Dr. Zulfiqar Hasan
A corporation that operates in two or more countries is called Multinational Corporation.
MNC is a company with production and distribution facilities in more than one country.
Features of Multinational corporation (MNC) are:
Huge amount of capital Large sized plant and machinery; Various activities; Market expansion on large scale; Professional management; Advance technology; Profit is the main objective; Control of head office; Creation of new project; Low-cost locations etc.
Managing for Value for MNC
01. Like domestic projects, foreign projects involve an investment decision and a financing decision.
02. When managers make multinational finance decisions that maximize the overall present value of future cash flows, they maximize the firm’s value, and hence shareholder wealth.
03. An MNC’s financial decisions include how much business to conduct in each country and how much financing to obtain in each currency.
04. Its financial decisions determine its exposure to the international environment.
Why Do Firms Expand Into Other Countries?
For several reasons, domestic firms expands into other countries.
01. To seek new markets
02. To seek raw materials.
03. To seek new technology.
04. To seek production efficiency.
05.To avoid political and regulatory hurdles.
06. To diversify.
07. To Minimize costs of production
08. Globalization: Political and Labor Union Concerns
09. Privatizations of state-owned industries
10. Revolution in information technology
11. Wave of Mergers and Acquisitions (M&A)
12. Emergence of free market policies
13. Rise of Big Emerging Markets (BEMs)
14. Prime Transmitter of Competitive Forces
15. Massive deregulation
16. Collapse of communism
Reasons for International Merger and Acquisition
a. Synergy: the idea that the value and performance of two companies combined will be greater than the sum of the separate individual parts is one of the reasons companies merger.
b. Staff reductions
c. Economies of scale
d. Acquiring new technology
e. Improved market reach and industry visibility
f. Complementary Strengths
g. Efficiency Increases
h. Financing Synergy
i. Tax Benefits
j. Strategic Realignments
k. Increased firm size
l. Reduced firm risk through diversification
Dr. Zulfiqar Hasan is working as an Associate Professor (Finance), Department of Business Administration, Bangladesh Islami University, Dhaka. He has done his MBA from London School of Commerce (LSC), London, UK. He has also been the Program Coordinator, MBA program, Northern University Bangladesh (NUB), Dhaka and in the same capacity in Bangladesh Islami University, Dhaka.