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Answers for International Finance Ch.1, 2, 3

In: Business and Management

Submitted By Ghazal64
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Chapter 1 –
Q5) A- The factors include international trading, licensing, franchising, joint ventures, and acquiring or establishing subsidiaries. For example, those factors allow MNCs to penetrate global markets by exporting and giving a license to foreign countries for a certain fee. Through these factors, MNCs will have more strength in foreign countries and learn more about international markets. B- 1) The MNC becomes more successful when it can monitor managers of the foreign subsidiaries, which is facilitated by the use of the internet, and therefore reducing agency costs. 2) Online price listings of products and services that are offered by the MNC 3) Online purchases can enhance sales 4) Eases the exporting/importing process by providing access to updated tracking information online

Q7) Reasons for growth in international business: * Comparative advantage allows for more market efficiency by having more specialization and interaction between companies around the world. Specializing in what you do best and benefiting from what others do best allows for growth and attracts going global. * Imperfect markets describe the reality where not all goods that are needed by a company in a certain country can be imported or acquired easily. Therefore, local companies choose to go global to ease the process of acquiring certain resources and reduce the shipment costs that would be imposed if the company would rather import. * Product cycle theory describes that companies that start locally take steps in order to reach global markets by first exporting products to meet foreign demand, and then establishes a subsidiary in foreign countries to reduce costs of shipping.
Disadvantages of international business:
Disadvantages to going global can be increased agency problems due to different environments and…...

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