n Facilitate the entry of local capital to joint venture l FUND TRANSFER STRATEGIES: è If foreign exchange losses are expected, speed up the transfer è Consideration for the age and size of the affiliate è Availability of the fund to the affiliate è Availability of the joint venture è Transferability of royalty fees and other foreign income è Consideration for transaction, speculative and precautionary balances MENU

3. Managing International Receivables & Inventory v Receivable: Lead and Lag Techniques:  Provide funds to affiliate in exchange for equities  Sell in and provide credit in long run from one affiliate to others  Re-invoicing centers: separate subsidies to manage intercompany transactions when the title passes to re- invoice center but goods are directed to the affiliate. v Inventory: v Taking advantage of free trade zone v Consideration for inflation rate v Consideration for currency devaluation, price freeze, import restrictions etc.. MENU

4. MNC’s Strategy & Direct Investment 1. Theory of MNC Most MNC’s are oligopolies.Most MNC’s are oligopolies. They operate in product and factor market imperfection.They operate in product and factor market imperfection. They have intangible capital in the form of trade markets, patents, general marketing skills, organizational abilities to raise the market and introduce new products, quality control, advertising, distribution, after-the-sale service and ability to forecast exchange markets.They have intangible capital in the form of trade markets, patents, general marketing skills, organizational abilities to raise the market and introduce new products, quality control, advertising, distribution, after-the-sale service and ability to forecast exchange markets. 2. Investment Strategy Vertical Integration - diversification across the industry.Vertical Integration - diversification across the industry. Horizontal Integration - investment within the industry.Horizontal Integration - investment within the industry. Trade innovation and barriers prohibit market entry by continuous introduction of new products, different services and product differentiation.Trade innovation and barriers prohibit market entry by continuous introduction of new products, different services and product differentiation. 3. Follow-the-Lead Behavior Cost reduction and economy of scale; low cost production site with low price -- oligopoly price leadership and cost minimizer.Cost reduction and economy of scale; low cost production site with low price -- oligopoly price leadership and cost minimizer. MENU

5. MNC’s Strategy & Direct Investment (con...) 4. Joint Venture 5. Pricing Conversion  High prices in home country to compensate for low prices overseas. 6. Investing in Each Other’s Market “if you undercut me in my home market, I will do the same thing in your market.” MENU

6. Process Classification ProcessU.S.E.C.Japan MENU

7. END