2. You are hired to help Home Depot with their global strategy formulation, which they need to complete in the next 5 years with at least 6% return. Given the capital investments summaries below, what project should Home Depot undertake and why? What are some of the limitations of the analysis you should consider in your answer? Return on Payback | Investment Period (ROI) 4.5 0.03 years Net Present Value (NPV) Internal Rate of Return (IRR) 0.01 0.085 18 P1: expand operations in Germany P2: establish operations in Lithuania P3: conduct a merger with a Taiwanese distributor 0.10 1.7 0.05 months 7 years 0.059 -2.1 0.045 3. Home Depot is considering an investment project proposal to expand its operations in Germany. As part of the proposed project, the German operation is required to pay an annual royalty of 500,000 to the parent company. Explain the implications (i.e., risks) of the 500,000 foreign currency payment for the parent company and way to mitigate the risk. 4. What type of management control system (which-centric") would benefit Home Depot in achieving their operation goals across the world? How might your operational budgets need to be different based on culture in USA vs. Germany vs. Taiwan vs. Lithuania? 5. Home Depot established foreign operations in Lithuania and Taiwan in the current year. Corporate management has decided to evaluate the foreign operations and their managers on the basis of earnings before tax. + . O Happenings in Lithuania Strike of delivery truck drivers by strong trade unions Favorable discretionary price set by headquarters due to low corporate income tax rate High employee turnover . Happenings in Taiwan Political sanctions on imports from mainland China Inflation of the New Taiwan dollar (NT$) High interest rate on intercompany loan from headquarters Discuss the issues that Home Depot's corporate management should consider in determining exactly how its foreign operations' earnings before tax will be measured for performance evaluation purposes. 6. Regarding global performance evaluation, Home Depot prefers to use the Balanced Scorecard method. Fill in the table below. Why would this evaluation method be important for a globalized company like Home Depot? How do we look to shareholders? Financial Perspective Goals: Measures: At what must we excel? How do customers see us? Customer Perspective Goals: Measures: Vision and Strategy Internal Business Perspective Goals: Measures: Innovation and Learning Perspective Goals: Measures: Can we continue to improve and create value? 2. You are hired to help Home Depot with their global strategy formulation, which they need to complete in the next 5 years with at least 6% return. Given the capital investments summaries below, what project should Home Depot undertake and why? What are some of the limitations of the analysis you should consider in your answer? Return on Payback | Investment Period (ROI) 4.5 0.03 years Net Present Value (NPV) Internal Rate of Return (IRR) 0.01 0.085 18 P1: expand operations in Germany P2: establish operations in Lithuania P3: conduct a merger with a Taiwanese distributor 0.10 1.7 0.05 months 7 years 0.059 -2.1 0.045 3. Home Depot is considering an investment project proposal to expand its operations in Germany. As part of the proposed project, the German operation is required to pay an annual royalty of 500,000 to the parent company. Explain the implications (i.e., risks) of the 500,000 foreign currency payment for the parent company and way to mitigate the risk. 4. What type of management control system (which-centric") would benefit Home Depot in achieving their operation goals across the world? How might your operational budgets need to be different based on culture in USA vs. Germany vs. Taiwan vs. Lithuania? 5. Home Depot established foreign operations in Lithuania and Taiwan in the current year. Corporate management has decided to evaluate the foreign operations and their managers on the basis of earnings before tax. + . O Happenings in Lithuania Strike of delivery truck drivers by strong trade unions Favorable discretionary price set by headquarters due to low corporate income tax rate High employee turnover . Happenings in Taiwan Political sanctions on imports from mainland China Inflation of the New Taiwan dollar (NT$) High interest rate on intercompany loan from headquarters Discuss the issues that Home Depot's corporate management should consider in determining exactly how its foreign operations' earnings before tax will be measured for performance evaluation purposes. 6. Regarding global performance evaluation, Home Depot prefers to use the Balanced Scorecard method. Fill in the table below. Why would this evaluation method be important for a globalized company like Home Depot? How do we look to shareholders? Financial Perspective Goals: Measures: At what must we excel? How do customers see us? Customer Perspective Goals: Measures: Vision and Strategy Internal Business Perspective Goals: Measures: Innovation and Learning Perspective Goals: Measures: Can we continue to improve and create value
