Chapter 1
g g
MultinationalgFinancialgManagement:g AngOverview
LecturegOutline
ManaginggthegMNC
HowgBusinessgDisciplinesgAregUsedgtogManagegthegMNCg
AgencygProblems
ManagementgStructuregofgangMNC
WhygFirmsgPursuegInternationalgBusiness
gTheorygofgComparativegAdvantageg Imperf
ectgMarketsgTheory
ProductgCyclegTheory
MethodsgtogConductgInternationalgBusiness
InternationalgTradeg
LicensinggFranchisin
g
JointgVentures
AcquisitionsgofgExistinggOperationsgE
stablishinggNewgForeigngSubsidiariesg
SummarygofgMethods
ValuationgModelgforgangMNCgDomest
icgValuationgModelgMultinationalgVal
uationgModel
UncertaintygSurroundinggangMNC’sgCashgFlowsgHo
wgUncertaintygAffectsgthegMNC’sgCostgofgCapital
OrganizationgofgthegText
©g2021gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegorgingpart,gexceptgforgu
segasg permittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherwisegongagpassword-
protectedgwebsitegforgclassroomguse.
, MultinationalgFinancialgManagement:gAngOverviewg❖g2
ChaptergTheme
Thisgchaptergintroducesgthegmultinationalgcorporationgasghavinggsimilarggoalsgtogthegpurelygdomesticgcorpora
tion,gbutgagwidergvarietygofgopportunities.g Withgadditionalgopportunitiesgcomegpotentialgincreasedgreturnsgan
dgothergformsgofgriskgtogconsider.g Thegpotentialgbenefitsgandgrisksgaregintroduced.
TopicsgtogStimulategClassgDiscussion
1. WhatgisgthegappropriategdefinitiongofgangMNC?
2. WhygdoesgangMNCgexpandginternationally?
3. WhatgaregthegrisksgofgangMNCgwhichgexpandsginternationally?
4. Whygmustgpurelygdomesticgfirmsgbegconcernedgaboutgtheginternationalgenvironment?
POINT/COUNTER-POINT:
ShouldgangMNCgReducegItsgEthicalgStandardsgtogCompetegInternationally?
POINT:gYes.g WhengagU.S.-
basedgMNCgcompetesgingsomegcountries,gitgmaygencountergsomegbusinessgnormsgtheregthatgaregnotgallo
wedgingthegU.S.gForgexample,gwhengcompetinggforgaggovernmentgcontract,gfirmsgmightgprovidegpayoffs
gtogtheggovernmentgofficialsgwhogwillgmakegthegdecision.gYet,gingthegUnitedgStates,gagfirmgwillgsometi
mesgtakegagclientgongangexpensiveggolfgoutinggorgprovidegskyboxgticketsgtogevents.gThisgisgnogdifferentg
thangagpayoff.gIfgthegpayoffsgaregbiggergingsomegforeigngcountries,gthegMNCgcangcompetegonlygbygmat
chinggthegpayoffsgprovidedgbygitsgcompetitors.
COUNTER-POINT:g No.gAgU.S.-
basedgMNCgshouldgmaintaingagstandardgcodegofgethicsgthatgappliesgtoganygcountry,gevengifgitgisgatgagdisa
dvantagegingagforeigngcountrygthatgallowsgactivitiesgthatgmightgbegviewedgasgunethical.gIngthisgway,gtheg
MNCgestablishesgmoregcredibilitygworldwide.
WHOgISgCORRECT?gUsegthegInternetgtoglearngmoregaboutgthisgissue.gWhichgargumentgdogyougsupport
?gOffergyourgowngopiniongongthisgissue.
ANSWER:gThegissuegisgfrequentlygdiscussed.gItgisgeasygtogsuggestgthatgthegMNCgshouldgmaintaingagsta
ndardgcodegofgethics,gbutgingreality,gthatgmeansgthatgitgwillgnotgbegablegtogcompetegingsomegcases.gForge
xample,gevengifgitgsubmitsgtheglowestgbidgongagspecificgforeignggovernmentgproject,gitgwillgnotgreceivegt
hegbidgwithoutgagpayoffgtogthegforeignggovernmentgofficials.gThegissuegisgespeciallygagconcerngforglargeg
projectsgthatgmayggenerategsubstantialgcashgflowsgforgthegfirmgthatgisgchosengtogdogthegproject.gIdeally,gt
hegMNCgcangclearlygdemonstrategtogwhoevergoverseesgthegdecisiongprocessgthatgitgdeservesgtogbegselect
ed.gIfgtheregisgjustgonegdecision-
makergwithgnogoversight,gangMNCgcangnotgensuregthatgthegdecisiongwillgbegethical.gButgifgthegdecision-
makergmustgbegaccountablegtogagdepartmentgwhogoverseesgthegdecision,gthegMNCgmaygbegablegtogprom
ptgthegdepartmentgtogensuregthatgthegprocessgisgethical.
©g2021gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegorgingpart,gexceptgforgu
segasg permittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherwisegongagpassword-
protectedgwebsitegforgclassroomguse.
, MultinationalgFinancialgManagement:gAngOverviewg❖g3
AnswersgtogEndgofgChaptergQuestions
1. AgencygProblemsgofgMNCs.
a. ExplaingthegagencygproblemgofgMNCs.
ANSWER:g Thegagencygproblemgreflectsgagconflictgofginterestsgbetweengdecision-
makinggmanagersgandgthegownersgofgthegMNC.g Agencygcostsgoccurgingangeffortgtogassuregthatgma
nagersgactgingthegbestginterestgofgthegowners.
b. WhygmightgagencygcostsgbeglargergforgangMNCgthangforgagpurelygdomesticgfirm?
ANSWER:g ThegagencygcostsgaregnormallyglargergforgMNCsgthangpurelygdomesticgfirmsgforgthegfol
lowinggreasons.g First,gMNCsgincurglargergagencygcostsgingmonitoringgmanagersgofgdistantgforeigng
subsidiaries.g Second,gforeigngsubsidiarygmanagersgraisedgingdifferentgculturesgmaygnotgfollowgunif
ormggoals,gandgsomegmanagersgmaygfocusgongsatisfyinggrespectivegemployees.g Third,gthegsheergsiz
egofgtheglargergMNCsgwouldgalsogcreateglargegagencygproblems.
2. ComparativegAdvantage.
a. Explainghowgthegtheorygofgcomparativegadvantagegrelatesgtogthegneedgforginternationalgbusiness.
ANSWER:g Thegtheorygofgcomparativegadvantagegimpliesgthatgcountriesgshouldgspecializegingprodu
ction,gtherebygrelyinggongothergcountriesgforgsomegproducts.g Consequently,gtheregisgagneedgforginte
rnationalgbusiness.
b. ExplainghowgthegproductgcyclegtheorygrelatesgtogtheggrowthgofgangMNC.
ANSWER:gThegproductgcyclegtheorygsuggestsgthatgatgsomegpointgingtime,gthegfirmgwillgattemptgtog
capitalizegongitsgperceivedgadvantagesgingmarketsgothergthangwheregitgwasginitiallygestablished.
3. ImperfectgMarkets.
a. Explainghowgthegexistencegofgimperfectgmarketsghasgledgtogthegestablishmentgofgsubsidiariesg
ingforeigngmarkets.
ANSWER:g Becausegofgimperfectgmarkets,gresourcesgcannotgbegeasilygandgfreelygretrievedgbygth
egMNC.g Consequently,gthegMNCgmustgsometimesggogtogthegresourcesgrathergthangretrievegresou
rcesg(suchgasgland,glabor,getc.).
b. Ifgperfectgmarketsgexisted,gwouldgwages,gprices,gandginterestgratesgamonggcountriesgbegmo
regsimilargorglessgsimilargthangundergconditionsgofgimperfectgmarkets?g Why?
ANSWER:gIfgperfectgmarketsgexisted,gresourcesgwouldgbegmoregmobilegandgcouldgthereforegbegtra
nsferredgtogthosegcountriesgmoregwillinggtogpaygaghighgpricegforgthem.g Asgthisgoccurred,gshortagesg
ofgresourcesginganygparticulargcountrygwouldgbegalleviatedgandgthegcostsgofgsuchgresourcesgwouldgb
egsimilargacrossgcountries.
4. InternationalgOpportunities.
©g2021gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegorgingpart,gexceptgforgu
segasg permittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherwisegongagpassword-
protectedgwebsitegforgclassroomguse.
, MultinationalgFinancialgManagement:gAngOverviewg❖g4
a. Dogyougthinkgthatgeithergthegacquisitiongofgagforeigngfirmgorglicensinggwillgresultginggreaterggro
wthgforgangMNC?gWhichgalternativegisglikelygtoghavegmoregrisk?
ANSWER:g Angacquisitiongwillgtypicallygresultginggreaterggrowth,gbutgitgisgriskiergbecausegitgnormallygre
quiresgaglargerginvestmentgandgthegdecisiongcangnotgbegeasilygreversedgoncegthegacquisitiongisgmade.
b. Describegagscenariogingwhichgthegsizegofgagcorporationgisgnotgaffectedgbygaccessgtoginternatio
nalgopportunities.
ANSWER:gSomegfirmsgmaygavoidgopportunitiesgbecausegtheyglackgknowledgegaboutgforeigngmarke
tsgorgexpectgthatgthegrisksgaregexcessive.g Thus,gthegsizegofgthesegfirmsgisgnotgaffectedgbygthegopport
unities.
c. ExplaingwhygMNCsgsuchgasgCocagColagandgPepsiCogstillghavegnumerousgopportunitiesgf
orginternationalgexpansion.
ANSWER:gCocagColagandgPepsiCogstillghavegnewginternationalgopportunitiesgbecausegcountriesgaregatgv
ariousgstagesgofgdevelopment.g SomegcountriesghavegjustgrecentlygopenedgtheirgbordersgtogMNCs.
Manygofgthesegcountriesgdognotgoffergsufficientgfoodgorgdrinkgproductsgtogtheirgconsumers.
5. InternationalgOpportunitiesgDuegtogthegInternet.
a. Whatgfactorsgcausegsomegfirmsgtogbecomegmoreginternationalizedgthangothers?
ANSWER:gThegoperatinggcharacteristicsgofgthegfirmg(whatgitgproducesgorgsells)gandgthegriskgpercepti
ongofginternationalgbusinessgwillginfluencegthegdegreegtogwhichgagfirmgbecomesginternationalized.g Se
veralgothergfactorsgsuchgasgaccessgtogcapitalgcouldgalsogbegrelevantghere.g Firmsgthatgareglabor-
intensivegcouldgmoregeasilygcapitalizegonglow-
wagegcountriesgwhilegfirmsgthatgrelygongtechnologicalgadvancesgcouldgnot.
b. WhygmightgthegInternetghavegresultedgingmoreginternationalgbusiness.
ANSWER:gThegInternetgallowsgforgeasygandglow-
costgcommunicationgbetweengcountries,gsogthatg firmsgcouldgnowgdevelopgcontactsgwithgpotentialgcu
stomersgoverseasgbyghavinggagwebsite.gManygfirmsgusegtheirgwebsitegtogidentifygthegproductsgthatgth
eygsell,galonggwithgthegpricesgforgeachgproduct.g Thisgallowsgthemgtogeasilygadvertisegtheirgproductsgt
ogpotentialgimportersganywheregingthegworldgwithoutgmailinggbrochuresgtogvariousgcountries.g Ingadd
ition,gtheygcangaddgtogtheirgproductglinegandgchangegpricesgbygsimplygrevisinggtheirgwebsite,gsogimp
ortersgaregkeptgabreastgofgthegexporter’sgproductginformationgbygmonitoringgthegexporter’sgwebsitegp
eriodically.gFirmsgcangalsogusegtheirgwebsitesgtogacceptgordersgonline.g Somegfirmsgwithganginternati
onalgreputationgusegtheirgbrandgnamegtogadvertisegproductsgovergtheginternet.g Theygmaygusegmanufa
cturersgingsomegforeigngcountriesgtogproducegsomegofgtheirgproductsgsubjectgtogtheirgspecification
6. ImpactgofgExchangegRategMovements.gPlakgCo.gofgChicagoghasgseveralgEuropeangsubsidiariesgth
atgremitgearningsgtogitgeachgyear.gExplainghowgappreciationgofgthegeurog(thegcurrencygusedgingmany
gEuropeangcountries)gwouldgaffectgPlak'sgvaluation.
ANSWER:g Plak’sgvaluationgshouldgincreasegbecausegthegappreciationgofgthegeurogwillgincreasegthe
gdollargvaluegofgthegcashgflowsgremittedgbygthegEuropeangsubsidiaries.
©g2021gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegorgingpart,gexceptgforgu
segasg permittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherwisegongagpassword-
protectedgwebsitegforgclassroomguse.
g g
MultinationalgFinancialgManagement:g AngOverview
LecturegOutline
ManaginggthegMNC
HowgBusinessgDisciplinesgAregUsedgtogManagegthegMNCg
AgencygProblems
ManagementgStructuregofgangMNC
WhygFirmsgPursuegInternationalgBusiness
gTheorygofgComparativegAdvantageg Imperf
ectgMarketsgTheory
ProductgCyclegTheory
MethodsgtogConductgInternationalgBusiness
InternationalgTradeg
LicensinggFranchisin
g
JointgVentures
AcquisitionsgofgExistinggOperationsgE
stablishinggNewgForeigngSubsidiariesg
SummarygofgMethods
ValuationgModelgforgangMNCgDomest
icgValuationgModelgMultinationalgVal
uationgModel
UncertaintygSurroundinggangMNC’sgCashgFlowsgHo
wgUncertaintygAffectsgthegMNC’sgCostgofgCapital
OrganizationgofgthegText
©g2021gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegorgingpart,gexceptgforgu
segasg permittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherwisegongagpassword-
protectedgwebsitegforgclassroomguse.
, MultinationalgFinancialgManagement:gAngOverviewg❖g2
ChaptergTheme
Thisgchaptergintroducesgthegmultinationalgcorporationgasghavinggsimilarggoalsgtogthegpurelygdomesticgcorpora
tion,gbutgagwidergvarietygofgopportunities.g Withgadditionalgopportunitiesgcomegpotentialgincreasedgreturnsgan
dgothergformsgofgriskgtogconsider.g Thegpotentialgbenefitsgandgrisksgaregintroduced.
TopicsgtogStimulategClassgDiscussion
1. WhatgisgthegappropriategdefinitiongofgangMNC?
2. WhygdoesgangMNCgexpandginternationally?
3. WhatgaregthegrisksgofgangMNCgwhichgexpandsginternationally?
4. Whygmustgpurelygdomesticgfirmsgbegconcernedgaboutgtheginternationalgenvironment?
POINT/COUNTER-POINT:
ShouldgangMNCgReducegItsgEthicalgStandardsgtogCompetegInternationally?
POINT:gYes.g WhengagU.S.-
basedgMNCgcompetesgingsomegcountries,gitgmaygencountergsomegbusinessgnormsgtheregthatgaregnotgallo
wedgingthegU.S.gForgexample,gwhengcompetinggforgaggovernmentgcontract,gfirmsgmightgprovidegpayoffs
gtogtheggovernmentgofficialsgwhogwillgmakegthegdecision.gYet,gingthegUnitedgStates,gagfirmgwillgsometi
mesgtakegagclientgongangexpensiveggolfgoutinggorgprovidegskyboxgticketsgtogevents.gThisgisgnogdifferentg
thangagpayoff.gIfgthegpayoffsgaregbiggergingsomegforeigngcountries,gthegMNCgcangcompetegonlygbygmat
chinggthegpayoffsgprovidedgbygitsgcompetitors.
COUNTER-POINT:g No.gAgU.S.-
basedgMNCgshouldgmaintaingagstandardgcodegofgethicsgthatgappliesgtoganygcountry,gevengifgitgisgatgagdisa
dvantagegingagforeigngcountrygthatgallowsgactivitiesgthatgmightgbegviewedgasgunethical.gIngthisgway,gtheg
MNCgestablishesgmoregcredibilitygworldwide.
WHOgISgCORRECT?gUsegthegInternetgtoglearngmoregaboutgthisgissue.gWhichgargumentgdogyougsupport
?gOffergyourgowngopiniongongthisgissue.
ANSWER:gThegissuegisgfrequentlygdiscussed.gItgisgeasygtogsuggestgthatgthegMNCgshouldgmaintaingagsta
ndardgcodegofgethics,gbutgingreality,gthatgmeansgthatgitgwillgnotgbegablegtogcompetegingsomegcases.gForge
xample,gevengifgitgsubmitsgtheglowestgbidgongagspecificgforeignggovernmentgproject,gitgwillgnotgreceivegt
hegbidgwithoutgagpayoffgtogthegforeignggovernmentgofficials.gThegissuegisgespeciallygagconcerngforglargeg
projectsgthatgmayggenerategsubstantialgcashgflowsgforgthegfirmgthatgisgchosengtogdogthegproject.gIdeally,gt
hegMNCgcangclearlygdemonstrategtogwhoevergoverseesgthegdecisiongprocessgthatgitgdeservesgtogbegselect
ed.gIfgtheregisgjustgonegdecision-
makergwithgnogoversight,gangMNCgcangnotgensuregthatgthegdecisiongwillgbegethical.gButgifgthegdecision-
makergmustgbegaccountablegtogagdepartmentgwhogoverseesgthegdecision,gthegMNCgmaygbegablegtogprom
ptgthegdepartmentgtogensuregthatgthegprocessgisgethical.
©g2021gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegorgingpart,gexceptgforgu
segasg permittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherwisegongagpassword-
protectedgwebsitegforgclassroomguse.
, MultinationalgFinancialgManagement:gAngOverviewg❖g3
AnswersgtogEndgofgChaptergQuestions
1. AgencygProblemsgofgMNCs.
a. ExplaingthegagencygproblemgofgMNCs.
ANSWER:g Thegagencygproblemgreflectsgagconflictgofginterestsgbetweengdecision-
makinggmanagersgandgthegownersgofgthegMNC.g Agencygcostsgoccurgingangeffortgtogassuregthatgma
nagersgactgingthegbestginterestgofgthegowners.
b. WhygmightgagencygcostsgbeglargergforgangMNCgthangforgagpurelygdomesticgfirm?
ANSWER:g ThegagencygcostsgaregnormallyglargergforgMNCsgthangpurelygdomesticgfirmsgforgthegfol
lowinggreasons.g First,gMNCsgincurglargergagencygcostsgingmonitoringgmanagersgofgdistantgforeigng
subsidiaries.g Second,gforeigngsubsidiarygmanagersgraisedgingdifferentgculturesgmaygnotgfollowgunif
ormggoals,gandgsomegmanagersgmaygfocusgongsatisfyinggrespectivegemployees.g Third,gthegsheergsiz
egofgtheglargergMNCsgwouldgalsogcreateglargegagencygproblems.
2. ComparativegAdvantage.
a. Explainghowgthegtheorygofgcomparativegadvantagegrelatesgtogthegneedgforginternationalgbusiness.
ANSWER:g Thegtheorygofgcomparativegadvantagegimpliesgthatgcountriesgshouldgspecializegingprodu
ction,gtherebygrelyinggongothergcountriesgforgsomegproducts.g Consequently,gtheregisgagneedgforginte
rnationalgbusiness.
b. ExplainghowgthegproductgcyclegtheorygrelatesgtogtheggrowthgofgangMNC.
ANSWER:gThegproductgcyclegtheorygsuggestsgthatgatgsomegpointgingtime,gthegfirmgwillgattemptgtog
capitalizegongitsgperceivedgadvantagesgingmarketsgothergthangwheregitgwasginitiallygestablished.
3. ImperfectgMarkets.
a. Explainghowgthegexistencegofgimperfectgmarketsghasgledgtogthegestablishmentgofgsubsidiariesg
ingforeigngmarkets.
ANSWER:g Becausegofgimperfectgmarkets,gresourcesgcannotgbegeasilygandgfreelygretrievedgbygth
egMNC.g Consequently,gthegMNCgmustgsometimesggogtogthegresourcesgrathergthangretrievegresou
rcesg(suchgasgland,glabor,getc.).
b. Ifgperfectgmarketsgexisted,gwouldgwages,gprices,gandginterestgratesgamonggcountriesgbegmo
regsimilargorglessgsimilargthangundergconditionsgofgimperfectgmarkets?g Why?
ANSWER:gIfgperfectgmarketsgexisted,gresourcesgwouldgbegmoregmobilegandgcouldgthereforegbegtra
nsferredgtogthosegcountriesgmoregwillinggtogpaygaghighgpricegforgthem.g Asgthisgoccurred,gshortagesg
ofgresourcesginganygparticulargcountrygwouldgbegalleviatedgandgthegcostsgofgsuchgresourcesgwouldgb
egsimilargacrossgcountries.
4. InternationalgOpportunities.
©g2021gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegorgingpart,gexceptgforgu
segasg permittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherwisegongagpassword-
protectedgwebsitegforgclassroomguse.
, MultinationalgFinancialgManagement:gAngOverviewg❖g4
a. Dogyougthinkgthatgeithergthegacquisitiongofgagforeigngfirmgorglicensinggwillgresultginggreaterggro
wthgforgangMNC?gWhichgalternativegisglikelygtoghavegmoregrisk?
ANSWER:g Angacquisitiongwillgtypicallygresultginggreaterggrowth,gbutgitgisgriskiergbecausegitgnormallygre
quiresgaglargerginvestmentgandgthegdecisiongcangnotgbegeasilygreversedgoncegthegacquisitiongisgmade.
b. Describegagscenariogingwhichgthegsizegofgagcorporationgisgnotgaffectedgbygaccessgtoginternatio
nalgopportunities.
ANSWER:gSomegfirmsgmaygavoidgopportunitiesgbecausegtheyglackgknowledgegaboutgforeigngmarke
tsgorgexpectgthatgthegrisksgaregexcessive.g Thus,gthegsizegofgthesegfirmsgisgnotgaffectedgbygthegopport
unities.
c. ExplaingwhygMNCsgsuchgasgCocagColagandgPepsiCogstillghavegnumerousgopportunitiesgf
orginternationalgexpansion.
ANSWER:gCocagColagandgPepsiCogstillghavegnewginternationalgopportunitiesgbecausegcountriesgaregatgv
ariousgstagesgofgdevelopment.g SomegcountriesghavegjustgrecentlygopenedgtheirgbordersgtogMNCs.
Manygofgthesegcountriesgdognotgoffergsufficientgfoodgorgdrinkgproductsgtogtheirgconsumers.
5. InternationalgOpportunitiesgDuegtogthegInternet.
a. Whatgfactorsgcausegsomegfirmsgtogbecomegmoreginternationalizedgthangothers?
ANSWER:gThegoperatinggcharacteristicsgofgthegfirmg(whatgitgproducesgorgsells)gandgthegriskgpercepti
ongofginternationalgbusinessgwillginfluencegthegdegreegtogwhichgagfirmgbecomesginternationalized.g Se
veralgothergfactorsgsuchgasgaccessgtogcapitalgcouldgalsogbegrelevantghere.g Firmsgthatgareglabor-
intensivegcouldgmoregeasilygcapitalizegonglow-
wagegcountriesgwhilegfirmsgthatgrelygongtechnologicalgadvancesgcouldgnot.
b. WhygmightgthegInternetghavegresultedgingmoreginternationalgbusiness.
ANSWER:gThegInternetgallowsgforgeasygandglow-
costgcommunicationgbetweengcountries,gsogthatg firmsgcouldgnowgdevelopgcontactsgwithgpotentialgcu
stomersgoverseasgbyghavinggagwebsite.gManygfirmsgusegtheirgwebsitegtogidentifygthegproductsgthatgth
eygsell,galonggwithgthegpricesgforgeachgproduct.g Thisgallowsgthemgtogeasilygadvertisegtheirgproductsgt
ogpotentialgimportersganywheregingthegworldgwithoutgmailinggbrochuresgtogvariousgcountries.g Ingadd
ition,gtheygcangaddgtogtheirgproductglinegandgchangegpricesgbygsimplygrevisinggtheirgwebsite,gsogimp
ortersgaregkeptgabreastgofgthegexporter’sgproductginformationgbygmonitoringgthegexporter’sgwebsitegp
eriodically.gFirmsgcangalsogusegtheirgwebsitesgtogacceptgordersgonline.g Somegfirmsgwithganginternati
onalgreputationgusegtheirgbrandgnamegtogadvertisegproductsgovergtheginternet.g Theygmaygusegmanufa
cturersgingsomegforeigngcountriesgtogproducegsomegofgtheirgproductsgsubjectgtogtheirgspecification
6. ImpactgofgExchangegRategMovements.gPlakgCo.gofgChicagoghasgseveralgEuropeangsubsidiariesgth
atgremitgearningsgtogitgeachgyear.gExplainghowgappreciationgofgthegeurog(thegcurrencygusedgingmany
gEuropeangcountries)gwouldgaffectgPlak'sgvaluation.
ANSWER:g Plak’sgvaluationgshouldgincreasegbecausegthegappreciationgofgthegeurogwillgincreasegthe
gdollargvaluegofgthegcashgflowsgremittedgbygthegEuropeangsubsidiaries.
©g2021gCengagegLearning.gAllgRightsgReserved.gMaygnotgbegcopied,gscanned,gorgduplicated,gingwholegorgingpart,gexceptgforgu
segasg permittedgingaglicensegdistributedgwithgagcertaingproductgorgservicegorgotherwisegongagpassword-
protectedgwebsitegforgclassroomguse.
