International Banking and Trade Finance

1. International Banking and Trade Finance Chpt 1

2. Overview • Management’s goal • Hurdles to achieving goal • Theories of international business • Globalization and trade

3. Multinational Challenges • Management’s goal • increase shareholder wealth • new international markets • small and large companies benefit • Hurdles to achieving goal • agency problem • constraints to business

4. Theories of International Business • Comparative advantage • e.g., shoes vs. computers & software • Imperfect markets • goods and labor: not easily transferred • Product cycle • domestic production • export to foreign market • foreign production

5. Globalization • Reasons for increased linkages • international trade and investment • standardization of products and services • privatizations • national airlines, phone companies, mines, power plants, etc.

6. International Business Methods • 1. International trade • importing and exporting • 2. Licensing • MNC provides technology in exchange for goods and services (soft drink companies)

7. International Business Methods • 3. Franchising • MNC provides expertise and support for a fee • 4. Joint Venture • operations owned by complementary firms • e.g., products of one meshes with distribution channels of another

8. International Business Methods • 5. Acquisitions • a quick method to obtain market share • 6. Subsidiaries • establishing new operations

9. Increased Globalization • International trade • Direct foreign investment • Globalization and profitability

10. International Opportunities and Risk • Opportunities • Europe, Mexico, other places • Risk • exchange rate fluctuations • foreign economies • political risk

11. Summary • Main goal of MNC is to maximize shareholder wealth • Three theories justify international business • comparative advantage • imperfect markets • product cycle • Five common methods exist for conducting international business