Financial Management of MNCs

1. Introduction to International
Finance
Dr Raju Indukoori

2. Company’s need for International Finance
• Export Business
• Import Business
• Multinational Operations
• Business Process Outsourced (BPO)
• Knowledge Process Outsourced (KPO)
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3. International Financial Management
Objectives
1) Maximize shareholders wealth
2) Affiliate transfer
3) Flexibility in funds flow
4) Select variety of financial channels.
5) Tax minimization.
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4. International Finance Function
• Global Financing
• Global Investing
• Dividend decisions and subsidiaries
• Assessing and managing financial risk
– Political
– Economical
– Market
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5. 5
Hierarchy of International Companies
• Exporting / Importing Company
• International Company
• Transnational Company
• Multinational Company / Multinational Enterprise
• Global Company
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6. Multinational Corporation (MNC)
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7. 7
Multinational Corporation
It is defined as one that has operating subsidiaries,
branches or affiliates located in foreign countries. It is
also known as Multinational enterprise (MNE)
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8. 8
MNCs and International Finance
While international finance focuses on MNEs, purely
domestic firms can also face significant international
exposures like
• Import & export of products, components and services
• Licensing of foreign firms to conduct their foreign business
• Exposure to foreign competition in the domestic market
• Indirect exposure to international risks through relationships with
customers and suppliers
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9. 9
Types of Multinational Enterprises
 Raw Material Seekers
 First type of MNCs
 Exploit raw materials found overseas
 Trading, mining and oil companies
 Market Seekers
 Post-WWII MNCs
 Expand production and sales into foreign markets
 Big name companies – IBM, McDonalds etc.
 Cost Minimisers
 More recent MNCs
 Seek out lowest production cost countries
 Manufacturing and service companies
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10. 10
Domestic Vs International Finance
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11. Thank You
Dr Raju Indukoori 11