5.6.7.

Management of International Business

Activities

Mai The Cuong, PhD

© 2023 Mai The Cuong.

 Agenda
1. Revisited the Company Value Chain

2. Management of International Business Activities

– Manufacturing and Materials
– Marketing and R&D
– Human Resource
– Accounting & Finance

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© 2023 Mai The Cuong.
MANAGEMENT OF MANUFACTURING
& MATERIALS

3
 A17-18-19
• A17. Discuss the Toyota’s decisions of selecting Vietnam as a
production location
• A18. Discuss the Honda’s decisions of selecting Vietnam as a
production location
• A19. Discuss the Samsung’s decisions of selecting Vietnam as a
production location
– Introduction of the selected company
– Manufacturing locations of the company in the world
– Manufacturing factories in Vietnam
– Reasons to choose the selected location (province) in Vietnam

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© 2023 Mai The Cuong.
 A20
• A20: Research the Toyota’s way of production
– Overview of Toyota’s development
– Model of Toyota’s way of production
– Principles of the model
– Conditions to apply the model
– The way that materials flow in the system
– How can Vietnamese companies apply the model?

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© 2023 Mai The Cuong.
The Company Value Chain

© 2023 Mai The Cuong.

 Manufacturing and materials management:
Strategic objectives
• Lower costs
– Disperse manufacturing
activities to efficient global
locations
• Increase productivity
– Using Total Quality
Management
(W. Edward Demming)
• Accommodate demands
for local responsiveness
– decentralize production
• Respond quickly to shifts
on customer demand
– time-based competition 7

extremely important © 2023 Mai The Cuong.

Relationship between quality & profit

© 2023 Mai The Cuong.

 Where to Manufacture?
• Optimum economic,
political, and cultural
Country conditions
•
Factors •
Externalities Fixed costs
– Skilled labor • Minimum efficient scale
pools • Flexible manufacturing
– Supporting – reduce setup times for complex equipment
Technological •
industries
Formal and informal
– increase machine utilization
Factors trade barriers
– improve quality control
• Flexible machine cells to perform a variety of
• Exchange rate
operations

Product • Two product features affect

Single or few locations. Factors location decisions:
– Value to weight ratio.
• Fixed costs are substantial – Product serves universal
• Minimum efficient scale is high needs
• Flexible manufacturing Locating • Two basic strategies
technologies available Manufacturing – Concentrating in a
Major market locations if it better meets local demands. Facilities centralized location and
serving the world market
• Fixed costs are low – Decentralizing them in
• Minimum efficient scale is low various regional or
• Flexible manufacturing technologies national locations close
unavailable to major markets9 when
Trade barriers and transportation costs remain major impediments opposite conditions exist
© 2023 Mai The Cuong.
Traditional Organizational Structure

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Organization structure with materials management
as separate function

Strategic
manager/CEO

Materials
Manufacturing Marketing Finance
management

Production
Purchasing planning Distribution
and control

© 2023 Mai The Cuong. 11

MANAGEMENT OF INTERNATIONAL
HUMAN RESOURCES

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 A21-22

• A21. Research the international human resource management of

Coca Cola
– History of Coca Cola
– International HRM policies of Coca Cola
– HRM of Coca Cola in Vietnam

• A22. Research the international human resource management of

ANZ/Shinhan Bank
– History of ANZ/Shinhan Bank
– International HRM policies of ANZ/Shinhan Bank
– HRM of ANZ/Shinhan Bank in Vietnam
– Banking business environment in Vietnam and standardization/adaption of
ANZ/Shinhan Bank HRM policies in Vietnam

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© 2023 Mai The Cuong.
 A23-24

• A23. Research the international human resource management of

of FPT
– History of the company
– International HRM policies of the company
– Examples of the HRM policies in a selected country (Myanmar)
– Business environment in Myanmar and standardization/adaption of FPT HRM
policies

• A24. Research the international human resource management of

of Viettel
– History of the company
– International HRM policies of the company
– Examples of the HRM policies in a selected country (Cambodia/Laos)
– Business environment in Cambodia/Laos and standardization/adaption of Viettel
HRM policies
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© 2023 Mai The Cuong.
 Human Resource Management

• Refers to the activities an organization carries out to use its

human resources effectively
• Four major tasks of HRM
– Staffing policy
– Management training and development
– Performance appraisal
– Compensation policy

18-15
© 2023 Mai The Cuong.
 Expatriate Problems

• Expatriate: citizens of one country working in

another
– Expatriate failure: premature return of the expatriate manager to
his/her home country
• Cost of failure is high: estimate = 3X the expatriate’s
annual salary plus the cost of relocation (impacted by
currency exchange rates and assignment location)

• Inpatriates: expatriates who are citizens of a foreign

country working in the home country of their
multinational employer
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© 2023 Mai The Cuong.

 Reasons for expatriate failure

• US multinationals • Japanese Firms

– Inability of spouse to adjust – Inability to cope with
larger overseas
– Manager’s inability to responsibilities
adjust – Difficulties with the new
– Other family problems environment
– Manager’s personal or – Personal or emotional
emotional immaturity problems
– Inability to cope with larger – Lack of technical
competence
overseas responsibilities
– Inability of spouse to
adjust.
• European multinationals
• Inability of spouse to adjust
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© 2023 Mai The Cuong.

Maximizing the Effectiveness of Expatriates
Assignments

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© 2023 Mai The Cuong.

Maximizing the Effectiveness of Expatriates
Assignments

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Nguồn: Deresky Helen (2006)
© 2023 Mai The Cuong.
 Compensation for Expatriates

• Cách 1: Đãi ngộ

dựa trên cấu
trúc lương ở
nước sở tại
(Going Rate
Approach)

• Cách 2: Đãi ngộ

dựa trên cấu
trúc lương ở
nước chủ nhà
(Balance Sheet
Approach)

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Source: Deresky Helen (2006)
© 2023 Mai The Cuong.
The Expatriate Transition Process

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Source: Deresky Helen (2006)
© 2023 Mai The Cuong.
MANAGEMENT OF
INTERNATIONAL ACCOUNTING
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 A25-26

• A25. Financial Management of Apple in international business

– Introduction of the company
– Capital structure of the company
– Cash flow management of the company
– Foreign exchange risk management of the company

• A26. Financial Management of Amazon in international business

– Introduction of the company
– Capital structure of the company
– Cash flow management of the company
– Foreign exchange risk management of the company

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© 2023 Mai The Cuong.
 A27-28

• A27. Useful techniques for moving funds to Vietnam

– Research the international movement of funds and useful technniques for moving
funds to Vietnam
– Examples for the use of each technique for different companies

• A28. Compare taxes & fees to companies doing business in Vietnam,

Thailand and the USA
– Make comparison by using tables
– Taxes and fees to companies doing business in Vietnam, Thailand and the USA

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© 2023 Mai The Cuong.
 Accounting Information:
Decision making of financial & tax reports

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© 2023 Mai The Cuong.

Determinants of National
Accounting Standards

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© 2023 Mai The Cuong.

 Scope of financial management

Investment Money management

Financing decisions
decisions decisions
• Decisions about • Decisions about • Decisions about
what activities to how to finance how to manage
finance those activities. the firm’s
financial
resources most
efficiently

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© 2023 Mai The Cuong.

INVESTMENT DECISIONS

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 Investment decisions

Capital • Quantifies the benefits, costs and risks of an

investment
• Managers can reasonably compare different
budgeting: investment alternatives within and across countries

Project & • Must distinguish between cash flows to project and

those to parent
• Political and economic risk can change the value of a
parent foreign investment
• Connection between cash flows to parent and the source
cashflow: of financing must be recognized

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© 2023 Mai The Cuong.

 Project and parent cash flows

• Project cash flows may not reach the parent:

– Host-country may block cash-flow repatriation

– Cash flows may be taxed at an unfavorable rate

– Host government may require a percentage of cash

flows to be reinvested in the host country

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© 2023 Mai The Cuong.

 Adjusting for political and economic risk

• Political risk:
– Expropriation - Iranian revolution, 1979
– Social unrest - after the breakup of Yugoslavia, company
assets were rendered worthless
– Political change - may lead to tax and ownership changes
• Examples. Collapse of communism in Eastern Europe
• Attack on the world trade center
• Economic risk
– Inflation

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© 2023 Mai The Cuong.

FINANCING DECISIONS

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 Source of financing

– Global capital markets for lower cost financing.

– Impact of host country-host-country may require
projects to be locally financed through debt or equity
• Limited liquidity raises the cost of capital.
• Host-government may offer low interest or
subsidized loans to attract investment.
– Impact of local currency (appreciation/depreciation)
influences capital and financing decisions

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© 2023 Mai The Cuong.

 Financial structure

• Financial structure:
– Debt/equity ratios vary with countries.
• Tax regimes
– Follow local capital structure norms?
• More easily evaluate return on equity relative to
local competition
• Good for company’s image
• Best recommendation: adopt a financial structure that
minimizes the cost of capital

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© 2023 Mai The Cuong.

MONEY MANAGEMENT DECISIONS

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 Global money management
-The efficiency objective

Minimizing cash balances: Reducing transaction costs (cost

of exchange):
Money market accounts - low interest - high Transaction costs: changing from one
liquidity currency to another
Certificates of deposit - higher interest - lower Transfer fee: fee for moving cash from one
liquidity location to another

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© 2023 Mai The Cuong.

 Global money management
The tax objective

• Countries tax income earned outside their boundaries by entities

based in their country.
– Can lead to double taxation
– Tax credit allows entity to reduce home taxes by amount
paid to foreign government
– Tax treaty is an agreement between countries specifying
what items will be taxed by authorities in country where
income is earned
– Deferral principle specifies that parent companies will not be
taxed on foreign income until the dividend is received
– Tax haven is used to minimize tax liability
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© 2023 Mai The Cuong.

 Tools for global money management

• Chuyển lợi nhuận về nước (Dividend remittances)

– Chính sách của nước sở tại
– Mức độ trưởng thành (maturity stage) của chi nhánh
• Phí bản quyền (Royalty payment and fee)
– Được tính là chi phí➔ thấp hơn thuế đánh vào lợi nhuận chuyển về nước
• Chuyển giá (transfer price):
– Di chuyển vốn giữa các quốc gia, giảm nghĩa vụ thuế (thu nhập, nhập khẩu), nâng giá đầu vào
• Vay nối tiếp (fronting loans): Công ty Mẹ >>> Ngân hàng >>> Chi nhánh
– Trả lãi vay ngân hàng dễ dàng hơn trả lãi vay cho công ty Mẹ (các chính phủ nước sở tại không
khuyến khích)
– Sử dụng tài khoản cho vay ở quốc gia đánh thuế thấp khoản lãi từ tiền gửi ngân hàng
(Bermuda)
• Thanh toán bù trừ (multilateral netting):
– Các chi nhánh thực hiện bù trừ hoặc không thực hiện thanh toán để giảm chi phí giao dịch

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© 2023 Mai The Cuong.

 Managing foreign exchange risk

• Risk that future changes in a country’s exchange rate will

hurt the firm.
– Transaction exposure: extent income from transactions
is affected by currency fluctuations.
– Translation exposure: impact of currency exchange rates
on consolidated results and balance sheet.
– Economic exposure: effect of changing exchange rates
over future prices, sales and costs.

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© 2023 Mai The Cuong.

Strategies for reducing foreign exchange risk (a)

• Primarily protect short-term cash flows.

• Reducing transaction and translation exposure:
– Buying forward and currency swaps.
– Lead strategy: collecting receivables early when
currency devaluation is anticipated and paying early
when currency may appreciate.
– Lag strategy: delaying receivable collection when
anticipating currency appreciation and delaying
payables when currency depreciation is expected.

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© 2023 Mai The Cuong.

Strategies for reducing foreign exchange risk (b)

• Reducing Transaction and translation exposure

– Lead strategy
– Lag strategy
• Reducing economic exposure:
– Key is to distribute productive assets to various
locations so firm is not severely affected by exchange
rate changes

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© 2023 Mai The Cuong.