EBK CFIN
6th Edition
ISBN: 9781337671743
Author: BESLEY
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 1, Problem 17PROB
Summary Introduction
To determine: the advantages and disadvantages of the ownership structure of “closed” companies in comparison to that of “open” companies
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Which of the following is not a reason for U.S. firms operating in foreign markets?
A.Better economic and political environment (in the U.S.)
B.Less expensive labor
C.Tax incentives
D. To achieve international diversification
The complexity posed by differences in the cultural, political, legal, and economic environments creates a so-called “liability of foreignness.”
This idea holds that foreign companies, because of their poorer familiarity with local conditions, incur additional costs. In theory, the liability of foreignness makes IB activity too expensive.
In practice, companies offset this liability by capitalizing on their unique advantages as well as selecting the mode of international business that best reflects their resource profile and risk tolerance--Always in the effort toward minimizing the intrinsic higher costs of international operations.
The higher costs of international operations, executives point out, are driven by things as varied as the cost of legally establishing businesses, real estate costs, customs duties, and translation costs.
Managing these costs is complicated by the report that _53_______%___ of global CEOs are concerned about the impact of __bribery and…
As for the outsourcing of multinational companies, please talk about the language and cultural differences, as well as the political risks that complicate the financial management of multinational companies.
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- Question 2 The Liability of Foreigness (LOF) is the inherent disadvantage of foreign firms experience in host countries because of their non-native status. Assume that you are the owner of a small and reasonable profitable firm,would you consider expanding oversea? Elaborate your point of view by relate with the issues of foreign market entryarrow_forward. What is globalization? What modes of international business are used by firms that want to globalize? Briefly describe each method. 1. What is the difference between a monochronic and a polychronic culture? How do such cultural differences affect business practices for international firms? 2. What is gross national income? How is it calculated? Illustrate your answer with a specific example. 1. What are the disadvantages of import restrictions in regard to creating domestic employment opportunities? 2. What is value chain configuration? Briefly list and discuss the factors that influence value chain configuration. 1. What is the relationship between a company's international market and its production location decisions? How do firms benefit from the use of scanning techniques when making location decisions? 2. Explain how franchising agreements differ from licensing agreements. 1. Compare push and pull promotional strategies in the context of international business.…arrow_forwardWhich of the following statements is true about expropriation? Multiple Choice Small firms are more likely targets of expropriation than large firms because more is to be gained by expropriating small firms. Expropriation is least likely to occur in non-Western countries that are poor, relatively unstable, and suspicious of foreign multinationals. Expropriation of foreign enterprises by developing countries were rare in the old days Firms at the greatest risk of expropriation are in extractive, agricultural, or infrastructural industries such as utilities and transportation.arrow_forward
- Assume that an U.S. firm wants to engage in international business without making a major investment in the foreign country. Which method is LEAST appropriate in this situation? A. licensing B. acquisition of an existing firm in the foreign country C. exporting D. franchisingarrow_forward1. What impact would harmonization of national accounting standards have on international businesses? 2. Are U.S. firms at a competitive disadvantage because they cannot use accounting reserves as German firms do?arrow_forwardEntry modes for entering new countries vary in their degree of control. What does control mean? O The degree of risk a firm has in its foreign activities The degree of ownership a firm has in its foreign activities O The degree of profits a firm has in its foreign activities O The degree of influence a firm has in its foreign activitiesarrow_forward
- Why do businesses decide to acquire other businesses? How do they decide to divest parts of their business? What are the risks and benefits of conducting business internationally?arrow_forwardHow is multinational financial management different from financial management as practicedby a firm that has no direct contacts with foreignfirms or customers? What special problems andchallenges do multinational firms face? Whatfactors cause companies to “go multinational”?arrow_forwardHow does Haier’s internationalization strategy differ from the pattern of international development typical of Western enterprises?arrow_forward
- How do you think the international equity market might benefit Malaysian firms? Is there any potential downside to multinational companies (MNC) in Malaysia from more international equity market?arrow_forwardMultinational corporations are exposed to higher risks that primarily come from two significant sources: (1) exchange rate risk and (2) political or country risk. An example of would be having property expropriated without adequate compensation. Which of the following are steps a company can take to reduce potential loss from expropriation? Check all that apply. Finance the subsidiary with local capital which reduces the local government's incentive to expropriate the multinational company's property. O Lock in the dollar return by selling currency in the forward market. Structure operations so that the subsidiary is only valuable as a part of the integrated corporate system. This reduces the risk exposure for the integrated company.arrow_forwardWhat is globalization? How is globalization impacting the external environment in which businesses operate and what can businesses do to operate successfully in the global environment. What are the advantages and disadvantages of globalization?arrow_forward
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