EECS 1520 Lecture Notes - Lecture 10: Sports Equipment, Multinational Corporation, Agency Cost
21 Jun 2018
School
Course
Professor
EECS 1520 Lecture 10 Notes
Introduction
Foreign countries
To the extent that this would increase the popularity of football (U.S. style) as a hobby in
the foreign countries, it would result in a demand for footballs in foreign countries.
Logan asked many of his foreign friends from college days if they recalled seeing
footballs sold in their home countries.
Most of them said they rarely noticed footballs being sold in sporting goods stores but
that they expected the demand for footballs to increase in their home countries.
Consequently, Logan decided to start a business of producing low-priced footballs and
exporting them to sporting goods distributors in foreign countries.
Those distributors would then sell the footballs at the retail level.
Logan planned to expand his product line over time once he identified other sports
products that he might sell to foreign sporting goods stores.
He decided to call his business ͞Sports Exports Company.͟
To avoid any rent and labor expenses, Logan planned to produce the footballs in his
garage and to perform the work himself.
Thus, his main business expenses were the cost of the materials used to produce
footballs and expenses associated with finding distributors in foreign countries who
would attempt to sell the footballs to sporting goods stores.
Is Sports Exports Company a multinational corporation?
Why are the agency costs lower for Sports Exports Company than for most MNCs?
Does Sports Exports Company have any comparative advantage over potential
competitors in foreign countries that could produce and sell footballs there?
How would Jim Logan decide which foreign markets he would attempt to enter?
Should he initially focus on one or many foreign markets?
The Sports Exports Company has no immediate plans to conduct direct foreign
investment.
54
EECS 1520 Full Course Notes
Verified Note
54 documents
Document Summary
To the extent that this would increase the popularity of football (u. s. style) as a hobby in the foreign countries, it would result in a demand for footballs in foreign countries. To avoid any rent and labor expenses, logan planned to produce the footballs in his garage and to perform the work himself. The sports exports company has no immediate plans to conduct direct foreign investment. However, it might consider other less costly methods of establishing its business in foreign markets. It would result in a demand for footballs in foreign countries. Logan asked many of his foreign friends from college days if they recalled seeing footballs sold in their home countries. Most of them said they rarely noticed footballs being sold in sporting goods stores but that they expected the demand for footballs to increase in their home countries.
