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Chapter 1: Globalization and theMultinational 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 InternationalTrade 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 ofInternational 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 ofInternational 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 ofInternational 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 ofInternational 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 1.4Worlds Top Nonfinancial Transnational

Corporations by Foreign Assets

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Definition of an MNC:

A firm that does business in two or moreforeign countries

How MNCs Enter Foreign Markets

Royalties

Licensing

Franchising

Joint ventures

Foreign Direct Investment (FDI)

1.3 Multinational Corporations

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The Goals of an MNC Investment Time Horizon

Stakeholder Alternative

Agency Theory and Corporate Governance

1.3 Multinational Corporations

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Corporate Governance Around the World Corporate governance differences across

countries affects a firms valuation

May lead to cross-listing of stocks

1.3 Multinational Corporations

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Exhibit 1.5Methods 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

E hibit 1 7

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Exhibit 1.7Cross-Border Mergers and Acquisitions by Buyerand 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