EECS 1019 Lecture Notes - Lecture 7: Colgate-Palmolive, Fortune Brands, Medtronic
15 Jun 2018
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EECS 1019 Lecture 7 Notes
Introduction
Managing the MNC
• Dow Chemical, IBM, Nike, and many other firms have more than half of their assets in
foreign countries.
• Some businesses, such as ExxonMobil, Fortune Brands, and Colgate- Palmolive,
commonly generate more than half of their sales in foreign countries.
• It is typical also for smaller U.S. firms to generate more than 20 percent of their sales in
foreign markets; examples include Ferro (Ohio) and Medtronic (Minnesota).
• Seventy-five percent of U.S. firms that export have fewer than 100 employees.
• International financial management is important even to companies that have no
international business.
• The reason is that these companies must recognize how their foreign competitors will
be influenced by movements in exchange rates, foreign interest rates, labor costs, and
inflation.
• Suh eooi harateristis a affet the foreig opetitors’ osts of produtio
and pricing policies.
• Background on the goals, motives, and valuation of a multinational corporation
• The commonly accepted goal of an MNC is to maximize shareholder wealth.
• Managers employed by the MNC are expected to make decisions that will maximize the
stok prie ad therey serve the shareholders’ iterests.
• Some publicly traded MNCs based outside the United States may have additional goals,
such as satisfying their respective governments, creditors, or employees.
• However, these MNCs now place greater emphasis on satisfying shareholders
• That way, the firm can more easily obtain funds from them to support its operations.
• Even in developing countries (e.g., Bulgaria and Vietnam) that have just recently
encouraged the development of business enterprise, managers of firms must serve
shareholder interests in order to secure their funding.
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