Chapter 1: Globalization and the
Multinational Corporations
Power Points created by:
Joseph F. Greco Ph. D.
California State University, Fullerton
Mihaylo College of Business and Economics
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Chapter 1: Globalization and the
Multinational Corporations
1.1
Introduction
1.2
Globalization and the Growth of International
Trade and Capital Flows
1.3
Multinational Corporations
1.4
Other Important International Players
1.5
Globalization and the Multinational Firm:
Benefactor or menace?
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1.1 Introduction
• Globalization:
• World economy increasingly globalized
• Increasing connectivity and integration of
countries and corporations
• Multinational corporations (MNCs) dominating
the landscape
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1.2 Globalization and the Growth of
International Trade and Capital Flows
• Globalization: Overview
• The Growth of International Trade
• Trade Liberalization
• International Efforts to Promote Free Trade
• The Growth in Trade
• MNCs Are Affecting Free Trade
• The Globalization of Financial Markets
• Trends in Financial Openness
• The New Financial Landscape
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1.2 Globalization and the Growth of
International Trade and Capital Flows
• The Growth of International Trade
• Trade Liberalization
• Comparative Advantage
• European Economic Community
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Exhibit 1.1
Trade and Financial Openness
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Exhibit 1.2
Trade Liberalization Dates by Country
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1.2 Globalization and the Growth of
International Trade and Capital Flows
• The Growth of International Trade
• International Efforts to Promote Free Trade
• GATT
• WTO
• EU
• NAFTA
• ASEAN
• Recent Developments
• outsourcing
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1.2 Globalization and the Growth of
International Trade and Capital Flows
• The Growth of International Trade
• The Growth in Trade
• MNCs Are Affecting Free Trade
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Exhibit 1.3 – Panel A
The Growth in International Trade
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Exhibit 1.3 – Panel B
The Growth in International Trade
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Exhibit 1.3 – Panel C
The Growth in International Trade
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1.2 Globalization and the Growth of
International Trade and Capital Flows
• The Globalization of Financial Market
• Trends in Financial Openness
• The New Financial Landscape
• Derivative security
• Securitization
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1.3 Multinational Corporations
• Multinational Corporations: Overview
• Definition of an MNC
• How MNCs Enter Foreign Markets
• The Goals of an MNC
• Corporate Governance Around the World
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Exhibit 1.4
World’s Top Nonfinancial Transnational
Corporations by Foreign Assets
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1.3 Multinational Corporations
• Definition of an MNC:
• A firm that does business in two or more
foreign countries
•
How MNCs Enter Foreign Markets
• Royalties
• Licensing
• Franchising
• Joint ventures
• Foreign Direct Investment (FDI)
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1.3 Multinational Corporations
• The Goals of an MNC
• Investment Time Horizon
• Stakeholder Alternative
• Agency Theory and Corporate Governance
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1.3 Multinational Corporations
• Corporate Governance Around the World
• Corporate governance differences across
countries affects a firm’s valuation
• May lead to cross-listing of stocks
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Exhibit 1.5
Methods of Overcoming Agency Problems Due to
the Separation of Ownership and Control
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Exhibit 1.6 – Panel A
Foreign Direct Investment
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Exhibit 1.6 – Panel B
Foreign Direct Investment
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Exhibit 1.7
Cross-Border Mergers and Acquisitions by Buyer
and Seller, 1990-2004 (in the millions of dollars)
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1.4 Other Important International Players
• International Players
•
•
•
•
•
International banks
Multilateral Development Banks
WTO
OECD
International institutions
• IMF
• World Bank
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1.5 Globalization and the Multinational Firm:
Benefactor or Menace?
• Two Sides to the Globalization Argument:
• Pro: Benefactors
• Con: Anti-globalists
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