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BACKGROUND One of the best methods of learning broad concepts in this text is to put yourself in the place of an MNC manager or board member, and...

c. Explain how you might be able to use a compensation plan that limits the potential agency problems?

d. Assume that you have been approached by a competitor in Thailand to engage in a joint venture.
The competitor would offer the classroom facilities (so that you would not need to rent classroom facilities), while your employees would provide the teaching. You would split the profits with this business. Discuss how your potential return and your risk would change if you pursue the joint venture.
BACKGROUND One of the best methods of learning broad concepts in this text is to put yourself in the place of an MNC manager or board member, and apply the concepts to make financial decisions. Board members do not normally make the decisions that are discussed here, but must have the conceptual skills to monitor the policies that are implemented by the MNC’s managers. Thus, they must frequently ask themselves what they would do if they were making the managerial decisions or setting corporate polices. Consider the following business that you could easily create: a business that teaches individuals in another country to speak English. While this business is very basic, it still requires the same type of decisions faced by large MNCs. Assume that you initially establish this business in Thailand. Details of Your Business. You live in Malaysia. You invested RM60,000 to establish a business of a language school called UCSI Thailand in Bangkok, Thailand. You hire local individuals in Thailand who can speak English and train others how to speak English. You have a small subsidiary in Thailand, which has an office and an attached classroom that you lease. Clients can come to your subsidiary for a 1-month structured course in English, taught by your employees. You advertise in the local newspapers to promote the teaching services offered by your business. You also serve some individuals from Thailand who have taken English classes and want to come to Malaysia. for a one-week intense course in which they can improve and practice their English and practice it. All revenue and expenses associated with your business are denominated in Thai Baht. Most of the profits from the business in Thailand are sent to you by your subsidiary at the end of each month. While your expenses are somewhat stable, your revenue varies with the number of clients who sign up for the English-speaking courses in Thailand. You only need to know this background so that you can answer the related questions that are asked about your business throughout the term. Answer each question as if you were serving on the board of your business or as a manager of the business. The questions in the early chapters force you to assess the firm’s opportunities and exposure, while the later chapters force you to offer your input on potential strategies that your business may pursue.
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Multinational Financial Management a. Discuss the corporate control of your business. Explain why your business in Thailand is exposed to agency problems. b. How would you attempt to monitor the ongoing operations of the business? c. Explain how you might be able to use a compensation plan that limits the potential agency problems? d. Assume that you have been approached by a competitor in Thailand to engage in a joint venture. The competitor would offer the classroom facilities (so that you would not need to rent classroom facilities), while your employees would provide the teaching. You would split the profits with this business. Discuss how your potential return and your risk would change if you pursue the joint venture. e. Explain the conditions that would cause your business to be adversely affected by exchange rate movements. f. Explain how your business could be adversely affected by political risk.
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