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Presentation on mnc
 

Presentation on mnc

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  • FDI attractiveness such as: Reduced corporate tax rate for foreign companies from 65 percent to 55 percent. 100 percent foreign investment in the construction of roads/bridges. The peak custom duty rate was reduced to 50 percent from 65 percent in the March 1995 budge

Presentation on mnc Presentation on mnc Presentation Transcript

  • UNIVERSITY OF MYSORE Presentation On International Financial Management
  • PRESENTED TOProf.B.NagrajuProfessor In Department Of Studies In CommerceManasagangothriMysore
  • INTRODUCTION Every country is not gifted with all the resources , so there is need of International Business in order to export the resources or any goods/service which is abundant in our country & to import the resources which is not abundant our country,
  • THE INTERNATIONAL FINANCIALENVIRONMENT Multinational Corporation (MNC) Foreign Exchange Markets Dividend Remittance Exporting & Financing Investing & Importing & Financing Product Markets Subsidiaries International Financial Markets
  • WHAT ARE MNC’S? MNC’s are huge industrial organizations which extend their industrial and marketing operations through a network of their branches or their Majority Owned Foreign Affiliates. MNC’s are also know as Transnational Corporation (TNC’s).
  • DEFINITION According to Franklin Root (1994), an MNC is a parent company that: engages in foreign production through its affiliates located in several countries, exercises direct control over the policies of its affiliates, implements business strategies in production, marketing, finance and staffing that transcend national boundaries.
  • OBJECTIVES To expand the business beyond the boundaries of the home country. Minimize cost of production, especially labour cost. Avail of competitive advantage internationally. Establish an international corporate image.
  • OBJECTIVES Achieve greater efficiency by producing in local market and then exporting the products. Make best use of technological advantages by setting up production facilities abroad.
  • MNC IN INDIA MNC in India are attracted to: India’s large market potential Labor competiveness FDI attractiveness
  • MNC IN INDIA(CONTD…) India’s vast population is increasing its purchasing power India is also emerging as the manufacturing and sourcing location of choice for various industries
  • TRENDS OF MNC’S IN INDIA… First MNC in INDIA was DUTCH EAST INDIA Co. in 1600. American companies accounts for around 37% of the turnover of the top 20 firms operating in India. The scenario for MNC in India has changed a lot in recent years, since more and more firms from European Union like Britain, Italy, France, Germany, Netherlands, Finland, Belgium etc have outsourced their work to India. Finnish mobile handset manufacturing giant Nokia is the largest Multinational Corporation In India.
  • TRENDS OF MNC’S IN INDIA…(CONTD..) A host of automobile companies like Fiat Motors, from Italy have opened shop in India with R&D wing attached. Oil companies, Infrastructure builders from Middle East are also flocking in India to catch the boom. South Korean electronics giants Samsung and LG Electronics and small and mid-segment car major Hyundai Motors are doing excellent business and using India as a hub for global delivery.
  • TRENDS OF MNC’S IN INDIA…(CONTD..) Also insurance companies like AIG and Max New York Life Insurance doing business in India.
  • MNC IN INDIA… MNC in India represent a diversified portfolio of companies representing different nations.
  • THE INDIAN MNCS……………… Paints – Asian Paints Auto & Components – Tata Motors, Bharat Forge Chemicals – Tata Chemicals, United Phosphorus Metals – Sterlite Industries, TISCO Packaging – Essel Pharmaceuticals – Ranbaxy, Wockhardt, Sun, DRL Oil & Gas – ONGC
  • MULTINATIONAL CORPORATESTRUCTURE Horizontally integrated multinational corporations manage production establishments located in different countries to produce the same or similar products. (example: McDonalds) Vertically integrated multinational corporations manage production establishment in certain country/countries to produce products that serve as input to its production establishments in other country/countries. (example: Adidas) Diversified multinational corporations manage production establishments located in different countries that are neither horizontally nor vertically. (example: Microsoft or Siemens )
  • ADVANTAGES OF MNC’S MNC’s have become vehicles of technology to the developing countries Greater employment and career opportunities are provided by these MNC’s. MNC’s make commendable contribution to inventions and innovations in the host country. Practice of MNC’s bring to the host country, the latest technique in the field of management. Varity of goods and services produced for local customers.
  • DISADVANTAGES OFMNC’S MNC’s create monopolies in the market and eliminate local competitors. MNC’s may create depletion of resources due to its continues use by these overseas companies. MNC’s generally carry out their R&D in their home country and supply to the host country. Slow down in the growth of employment in the home country.
  • CONSTRAINTSINTERFERING WITH THE MNC’SGOAL As MNC managers attempt to maximize their firm’s value, they may be confronted with various constraints.  Environmental constraints.  Regulatory constraints.  Ethical constraints.
  • THEORIES OFINTERNATIONAL BUSINESSWhy are firms motivated to expandtheir business internationally? Theory of Comparative Advantage  Specialization by countries can increase production efficiency. Imperfect Markets Theory  The markets for the various resources used in production are “imperfect.” Product Cycle Theory  As a firm matures, it may recognize additional opportunities outside its home country.
  • INTERNATIONALBUSINESS METHODSThere are several methods by which firms canconduct international business. International trade is a relatively conservative approach involving exporting and/or importing.  The internet facilitates international trade by enabling firms to advertise and manage orders through their websites. Licensing allows a firm to provide its technology in exchange for fees or some other benefits. Franchising obligates a firm to provide a specialized sales or service strategy, support assistance, and possibly an initial investment in the franchise in exchange for periodic fees.
  • INTERNATIONAL BUSINESS METHODS Firms may also penetrate foreign markets by engaging in a joint venture (joint ownership and operation) with firms that reside in those markets. Acquisitions of existing operations in foreign countries allow firms to quickly gain control over foreign operations as well as a share of the foreign market. Firms can also penetrate foreign markets by establishing new foreign subsidiaries. In general, any method of conducting business that requires a direct investment in foreign operations is referred to as a direct foreign investment (DFI). The optimal international business method may depend on the characteristics of the MNC.
  • VALUATION MODEL FOR AN MNC An MNC’s financial decisions include how much business to conduct in each country and how much financing to obtain in each currency. Its financial decisions determine its exposure to the international environment.
  • VALUATION MODEL FOR ANMNCDomestic Model n E ( CF$, t ) Value = ∑ t =1 (1 + k ) t E (CF$,t ) = expected cash flows to be received at the end of period t n = the number of periods into the future in which cash flows are received k = the required rate of return by investors
  • VALUATION MODEL FOR ANMNC Valuing International Cash Flows m  n ∑ [E (CFj , t ) ×E (ER j , t )]    Value = ∑ j =1  t =1  (1 + k ) t      E (CFj,t ) = expected cash flows denominated in currency j to be received by the U.S. parent at the end of period t E (ERj,t ) = expected exchange rate at which currency j can be converted to dollars at the end of period t
  • EXPOSURE TO INTERNATIONALRISKInternational business usuallyincreases an MNC’s exposure to: exchange rate movements  Exchange rate fluctuations affect cash flows and foreign demand. foreign economies  Economic conditions affect demand. political risk  Political actions affect cash flows.
  • VALUATION MODEL FOR AN MNCImpact of New International Opportunitieson an MNC’s Value Exposure to Foreign Exchange Rate Economies Risk m  n ∑ [E ( CFj , t ) × E (ER j , t ) ]   j =1  Value = ∑   t =1  (1 + k ) t      Political Risk
  • CONCLUSION MNCs are beneficial for India and its also give disadvantages to India. They give us employment, growth, development etc. but they also creates monopoly in market thus small sectors which exists in market getting closed.
  • THANK YOU FROM Raghunath.D 4thSemester M.F.A.M Manasagangothri Mysore