This chapter discusses globalization and multinational enterprises. It defines a multinational enterprise as a company with subsidiaries or affiliates in foreign countries. It also discusses theories of comparative advantage and how countries and firms specialize in areas where they have a relative production advantage. Market imperfections provide opportunities for multinational firms to exploit economies of scale, expertise, and financial strength across borders. Strategic motives for foreign direct investment include seeking new markets, resources, production efficiencies, and political stability.

1. Chapter 1 Globalization and the Multinational Enterprise

5. Exhibit 1.1 Creating Firm Value in Global Markets

13. Exhibit 1.2 Global Outsourcing of Comparative Advantage

17. Exhibit 1.4 Trident Corporation: Initiation of the Globalization Process

18. Exhibit 1.5 Trident’s Foreign Direct Investment Sequence

19. Exhibit 1.6 Potential Limits on Financial Globalization

21. Additional Chapter Exhibits Chapter 1

22. Exhibit 1.3 What Is Different about International Financial Management?

23. Exhibit 1 Porsche’s Growth in Sales, Income, and Margin

24. Exhibit 2 Return on Invested Capital (ROIC) for European Automakers, 2004

25. Exhibit 3 Porsche’s Velocity, Margin, and ROIC