As a firm evolves from purely domestic into a true multinational enterprise, it must consider (1) its competitive advantages, (2) its production location, (3) the type of control it wants to have over any foreign operations, and (4) how much monetary capital to invest abroad. Explain how each of these considerations is important to the success of foreign operations.
Answer to relevant QuestionsWhat are the advantages and disadvantages of limiting a firm’s activities to exporting compared to producing abroad? Answer the following questions: a. What is meant by the term “governance risk”? b. What is the most important type of governance risk? Identify and explain the main types of cultural and institutional risks, except protectionism. The OLI Paradigm is an attempt to create an overall framework to explain why MNEs choose FDI, rather than serve foreign markets through alternative modes. Explain what is meant by the O, the L, and the I of the paradigm. Capital projects provide both operating cash flows and financial cash flows. Why are operating cash flows preferred for domestic capital budgeting, but financial cash flows given major consideration in international ...
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