Question

CH 17:

1. Multinational corporations

Why do companies go global?

Multinational corporations operate in locations across the world. Each company has its own motive for its presence in different countries.

Consider the following case:

RTE Telecom Inc. is an American company that produces high-tech electronics. Its managers have decided to move some of its production facilities to Japan in an attempt to circumvent certain governmental regulations.

A: Which of the following best describes the reason RTE Telecom Inc. has decided to go global?

___To avoid political, trade, and regulatory hurdles

___To seek production efficiency

___To broaden its markets

B:Now consider the case of Blue Moose Producers, which has decided to establish worldwide production facilities and markets to cushion itself from adverse economic conditions in any particular country. Blue Moose Producers has decided to go global in order to : (CHOOSE ONE: A: protect processes and products B:protect processes and products   .C: protect processes and products ) .

C: Companies go global for various reasons. Although becoming a multinational corporation provides prospects for high returns and diversification, it makes financial management more complicated for financial executives and managers. Based on your understanding of the factors that complicate financial management in multinational firms, complete the following statement: Compared to domestic corporations, multinational corporations have (CHOOSE ONE: REDUCED or INCREASED) risk from exchange rate fluctuations.

Answer 1

1.A.To avoid political, trade, and regulatory hurdles ,as it wants to escape governmental regulations.

2.Blue Moose Producers has decided to go global in order to-

A: protect processes and products

3. corporations have ( INCREASED) risk from exchange rate fluctuations as they have translation risk as well as transaction risks