Multinational Financial Management: An Overview

17. International Joint Venture.Anheuser-Busch,
the producer of Budweiser and other beers, has recently expanded into Japan by
engaging in a joint venture with Kirin Brewery, the largest brewery in
Japan. The joint venture enables
Anheuser-Busch to have its beer distributed through Kirin’s distribution
channels in Japan. In addition, it can
utilize Kirin’s facilities to produce beer that will be sold locally. In return, Anheuser-Busch provides
information about the American beer market to Kirin.

a. Explain how the joint venture can enable
Anheuser-Busch to achieve its objective of maximizing shareholder wealth.

b. Explain
how the joint venture can limit the risk of the international business.

c. Many
international joint ventures are intended to circumvent barriers that normally
prevent foreign competition. What
barrier in Japan is Anheuser-Busch circumventing as a result of the joint
venture? What barrier in the United
States is Kirin circumventing as a result of the joint venture?

d. Explain
how Anheuser-Busch could lose some of its market share in countries outside
Japan as a result of this particular joint venture.

.

18. Impact of Eastern European Growth.The
managers of Loyola Corp. recently had a meeting to discuss new opportunities in
Europe as a result of the recent integration among Eastern European
countries. They decided not to penetrate
new markets because of their present focus on expanding market share in the
United States. Loyola’s financial
managers have developed forecasts for earnings based on the 12 percent market
share (defined here as its percentage of total European sales) that Loyola
currently has in Eastern Europe. Is 12
percent an appropriate estimate for next year’s Eastern European market
share? If not, does it likely
overestimate or underestimate the actual Eastern European market share next
year?

19.
Valuation of an MNC.Birm Co.,
based in Alabama, considers several international opportunities in Europe that
could affect the value of its firm. The valuation of its firm is dependent on
four factors: (1) expected cash flows in dollars, (2) expected cash flows in
euros that are ultimately converted into dollars, (3) the rate at which it can
convert euros to dollars, and (4) Birm’s weighted average cost of capital. For
each opportunity, identify the factors that would be affected.

Birm
plans a licensing deal in which it will sell technology to a firm in
Germany for $3,000,000; the payment is invoiced in dollars, and this
project has the same risk level as its existing businesses.
Birm
plans to acquire a large firm in Portugal that is riskier than its
existing businesses.
Birm
plans to discontinue its relationship with a U.S. supplier so that can
import a small amount of supplies (denominated in euros) at a lower cost
from a Belgian supplier.
Birm
plans to export a small amount of materials to Ireland that are
denominated in euros.