3616_Week 8_CWee - 13-1 Butler Multinational FinanceChapter...

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Unformatted text preview: 13-1 Butler / Multinational FinanceChapter 13 Foreign Market Entry and Country Risk Management WTO members 13-2 Butler / Multinational FinanceChapter 13 Foreign Market Entry and Country Risk Management FINS3616 International Business Finance Week 8 Lecturer: Claudia Wee 13-3 Butler / Multinational FinanceChapter 13 Foreign Market Entry and Country Risk Management Part IV Valuation and the Structureof Multinational Operations Ch 13 Foreign Market Entry & Country Risk Management Ch 14Cross-Border Capital Budgeting Ch 15Multinational Capital Structure and Cost of Capital Ch 16Taxes and Multinational Corporate Strategy Ch 17Real Options and Cross-Border Investment Strategy Ch 18Corporate Governance and the International Market for Corporate Control 13-4 Butler / Multinational FinanceChapter 13 Foreign Market Entry and Country Risk Management Learning objectives PForeign market entry PRecognizing and understanding country risks PStrategies for managing country risks PProtecting the firm’s competitive advantages – Intellectual property rights Chapter 13 Foreign Market Entry and Country Risk Management 13-5 Butler / Multinational FinanceChapter 13 Foreign Market Entry and Country Risk Management Business risk Multinational business risk Domestic business risk Knowledge of the foreign market or country ØFamiliarity with a foreign market is useful in the market entry decision ✓Foreign market entry Recognizing and understanding country risks Strategies for managing country risks Protecting the MNC’s competitive advantages Familiarity ✓Modes Investment-based entry 13-6 Butler / Multinational FinanceChapter 13 Foreign Market Entry and Country Risk Management Hofstede Dimensions of Cultural Distance Management scholar Geert Hofstede studies national differences, and has identified 5 dimensions of cultural distance. ØPower Distance- extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally. ØIndividualism v collectivism - degree to which individuals are integrated into groups. ØMasculinityv femininity- the distribution of roles between the genders. ØUncertainty Avoidance- a society's tolerance for uncertainty, ambiguity; comfort in unstructured situations. ØLong-termv short-termorientation- a society’s “time horizon” http://www.geert-hofstede.com/index.shtml 13-7 Butler / Multinational FinanceChapter 13 Foreign Market Entry and Country Risk Management Modes of foreign market entry ØExport or import entry -Agents or distributors (foreign or domestic) -Foreign sales branches or subsidiaries -Preferred when market potential is high + significant investment risks -Preferred by small firms without international experience ØContract-based entry -Licensing or franchising -Licensingis preferred when a country has investment barriers/ when political and cultural risks are high ØInvestment-based entry -Foreign direct investments (FDI) - preferred when the MNC owns production...
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This note was uploaded on 01/10/2012 for the course FINS 3616 taught by Professor Curry during the Three '10 term at University of New South Wales.

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3616_Week 8_CWee - 13-1 Butler Multinational FinanceChapter...

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