Chapter 1 Flashcards
agency problem
conflicts between the goals of firm’s managers and shard holders
SOX
requires firms to implement an internal reporting process that can be easily monitored by executives and the board of directors
MNC improve internal processes by
establishing a centralized database of info
ensuring that all data are reported consistently among subs
implementing a system that automatically checks data for unusual discrepancies relative to norms
speeding the process by which all departments and subs access needed data
making executives more accountable for F/S by personally verifying their accuracy
comparative advantages
allows firms to penetrate foreign markets
reasons why firms pursue international business
- theory of comparative advantage
- imperfect markets theory
- product cycle theory
imperfect market
where factors of production are somewhat immobile
product cycle theory
firms become established in the home market as a result of some perceived advantage over existing competitors
international business methods
international trade licensing franchising joint ventures acquisitions of existing operations establishment of new foreign subs
international trade
selling goods internationally
licensing
arrangement where one firm provides its tech in exchange for fees or other considerations
franchising
one firm provides a specialized sales or service strategy, support assistance, and possibly an initial investment in the franchise in exchange for periodic fees
joint venture
venture that is jointly owned and operated by two or more firms
direct foreign investment
any method of increasing international business that requires a direct investment in foreign operations
PV of expected cash flows
value of a firm
