Lecture 1

Topics: International economics, International trade, Balance of payments Pages: 9 (1142 words) Published: August 28, 2013
FINS3616 International Business Finance
Dr Bohui Zhang (Week 1-6) 9385 5834 Room: ASB 314 (access from west lobby) Email: bohui.zhang@unsw.edu.au Consultation: Tue 16:00 – 18:00 (or by appointment) 1-1

FINS3616 International Business Finance
Dr Jaehoon Lee (Week 7-12) 9385 6013 Room: ASB 365 (access from east lobby) Email: jaehoon.lee@unsw.edu. Consultation: Fri 12:00 – 14:00 (or by appointment) 1-2

Textbook
 Required

Assessment
 Tutorials

textbook: - Bekaert, Geert, and Hodrick, Robert, 2012, International Financial Management: International Edition, 2nd ed. Pearson - This book is available from the UNSW bookshop located near the Quadrangle.

10% 5% 5% 30%

- Attendance - Participation
 Mid

Session - Week 7 – Saturday (Sep. 14th) - Coverage: Week 1 to 6 project

 Group  Final

25% 35%

 Other

reference: - Butler, Kirt, 2008, Multinational Finance, John Wiley Publishing, 4th Edition.

Examination - Formal exam period - Coverage: Week 7-12

 Total

100%

1-3

1-4

Mid-session Exam
 Australian  It

Study Tools
Securities Exchange (http://www.asx.com.au/)

includes 45 multiple choice questions. book

 Closed  One

 Reserve

Bank of Australia (http://www.rba.gov.au/) map

and a half hours will be discussed in week 6.
 World

 Details

(http://maps.google.com/)
 Bloomberg.com

(http://www.bloomberg.com/news/)

1-5

1-6

Australia's top 10 export markets in 2010

1-8

Three phases of business
Three

broad phases in the evolution of a

firm
1. Introduction of international business finance - Domestic phase : operations are confined within the boundaries of one country - International trade phase : the firm imports materials or export its product or both - Multinational phase : the firm establishes operations overseas

1-10

The objective of international business finance
Y1905 Local business Rio Tinto Y1990 Export Rio Tinto Y2001 Foreign operation Rio Tinto Grasberg Joint Venture, Indonesia Chinese mills Australian mills

 This

course is concerned with multinational corporations (MNCs) takes the perspective of a financial manager in a multinational corporation develops framework for evaluating the opportunities, costs, and risks of operating in the world’s markets for goods, services, and financial assets 1-12

 It

 It

Structure of a multinational corporation

The objective of international business finance
 Goals of an MNC --Maximize shareholder wealth (US, UK, Australia) --Maximize stakeholder wealth (Europe and Asia)  Conflict

of interest between shareholders and managers

Independent board of directors; concentrated ownership; executive compensation; shareholder activism and litigation; hostile takeovers

1-13

1-14

Theoretical support for multinational operations
 Theory

2. Opportunities of multinational operations

of comparative advantage: a country should produce and export goods if it can produce with relative efficiency and import goods from other nations which can produce more efficiently. example: -- Australia: mining and agricultural industries -- India: IT industry -- Japan/Germany: manufacturing -- Saudi Arabia: oil-based industries

 For

1-16

How do MNCs enter foreign markets?


Four methods

--Licensing: gives local firms right to manufacture their products in exchange for fees --Franchising: provides specialized sales or service strategies in exchange for fees. e.g. McDonald --Joint venture: jointly invest and operate a business with a foreign company. --Foreign direct investment: starts a company from scratch

1-18

 Political

risk - The risk that a host government will change the “rules of the game” under which business is conducted. - Due to unexpected political changes within a host country or to the host’s relationship with other governments. risk - Foreign exchange risk: the risk of an unexpected change in the value of the firm due to an...
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