In deciding whether to invest abroad, management must first determine whether the firm has a sustainable competitive advantage that enables it to compete effectively in the home market. What are the necessary characteristics of this competitive advantage?
Answer to relevant QuestionsExplain briefly how economies of scale and scope can be developed in production, marketing, finance, research and development, transportation, and purchasing. Capital budgeting for a foreign project uses the same theoretical framework as does domestic capital budgeting. What are the basic steps in domestic capital budgeting? Should the anticipated internal rate of return (IRR) for a proposed foreign project be compared to (1) alternative home country proposals, (2) returns earned by local companies in the same industry and/or risk class, or (3) ...Is any operating exposure created during the course of a firm’s operating cycle? Explain the difference between the “transaction motive” and the “precautionary motive” for holding cash.
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