1/21 Class

Question 1

pros and cons to the parent company of the following

Answer 1

licensing agreements
provide tech, copyrights, trademarks for someone else to use
hotel brewing starbucks coffee
disney - manufacturers that make characters, costumes, etc.
independent
license right to use images
microsoft - license software
canvas for U of U - we license the use of software
BlockU
putting images on clothing, mugs, pens, paraphernalia
cannot control quality of product
franchising
generally parent has a bit more control
supplying recipes, suppliers, cannot make changes
doesn’t require a lot of capital for the parent
does require capital for franchisee
pay money for the right ot open it up
royalites
franchisee is an owner (self employed) - bigger stake in making business work
a lot more risk to franchisee as opposed to a licensing agreement
quality and services can vary
parent tries to oversee and avoid bad experiences
try to protect brand
joint ventures
two companies join to share competitive advantages
oil and oil drilling - join forces to jump right into business
nestle and general mills - in europe competitors but in US joint
apple and HP joining forces to market the ipod
conflicts can arise based strategy ideas
need to have a lot of trust in the people you are going into business with
have some good lawyers on your side
what makes foreign operations, and therefore future cash flows, risky?
economic conditions
improve in the company, more demand, more cash
poorer economic conditions, less demand, less money
taxation
netting
transfer pricing agreements
political risk
friction in governments
boycotting
internal gov’t friction
nationalization vs. privatization
exchange rate risk
changes and effect on cash flows
How are US and foreign economies correlated? What happens when a foreign currency weakens against the dollar?
MNC’s are sold in the country and therefore in their currency
P&G sales come from out of US
Dollar is getting stronger
Getting less dollars now for same amount tomorrow

Question 2

MNC

Answer 2

common finance decisions include
discontinue operations in a particular country
pursue new business in a particular country

Question 3

agency problems

Answer 3

conflict of goals between managers and shareholders
parent control of agency problems
corporate control of agency problems
sarbanes oxley act (SOX)

Question 4

how did SOX improve corporate governance of MNCs

Answer 4

establishing a centralized database of info
ensuring that all data are reported consistently among subsidiaries
implementing a system that automatically checks for unusual discrepancies relative to norms
speeding the process by which departments and subsidiaries have access to all the data they need
making executives more accountable for f/s

Question 5

management structure of MNC

Answer 5

centralized
everything goes back to the parent
decentralized
how internet facilitates management control

Question 6

international business strategy( reasons for MNC setups)

Answer 6

theory of competitive advantage
imperfect markets theory
product cycle theory

Question 7

international business types(foreign direct investment)

Answer 7

international trade
licensing 
franchising 
joint ventures
acquisitions of existing operations
establishing new foreign subsidiaires

Question 8

lots of models

Answer 8

we are going to get right back into finance

Question 9

formulas

Answer 9

in slides

Question 10

HMK 1

Answer 10

due next monday

Question 11

MNC

Answer 11

meant to maximize shareholder wealth