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Chapter 16
1. Evolving into Multinationalism. As a firm evolves from purely domestic into a true multinational enterprise, it must consider 1) its competitive advantages, 2) its production location, 3) the type of control it wants to have over any foreign operations, and 4) how much monetary capital to invest abroad. Explain how each of these considerations is important to the success of foreign operations.
If a firm lacks sufficient competitive advantage to compete effectively in its home market, it is unlikely to have sufficient advantages of any type to be successful in a foreign market. t. Foreign operations must be located where market imperfections are such that the firm can take advantage of its competitive advantages to the degree necessary to earn a risk-adjusted rate of return above the firm’s cost of capital.
The firm must decide upon the degree of control it will need over the foreign operation, recognizing that greater control usually involves both greater risk and a greater investment.The firm must decide if the benefits of greater investment (presumably greater profits, plus possibly acquiring market share or forestalling competitors from gaining a greater market share) are worth the differing amounts of monetary capital needed.
2. Market Imperfections. MNEs strive to take advantage of market imperfections in national markets for products, factors of production, and financial assets. Large international firms are better able to exploit such imperfections. What are their main competitive advantages?
MNEs strive to take advantage of imperfections in national markets for products, factors of production, and financial assets. Imperfections in the market for products translate into market opportunities for MNEs. Large international firms are better able to exploit such competitive factors as economies of scale, managerial and technological expertise,

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