The Environment for Multinationals

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Contents

1. Introduction…………………………………………………………………………………

2. Executive summary…………………………………………………………………………

3. Article research……………………………………………………………………………..

3.1. Example of an environment being set up for MNC’s…………………………………….

3.1.1. Background

3.1.2. Key points

3.1.3. Relevance / Importance

3.1.4. Relevance to the corporate Finance course

3.2. India opening the retail business to foreign companies…………………………………

3.2.1. Background

3.2.2. Key points

3.2.3. Relevance / Importance

3.2.4. Relevance to the corporate Finance course

3.3. UK’s lowers taxes to attract MNC’s……………………………………………………….

3.3.1. Background

3.3.2. Key points

3.3.3. Relevance / Importance

3.3.4. Relevance to the corporate Finance course

3.4. French taxes rise – bringing MNC’s to the UK at the right time……………………….

3.4.1. Article 1 - Background

3.4.2. Key points

3.4.3 Article 2 – Background

3.4.4 Key points

3.4.5 Relevance / Importance

3.4.6. Relevance to the corporate finance course

4. Conclusion…………………………………………………………………………………….

5. Recommendations……………………………………………………………………………

6. Appendix ……………………………………………………………………………………

1. Executive summary

This report was commissioned to examine the environment for multinationals (MNC’s) .The research in the Article research draws attention to an example of an environment that’s being set-up pacifically for MNC’s to come in to, How changing of laws and regulations can affect MNC’s being both positive and negative, The challenge for MNC’s to get into some countries and advantages and disadvantages of the affect that MNC’s have on a country when that country changes its taxes. MNCs’ are key players in international business and their growth depends part on the actions of governments in their host countries. Countries that can reduce political risks for multinationals attract higher levels of multinational investments.

Countries that have a range of tactics they use to stay ahead of the game and attract investors are the countries that have good economies. This report evaluates this range and concludes on both the positive and the negatives that indices MNC’s into a particular environment and how it relates back to corporate finance.

It is recommended that countries that want to attract MNC’s to their countries will have a few things to focus on and MNC’s that are considering moving to a different environment that researching the country internally is very important and examining the risk of starting up in that country.

2. Introduction

Multinational Corporations (MNC’s) are the key players in international business; they are defined as “A business that has direct investments abroad in multiple countries.”

There are loads of risks that affect the environment for multinationals, the most important risk facing MNC’s is political risk, which refers to actions taken by a government that have a negative impact on the value of foreign companies operating in that country. Political risk has two basic dimensions: Macro- country specific and Micro – firms specific.

Nationalisation is the most extreme form of political risk. However there are other levels and forms of political risk that affect the environment for MNC’s, including currency and trade controls, changes in tax or labour laws, regulatory restrictions and requirements for additional local production.

Firms operating in emerging markets are exposed to tremendous risk from both economic and political sources that affect the environment. On the political side, governments can expropriate assets, renege on tax agreements, restrict capital flows, and fail to enforce contracts, or engage in other activities that negatively affect multinational's assets or income streams. Countries that can reduce political risks for multinationals attract higher levels of...
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