Chapter 1
h h
Multinational Financial Management: An Overview
h h h h
Lecture Outline
h
ManaginghthehMNC
HowhBusinesshDisciplineshArehUsedhtohManagehthehMNChAg
encyhProblems
ManagementhStructurehofhanhMNC
WhyhFirmshPursuehInternationalhBusinessh
TheoryhofhComparativehAdvantageh Imperfec
thMarketshTheory
ProducthCyclehTheory
MethodshtohConducthInternationalhBusiness
InternationalhTradeh
LicensinghFranchisin
g
JointhVentures
AcquisitionshofhExistinghOperationshEst
ablishinghNewhForeignhSubsidiarieshSu
mmaryhofhMethods
ValuationhModelhforhanhMNChDomesti
chValuationhModelhMultinationalhValua
tionhModel
UncertaintyhSurroundinghanhMNC’shCashhFlowshHo
whUncertaintyhAffectshthehMNC’shCosthofhCapital
OrganizationhofhthehText
©h2021hCengagehLearning.hAllhRightshReserved.hMayhnothbehcopied,hscanned,horhduplicated,hinhwholehorhinhpart,hexcepthforhusehas
h permittedhinhahlicensehdistributedhwithhahcertainhproducthorhservicehorhotherwisehonhahpassword-
protectedhwebsitehforhclassroomhuse.
, MultinationalhFinancialhManagement:hAnhOverviewh❖h2
Chapter Theme h
Thishchapterhintroduceshthehmultinationalhcorporationhashhavinghsimilarhgoalshtohthehpurelyhdomestichcorporatio
n,hbuthahwiderhvarietyhofhopportunities.h Withhadditionalhopportunitieshcomehpotentialhincreasedhreturnshandhothe
rhformshofhriskhtohconsider.h Thehpotentialhbenefitshandhrisksharehintroduced.
Topics to Stimulate Class Discussion
h h h h
1. WhathishthehappropriatehdefinitionhofhanhMNC?
2. WhyhdoeshanhMNChexpandhinternationally?
3. WhatharehthehriskshofhanhMNChwhichhexpandshinternationally?
4. Whyhmusthpurelyhdomestichfirmshbehconcernedhabouththehinternationalhenvironment?
POINT/COUNTER-POINT:
Should an MNC Reduce Its Ethical Standards to Compete Internationally?
h h h h h h h h h
POINT:hYes.h WhenhahU.S.-
basedhMNChcompeteshinhsomehcountries,hithmayhencounterhsomehbusinesshnormshtherehthatharehnothallowe
dhinhthehU.S.hForhexample,hwhenhcompetinghforhahgovernmenthcontract,hfirmshmighthprovidehpayoffshtohthe
hgovernmenthofficialshwhohwillhmakehthehdecision.hYet,hinhthehUnitedhStates,hahfirmhwillhsometimeshtakehah
clienthonhanhexpensivehgolfhoutinghorhprovidehskyboxhticketshtohevents.hThishishnohdifferenththanhahpayoff.hI
fhthehpayoffsharehbiggerhinhsomehforeignhcountries,hthehMNChcanhcompetehonlyhbyhmatchinghthehpayoffshpr
ovidedhbyhitshcompetitors.
COUNTER-POINT:h No.hAhU.S.-
basedhMNChshouldhmaintainhahstandardhcodehofhethicshthathapplieshtohanyhcountry,hevenhifhithishathahdisadva
ntagehinhahforeignhcountryhthathallowshactivitieshthathmighthbehviewedhashunethical.hInhthishway,hthehMNChes
tablisheshmorehcredibilityhworldwide.
WHOhIShCORRECT?hUsehthehInternethtohlearnhmorehabouththishissue.hWhichhargumenthdohyouhsupport?hO
fferhyourhownhopinionhonhthishissue.
ANSWER:hThehissuehishfrequentlyhdiscussed.hIthisheasyhtohsuggesththaththehMNChshouldhmaintainhahstandar
dhcodehofhethics,hbuthinhreality,hthathmeanshthathithwillhnothbehablehtohcompetehinhsomehcases.hForhexample,he
venhifhithsubmitshthehlowesthbidhonhahspecifichforeignhgovernmenthproject,hithwillhnothreceivehthehbidhwithout
hahpayoffhtohthehforeignhgovernmenthofficials.hThehissuehishespeciallyhahconcernhforhlargehprojectshthathmayh
generatehsubstantialhcashhflowshforhthehfirmhthathishchosenhtohdohthehproject.hIdeally,hthehMNChcanhclearlyhd
emonstratehtohwhoeverhoverseeshthehdecisionhprocesshthathithdeserveshtohbehselected.hIfhtherehishjusthonehdeci
sion-makerhwithhnohoversight,hanhMNChcanhnothensurehthaththehdecisionhwillhbehethical.hButhifhthehdecision-
makerhmusthbehaccountablehtohahdepartmenthwhohoverseeshthehdecision,hthehMNChmayhbehablehtohprompthth
ehdepartmenthtohensurehthaththehprocesshishethical.
©h2021hCengagehLearning.hAllhRightshReserved.hMayhnothbehcopied,hscanned,horhduplicated,hinhwholehorhinhpart,hexcepthforhusehas
h permittedhinhahlicensehdistributedhwithhahcertainhproducthorhservicehorhotherwisehonhahpassword-
protectedhwebsitehforhclassroomhuse.
, MultinationalhFinancialhManagement:hAnhOverviewh❖h3
Answers to End of Chapter Questions
h h h h h
1. AgencyhProblemshofhMNCs.
a. ExplainhthehagencyhproblemhofhMNCs.
ANSWER:h Thehagencyhproblemhreflectshahconflicthofhinterestshbetweenhdecision-
makinghmanagershandhthehownershofhthehMNC.h Agencyhcostshoccurhinhanhefforthtohassurehthathmanag
ershacthinhthehbesthinteresthofhthehowners.
b. WhyhmighthagencyhcostshbehlargerhforhanhMNChthanhforhahpurelyhdomestichfirm?
ANSWER:h ThehagencyhcostsharehnormallyhlargerhforhMNCshthanhpurelyhdomestichfirmshforhthehfollo
winghreasons.h First,hMNCshincurhlargerhagencyhcostshinhmonitoringhmanagershofhdistanthforeignhsubsi
diaries.h Second,hforeignhsubsidiaryhmanagershraisedhinhdifferenthcultureshmayhnothfollowhuniformhgoa
ls,handhsomehmanagershmayhfocushonhsatisfyinghrespectivehemployees.h Third,hthehsheerhsizehofhthehlar
gerhMNCshwouldhalsohcreatehlargehagencyhproblems.
2. ComparativehAdvantage.
a. Explainhhowhthehtheoryhofhcomparativehadvantagehrelateshtohthehneedhforhinternationalhbusiness.
ANSWER:h Thehtheoryhofhcomparativehadvantagehimplieshthathcountrieshshouldhspecializehinhproducti
on,htherebyhrelyinghonhotherhcountrieshforhsomehproducts.h Consequently,htherehishahneedhforhinternatio
nalhbusiness.
b. Explainhhowhthehproducthcyclehtheoryhrelateshtohthehgrowthhofhanh MNC.
ANSWER:hThehproducthcyclehtheoryhsuggestshthathathsomehpointhinhtime,hthehfirmhwillhattempthtohcapit
alizehonhitshperceivedhadvantageshinhmarketshotherhthanhwherehithwashinitiallyhestablished.
3. ImperfecthMarkets.
a. Explainhhowhthehexistencehofhimperfecthmarketshhashledhtohthehestablishmenthofhsubsidiarieshinh
foreignhmarkets.
ANSWER:h Becausehofhimperfecthmarkets,hresourceshcannothbeheasilyhandhfreelyhretrievedhbyhtheh
MNC.h Consequently,hthehMNChmusthsometimeshgohtohthehresourceshratherhthanhretrievehresourcesh(
suchhashland,hlabor,hetc.).
b. Ifhperfecthmarketshexisted,hwouldhwages,hprices,handhinteresthrateshamonghcountrieshbehmoreh
similarhorhlesshsimilarhthanhunderhconditionshofhimperfecthmarkets?h Why?
ANSWER:hIfhperfecthmarketshexisted,hresourceshwouldhbehmorehmobilehandhcouldhthereforehbehtransfe
rredhtohthosehcountrieshmorehwillinghtohpayhahhighhpricehforhthem.h Ashthishoccurred,hshortageshofhresou
rceshinhanyhparticularhcountryhwouldhbehalleviatedhandhthehcostshofhsuchhresourceshwouldhbehsimilarhac
rosshcountries.
4. InternationalhOpportunities.
©h2021hCengagehLearning.hAllhRightshReserved.hMayhnothbehcopied,hscanned,horhduplicated,hinhwholehorhinhpart,hexcepthforhusehas
h permittedhinhahlicensehdistributedhwithhahcertainhproducthorhservicehorhotherwisehonhahpassword-
protectedhwebsitehforhclassroomhuse.
, MultinationalhFinancialhManagement:hAnhOverviewh❖h4
a. Dohyouhthinkhthatheitherhthehacquisitionhofhahforeignhfirmhorhlicensinghwillhresulthinhgreaterhgrowthhf
orhanhMNC?hWhichhalternativehishlikelyhtohhavehmorehrisk?
ANSWER:h Anhacquisitionhwillhtypicallyhresulthinhgreaterhgrowth,hbuthithishriskierhbecausehithnormallyhrequi
reshahlargerhinvestmenthandhthehdecisionhcanhnothbeheasilyhreversedhoncehthehacquisitionhishmade.
b. Describehahscenariohinhwhichhthehsizehofhahcorporationhishnothaffectedhbyhaccesshtohinternationalh
opportunities.
ANSWER:hSomehfirmshmayhavoidhopportunitieshbecausehtheyhlackhknowledgehabouthforeignhmarketsh
orhexpecththaththehrisksharehexcessive.h Thus,hthehsizehofhthesehfirmshishnothaffectedhbyhthehopportunities
.
c. ExplainhwhyhMNCshsuchhashCocahColahandhPepsiCohstillhhavehnumeroushopportunitieshforh
internationalhexpansion.
ANSWER:hCocahColahandhPepsiCohstillhhavehnewhinternationalhopportunitieshbecausehcountriesharehathvari
oushstageshofhdevelopment.h SomehcountrieshhavehjusthrecentlyhopenedhtheirhbordershtohMNCs.
Manyhofhthesehcountrieshdohnothofferhsufficienthfoodhorhdrinkhproductshtohtheirhconsumers.
5. InternationalhOpportunitieshDuehtohthehInternet.
a. Whathfactorshcausehsomehfirmshtohbecomehmorehinternationalizedhthanhothers?
ANSWER:hThehoperatinghcharacteristicshofhthehfirmh(whathithproduceshorhsells)handhthehriskhperceptionh
ofhinternationalhbusinesshwillhinfluencehthehdegreehtohwhichhahfirmhbecomeshinternationalized.h Severalh
otherhfactorshsuchhashaccesshtohcapitalhcouldhalsohbehrelevanthhere.h Firmshthatharehlabor-
intensivehcouldhmoreheasilyhcapitalizehonhlow-
wagehcountrieshwhilehfirmshthathrelyhonhtechnologicalhadvanceshcouldhnot.
b. WhyhmighththehInternethhavehresultedhinhmorehinternationalhbusiness.
ANSWER:hThehInternethallowshforheasyhandhlow-
costhcommunicationhbetweenhcountries,hsohthath firmshcouldhnowhdevelophcontactshwithhpotentialhcusto
mershoverseashbyhhavinghahwebsite.hManyhfirmshusehtheirhwebsitehtohidentifyhthehproductshthaththeyhsell,
halonghwithhthehpriceshforheachhproduct.h Thishallowshthemhtoheasilyhadvertisehtheirhproductshtohpotential
himportershanywherehinhthehworldhwithouthmailinghbrochureshtohvarioushcountries.h Inhaddition,htheyhcan
haddhtohtheirhproducthlinehandhchangehpriceshbyhsimplyhrevisinghtheirhwebsite,hsohimportersharehkepthabre
asthofhthehexporter’shproducthinformationhbyhmonitoringhthehexporter’shwebsitehperiodically.hFirmshcanh
alsohusehtheirhwebsiteshtohaccepthordershonline.h Somehfirmshwithhanhinternationalhreputationhusehtheirhb
randhnamehtohadvertisehproductshoverhthehinternet.h Theyhmayhusehmanufacturershinhsomehforeignhcount
rieshtohproducehsomehofhtheirhproductshsubjecthtohtheirhspecification
6. ImpacthofhExchangehRatehMovements.hPlakhCo.hofhChicagohhashseveralhEuropeanhsubsidiarieshthath
remithearningshtohitheachhyear.hExplainhhowhappreciationhofhtheheuroh(thehcurrencyhusedhinhmanyhEuro
peanhcountries)hwouldhaffecthPlak'shvaluation.
ANSWER:h Plak’shvaluationhshouldhincreasehbecausehthehappreciationhofhtheheurohwillhincreasehthehd
ollarhvaluehofhthehcashhflowshremittedhbyhthehEuropeanhsubsidiaries.
©h2021hCengagehLearning.hAllhRightshReserved.hMayhnothbehcopied,hscanned,horhduplicated,hinhwholehorhinhpart,hexcepthforhusehas
h permittedhinhahlicensehdistributedhwithhahcertainhproducthorhservicehorhotherwisehonhahpassword-
protectedhwebsitehforhclassroomhuse.
h h
Multinational Financial Management: An Overview
h h h h
Lecture Outline
h
ManaginghthehMNC
HowhBusinesshDisciplineshArehUsedhtohManagehthehMNChAg
encyhProblems
ManagementhStructurehofhanhMNC
WhyhFirmshPursuehInternationalhBusinessh
TheoryhofhComparativehAdvantageh Imperfec
thMarketshTheory
ProducthCyclehTheory
MethodshtohConducthInternationalhBusiness
InternationalhTradeh
LicensinghFranchisin
g
JointhVentures
AcquisitionshofhExistinghOperationshEst
ablishinghNewhForeignhSubsidiarieshSu
mmaryhofhMethods
ValuationhModelhforhanhMNChDomesti
chValuationhModelhMultinationalhValua
tionhModel
UncertaintyhSurroundinghanhMNC’shCashhFlowshHo
whUncertaintyhAffectshthehMNC’shCosthofhCapital
OrganizationhofhthehText
©h2021hCengagehLearning.hAllhRightshReserved.hMayhnothbehcopied,hscanned,horhduplicated,hinhwholehorhinhpart,hexcepthforhusehas
h permittedhinhahlicensehdistributedhwithhahcertainhproducthorhservicehorhotherwisehonhahpassword-
protectedhwebsitehforhclassroomhuse.
, MultinationalhFinancialhManagement:hAnhOverviewh❖h2
Chapter Theme h
Thishchapterhintroduceshthehmultinationalhcorporationhashhavinghsimilarhgoalshtohthehpurelyhdomestichcorporatio
n,hbuthahwiderhvarietyhofhopportunities.h Withhadditionalhopportunitieshcomehpotentialhincreasedhreturnshandhothe
rhformshofhriskhtohconsider.h Thehpotentialhbenefitshandhrisksharehintroduced.
Topics to Stimulate Class Discussion
h h h h
1. WhathishthehappropriatehdefinitionhofhanhMNC?
2. WhyhdoeshanhMNChexpandhinternationally?
3. WhatharehthehriskshofhanhMNChwhichhexpandshinternationally?
4. Whyhmusthpurelyhdomestichfirmshbehconcernedhabouththehinternationalhenvironment?
POINT/COUNTER-POINT:
Should an MNC Reduce Its Ethical Standards to Compete Internationally?
h h h h h h h h h
POINT:hYes.h WhenhahU.S.-
basedhMNChcompeteshinhsomehcountries,hithmayhencounterhsomehbusinesshnormshtherehthatharehnothallowe
dhinhthehU.S.hForhexample,hwhenhcompetinghforhahgovernmenthcontract,hfirmshmighthprovidehpayoffshtohthe
hgovernmenthofficialshwhohwillhmakehthehdecision.hYet,hinhthehUnitedhStates,hahfirmhwillhsometimeshtakehah
clienthonhanhexpensivehgolfhoutinghorhprovidehskyboxhticketshtohevents.hThishishnohdifferenththanhahpayoff.hI
fhthehpayoffsharehbiggerhinhsomehforeignhcountries,hthehMNChcanhcompetehonlyhbyhmatchinghthehpayoffshpr
ovidedhbyhitshcompetitors.
COUNTER-POINT:h No.hAhU.S.-
basedhMNChshouldhmaintainhahstandardhcodehofhethicshthathapplieshtohanyhcountry,hevenhifhithishathahdisadva
ntagehinhahforeignhcountryhthathallowshactivitieshthathmighthbehviewedhashunethical.hInhthishway,hthehMNChes
tablisheshmorehcredibilityhworldwide.
WHOhIShCORRECT?hUsehthehInternethtohlearnhmorehabouththishissue.hWhichhargumenthdohyouhsupport?hO
fferhyourhownhopinionhonhthishissue.
ANSWER:hThehissuehishfrequentlyhdiscussed.hIthisheasyhtohsuggesththaththehMNChshouldhmaintainhahstandar
dhcodehofhethics,hbuthinhreality,hthathmeanshthathithwillhnothbehablehtohcompetehinhsomehcases.hForhexample,he
venhifhithsubmitshthehlowesthbidhonhahspecifichforeignhgovernmenthproject,hithwillhnothreceivehthehbidhwithout
hahpayoffhtohthehforeignhgovernmenthofficials.hThehissuehishespeciallyhahconcernhforhlargehprojectshthathmayh
generatehsubstantialhcashhflowshforhthehfirmhthathishchosenhtohdohthehproject.hIdeally,hthehMNChcanhclearlyhd
emonstratehtohwhoeverhoverseeshthehdecisionhprocesshthathithdeserveshtohbehselected.hIfhtherehishjusthonehdeci
sion-makerhwithhnohoversight,hanhMNChcanhnothensurehthaththehdecisionhwillhbehethical.hButhifhthehdecision-
makerhmusthbehaccountablehtohahdepartmenthwhohoverseeshthehdecision,hthehMNChmayhbehablehtohprompthth
ehdepartmenthtohensurehthaththehprocesshishethical.
©h2021hCengagehLearning.hAllhRightshReserved.hMayhnothbehcopied,hscanned,horhduplicated,hinhwholehorhinhpart,hexcepthforhusehas
h permittedhinhahlicensehdistributedhwithhahcertainhproducthorhservicehorhotherwisehonhahpassword-
protectedhwebsitehforhclassroomhuse.
, MultinationalhFinancialhManagement:hAnhOverviewh❖h3
Answers to End of Chapter Questions
h h h h h
1. AgencyhProblemshofhMNCs.
a. ExplainhthehagencyhproblemhofhMNCs.
ANSWER:h Thehagencyhproblemhreflectshahconflicthofhinterestshbetweenhdecision-
makinghmanagershandhthehownershofhthehMNC.h Agencyhcostshoccurhinhanhefforthtohassurehthathmanag
ershacthinhthehbesthinteresthofhthehowners.
b. WhyhmighthagencyhcostshbehlargerhforhanhMNChthanhforhahpurelyhdomestichfirm?
ANSWER:h ThehagencyhcostsharehnormallyhlargerhforhMNCshthanhpurelyhdomestichfirmshforhthehfollo
winghreasons.h First,hMNCshincurhlargerhagencyhcostshinhmonitoringhmanagershofhdistanthforeignhsubsi
diaries.h Second,hforeignhsubsidiaryhmanagershraisedhinhdifferenthcultureshmayhnothfollowhuniformhgoa
ls,handhsomehmanagershmayhfocushonhsatisfyinghrespectivehemployees.h Third,hthehsheerhsizehofhthehlar
gerhMNCshwouldhalsohcreatehlargehagencyhproblems.
2. ComparativehAdvantage.
a. Explainhhowhthehtheoryhofhcomparativehadvantagehrelateshtohthehneedhforhinternationalhbusiness.
ANSWER:h Thehtheoryhofhcomparativehadvantagehimplieshthathcountrieshshouldhspecializehinhproducti
on,htherebyhrelyinghonhotherhcountrieshforhsomehproducts.h Consequently,htherehishahneedhforhinternatio
nalhbusiness.
b. Explainhhowhthehproducthcyclehtheoryhrelateshtohthehgrowthhofhanh MNC.
ANSWER:hThehproducthcyclehtheoryhsuggestshthathathsomehpointhinhtime,hthehfirmhwillhattempthtohcapit
alizehonhitshperceivedhadvantageshinhmarketshotherhthanhwherehithwashinitiallyhestablished.
3. ImperfecthMarkets.
a. Explainhhowhthehexistencehofhimperfecthmarketshhashledhtohthehestablishmenthofhsubsidiarieshinh
foreignhmarkets.
ANSWER:h Becausehofhimperfecthmarkets,hresourceshcannothbeheasilyhandhfreelyhretrievedhbyhtheh
MNC.h Consequently,hthehMNChmusthsometimeshgohtohthehresourceshratherhthanhretrievehresourcesh(
suchhashland,hlabor,hetc.).
b. Ifhperfecthmarketshexisted,hwouldhwages,hprices,handhinteresthrateshamonghcountrieshbehmoreh
similarhorhlesshsimilarhthanhunderhconditionshofhimperfecthmarkets?h Why?
ANSWER:hIfhperfecthmarketshexisted,hresourceshwouldhbehmorehmobilehandhcouldhthereforehbehtransfe
rredhtohthosehcountrieshmorehwillinghtohpayhahhighhpricehforhthem.h Ashthishoccurred,hshortageshofhresou
rceshinhanyhparticularhcountryhwouldhbehalleviatedhandhthehcostshofhsuchhresourceshwouldhbehsimilarhac
rosshcountries.
4. InternationalhOpportunities.
©h2021hCengagehLearning.hAllhRightshReserved.hMayhnothbehcopied,hscanned,horhduplicated,hinhwholehorhinhpart,hexcepthforhusehas
h permittedhinhahlicensehdistributedhwithhahcertainhproducthorhservicehorhotherwisehonhahpassword-
protectedhwebsitehforhclassroomhuse.
, MultinationalhFinancialhManagement:hAnhOverviewh❖h4
a. Dohyouhthinkhthatheitherhthehacquisitionhofhahforeignhfirmhorhlicensinghwillhresulthinhgreaterhgrowthhf
orhanhMNC?hWhichhalternativehishlikelyhtohhavehmorehrisk?
ANSWER:h Anhacquisitionhwillhtypicallyhresulthinhgreaterhgrowth,hbuthithishriskierhbecausehithnormallyhrequi
reshahlargerhinvestmenthandhthehdecisionhcanhnothbeheasilyhreversedhoncehthehacquisitionhishmade.
b. Describehahscenariohinhwhichhthehsizehofhahcorporationhishnothaffectedhbyhaccesshtohinternationalh
opportunities.
ANSWER:hSomehfirmshmayhavoidhopportunitieshbecausehtheyhlackhknowledgehabouthforeignhmarketsh
orhexpecththaththehrisksharehexcessive.h Thus,hthehsizehofhthesehfirmshishnothaffectedhbyhthehopportunities
.
c. ExplainhwhyhMNCshsuchhashCocahColahandhPepsiCohstillhhavehnumeroushopportunitieshforh
internationalhexpansion.
ANSWER:hCocahColahandhPepsiCohstillhhavehnewhinternationalhopportunitieshbecausehcountriesharehathvari
oushstageshofhdevelopment.h SomehcountrieshhavehjusthrecentlyhopenedhtheirhbordershtohMNCs.
Manyhofhthesehcountrieshdohnothofferhsufficienthfoodhorhdrinkhproductshtohtheirhconsumers.
5. InternationalhOpportunitieshDuehtohthehInternet.
a. Whathfactorshcausehsomehfirmshtohbecomehmorehinternationalizedhthanhothers?
ANSWER:hThehoperatinghcharacteristicshofhthehfirmh(whathithproduceshorhsells)handhthehriskhperceptionh
ofhinternationalhbusinesshwillhinfluencehthehdegreehtohwhichhahfirmhbecomeshinternationalized.h Severalh
otherhfactorshsuchhashaccesshtohcapitalhcouldhalsohbehrelevanthhere.h Firmshthatharehlabor-
intensivehcouldhmoreheasilyhcapitalizehonhlow-
wagehcountrieshwhilehfirmshthathrelyhonhtechnologicalhadvanceshcouldhnot.
b. WhyhmighththehInternethhavehresultedhinhmorehinternationalhbusiness.
ANSWER:hThehInternethallowshforheasyhandhlow-
costhcommunicationhbetweenhcountries,hsohthath firmshcouldhnowhdevelophcontactshwithhpotentialhcusto
mershoverseashbyhhavinghahwebsite.hManyhfirmshusehtheirhwebsitehtohidentifyhthehproductshthaththeyhsell,
halonghwithhthehpriceshforheachhproduct.h Thishallowshthemhtoheasilyhadvertisehtheirhproductshtohpotential
himportershanywherehinhthehworldhwithouthmailinghbrochureshtohvarioushcountries.h Inhaddition,htheyhcan
haddhtohtheirhproducthlinehandhchangehpriceshbyhsimplyhrevisinghtheirhwebsite,hsohimportersharehkepthabre
asthofhthehexporter’shproducthinformationhbyhmonitoringhthehexporter’shwebsitehperiodically.hFirmshcanh
alsohusehtheirhwebsiteshtohaccepthordershonline.h Somehfirmshwithhanhinternationalhreputationhusehtheirhb
randhnamehtohadvertisehproductshoverhthehinternet.h Theyhmayhusehmanufacturershinhsomehforeignhcount
rieshtohproducehsomehofhtheirhproductshsubjecthtohtheirhspecification
6. ImpacthofhExchangehRatehMovements.hPlakhCo.hofhChicagohhashseveralhEuropeanhsubsidiarieshthath
remithearningshtohitheachhyear.hExplainhhowhappreciationhofhtheheuroh(thehcurrencyhusedhinhmanyhEuro
peanhcountries)hwouldhaffecthPlak'shvaluation.
ANSWER:h Plak’shvaluationhshouldhincreasehbecausehthehappreciationhofhtheheurohwillhincreasehthehd
ollarhvaluehofhthehcashhflowshremittedhbyhthehEuropeanhsubsidiaries.
©h2021hCengagehLearning.hAllhRightshReserved.hMayhnothbehcopied,hscanned,horhduplicated,hinhwholehorhinhpart,hexcepthforhusehas
h permittedhinhahlicensehdistributedhwithhahcertainhproducthorhservicehorhotherwisehonhahpassword-
protectedhwebsitehforhclassroomhuse.
