Multinational Financial Management

Corporate Strategy and Foreign Direct Investment

Luck. There isn't any. Just winners and losers.

THE SILVER FOX

LEARNING OBJECTIVES

• To identify the fundamental motives for companies to invest abroad in order to determine those foreign investments that are most likely to be successful
• To identify the competitive advantages that a firm must have to be a successful multinational
• To describe the strategies followed by MNCs in defending and exploiting barriers to entry created by product and factor market imperfections
• To identify the factors that help determine whether a firm will export its output, license foreign companies to manufacture its products, or set up its own production or service facilities abroad
• To explain why for many firms becoming multinational is a matter not of choice but of survival
• To assess the nature of global competition and be able to identify the key factors leading to globalization of markets and competition
• To specify a five-step approach to designing a global expansion strategy

Although investors are buying an increasing amount of foreign stocks and bonds, most still invest overseas indirectly by holding shares of multinational corporations. MNCs create value for their shareholders by investing overseas in projects that have positive net present values (NPVs)–returns in excess of those required by shareholders. To continue to earn excess returns on foreign ...