International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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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.
franchising
Which one of the following is likely discouraging foreign direct investmen (FDI) in one country?
A.
The foreign firm would produce a good which is currently not available in the host country.
B.
The foreign firm intends to partner with the local firms of the host country.
C.
The foreign firm's products are similar with the local firms of the host country.
D.
The foreign firm is able to compete in the market of the host country.
Clear my choice
Reasons that a company might choose to acquire a business in a foreign country include all of the following except: Take advantage of free trade agreements Purchase local customer loyalty Local management understands local ing-hiet equatitions
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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_forwardThe 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…arrow_forwardDrexel Co. is a U.S.-based company that is establishing a project in a politically unstable country. It is considering two possible sources of financing. Either the parent could provide most of the financing, or the subsidiary could be supported by local loans from banks in that country. Which financing alternative is more appropriate to protect the subsidiary?arrow_forward
- Entry 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_forwardWhich of the following is an example of managing economic exposure by flexible sourcing policy? An American company sells its products in Brazil and Portugal. Reduced sales in Brazil due to the dollar appreciation against the “real” can be compensated by increased sales in Portugal due to the dollar depreciation against the euro. If yen is strong, it is preferable for a Japanese company to open a manufacturing subsidiary in the U.S. to produce and sell its products there. An American IT company hires software developers in Ukraine because of the weak position of grivna against dollar. A Canadian company spends a lot of money for research & development activities to improve its reputation and gain more customers.arrow_forwardIf a firm does not have foreign subsidiaries, it is not subject to ____. Group of answer choices transaction exposure economic exposure translation exposure A and Barrow_forward
- 1. Supposed a company plans to expand its business abroad, what are the risks it might encounter? 2. What are the needed policy interventions that must be imposed upon doing business internationally?arrow_forwardwhat are the the foreign exchange exposure of a multinational company with it's headquarters in Jamaica and how can the company plan to manage this exposure.arrow_forwardWhich of the following statements is true of foreign trade zone? It is an area through which merchandise is allowed to pass with fewer procedures but higher taxes. These areas provide very limited employment opportunities. International companies can store goods in these zones without incurring taxes, before shipping them to other countries. Goods imported into these zones require import licenses and are subject to import duties.arrow_forward
- What are the circumstances under which the capital expenditure of a foreign subsidiary might have a positive NPV in local currency terms but be unprofitable from the parent firm’s perspective?arrow_forwardGive typing answer with explanation and conclusion Which of the following is an example of foreign exchange risk for an MNC? a. Foreign subsidiary of the MNC may face higher tarriffs b. Foreign subsidiary of the MNC may have to pay higher taxes c. Foreign subsidiary of the MNC may make less sales due to weak foreign currency d. Foreign subsidiary of the MNC may make less sales due to lower consumer incomearrow_forwardQUESTION B Which of the following is NOT a factor direct investors look at when judging whether they will be able to operate in a foreign country? CA Trade policy and privatization policy. OB CC The functioning and efficiency of local markets. The quality of domestic accountability systems. Standards of treatment of foreign affiliates. OD.arrow_forward
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