point out the determinants affecting the value of an mnc . how does each influence the value of an mnc ?
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A multinational corporation (MNC) can be defined as a business firm incorporated in one country that has production and sales operations in several other countries. Indeed, some MNCs have operations in dozens of different countries. MNCs obtain financing from major money centers around the world in many different currencies to finance their operations. Global operations force the treasurer’s office to establish international banking relationships, to place short-term funds in several currency denominations, and to effectively manage foreign exchange risk.
Political Factors
Political factors concern government policies, laws and administrative orientations of different countries and regional economic blocks. The political factors form the basis for regulating international trade with respect to tariffs, quotas and technical standards. For example, the European Union has regulations that guarantee preferential trade treatment for member countries. Political stability is also an important aspect of the international business environment. Frequent political unrest and military coups could force a multinational cooperation to suspend or close operations.
Economic Factors
Rates of economic growth influence the levels of demand for your goods or services in international markets. However, economic growth rates may be high in some countries and low in others. For example, the 2010-2012 Eurozone debt crisis slowed down economic growth in many European countries at a time when countries in other regions were experiencing an economic boom. Consider such disparities of economic growth in the operational and planning activities of a multinational corporation.
Technological Factors
The availability of technological infrastructure and technical capacities determine the prosperity of a multinational corporation in host countries. Factors such as broadband connectivity and technical training have become essential ingredients of successful operations in the modern business world. Moreover, the levels of technological developments in a given country determine the scope of technical understanding among its population. While it may be easier to establish and maintain technical operations in high-technology countries, the same cannot be said of low-technology countries.
Social Factors
Demographic factors such as religion and culture affect the types, quality, functional features and demand levels of your products in international markets. Cultures attach different meanings to time, objects, names, color and attitudes. For example, General Motors suffered low sales when it introduced the Nova car in Latin American markets because the car name translated to “it does not move” in Spanish. Therefore, a multinational corporation must have the ability to interpret and understand varying cultural cues and patterns that are characteristic of the international business environment.
Political Factors
Political factors concern government policies, laws and administrative orientations of different countries and regional economic blocks. The political factors form the basis for regulating international trade with respect to tariffs, quotas and technical standards. For example, the European Union has regulations that guarantee preferential trade treatment for member countries. Political stability is also an important aspect of the international business environment. Frequent political unrest and military coups could force a multinational cooperation to suspend or close operations.
Economic Factors
Rates of economic growth influence the levels of demand for your goods or services in international markets. However, economic growth rates may be high in some countries and low in others. For example, the 2010-2012 Eurozone debt crisis slowed down economic growth in many European countries at a time when countries in other regions were experiencing an economic boom. Consider such disparities of economic growth in the operational and planning activities of a multinational corporation.
Technological Factors
The availability of technological infrastructure and technical capacities determine the prosperity of a multinational corporation in host countries. Factors such as broadband connectivity and technical training have become essential ingredients of successful operations in the modern business world. Moreover, the levels of technological developments in a given country determine the scope of technical understanding among its population. While it may be easier to establish and maintain technical operations in high-technology countries, the same cannot be said of low-technology countries.
Social Factors
Demographic factors such as religion and culture affect the types, quality, functional features and demand levels of your products in international markets. Cultures attach different meanings to time, objects, names, color and attitudes. For example, General Motors suffered low sales when it introduced the Nova car in Latin American markets because the car name translated to “it does not move” in Spanish. Therefore, a multinational corporation must have the ability to interpret and understand varying cultural cues and patterns that are characteristic of the international business environment.
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