9 Comparing degrees of economic exposure.

Carlton Ltd and Palmer Ltd are UK-based MNCs with subsidiaries in Brazil that distribute medical supplies

(produced in the United Kingdom) to customers throughout Latin America. Both subsidiaries purchase the products at cost and sell the products at 90% markup. The other operating costs of the subsidiaries are very low.

Carlton has a research and development centre in the United Kingdom that focuses on improving its medical technology. Palmer has a similar centre based in Brazil. The parent of each firm subsidizes its respective research and development centre on an annual basis. Which firm is subject to a higher degree of economic exposure? Explain.