Last month, Jim Logan completed his undergraduate degree in Finance and decided to pursue his dream of owning his own sporting goods business. Jim had worked in a sporting goods shop while going to college, and he noticed that many customers wanted to purchase a low-priced football. However, the sporting goods store where he worked, like many others, only sold top-of-the-line footballs. From his experience, he was aware that top-of-the-line footballs have a high mark-up and that a low-cost football could possibly penetrate the U.S. market. He also knew how to produce footballs. His goal was to create a firm that would produce low-priced footballs and sell them on a wholesale basis to various sporting goods stores in the United States. Unfortunately, many of the sporting goods stores began to sell low-priced footballs just before Jim was about to start his business. The firm that began to produce the low-cost footballs already provided numerous other products to sporting goods stores in the United States and therefore already established a business relationship with these stores. Jim did not believe that he could compete with this firm in the U.S. market. Rather than pursue a different business, Jim decided to implement his idea on a global basis. While football (as it is played in the U.S.) has not been a traditional sport in foreign countries, it has become more popular in some foreign countries in recent years. Furthermore, the expansion of cable networks in foreign countries would allow for much more exposure to U.S. football games in those countries in the future. To the extent that this would increase the popularity if football (US style) as a hobby in the foreign countries, it would result in a demand for footballs in foreign countries. Logan asked many of his foreign friends from college days if they recalled seeing footballs sold in their home countries. Most of them said they rarely notices footballs being sold in sporting goods stores but they expected the demand for footballs to increase in their home countries. Consequently, Logan decided to start a business of producing low-prices footballs and exporting them to sporting goods distributors in foreign countries. Those distributors would then sell the footballs at the retail level. Logan planned to expand his product line over time once he identified other sports products that he might sell to foreign sporting goods stores. He decided to call his business Sport Exports Company. To avoid any rent and labour expenses, Logan planned to produce the footballs in his garage and to perform the work himself. Thus his main business expenses were the cost of the materials used to produce footballs and expenses associated with finding distributors in foreign countries who would attempt to sell footballs to sporting goods stores.

a) Analyze whether the Sport Exports Company is a multinational corporation? (7 marks)

b) Evaluate why are the agency costs lower for Sport Exports Company than for most MNCs? (7 marks)

c) Discuss whether Sport Exports Company have any comparative advantage over potential competitors in foreign countries that could produce and sell footballs there? (10 marks)

d) Analyze how would Jim Logan decide which foreign markets he would attempt to enter? Should be initially focus on one or many foreign markets? (13 marks)

e) The Sport Exports Company has no immediate plans to conduct direct foreign investment. However, it might consider other less costly methods of establishing its business in foreign markets? Discuss on what methods might the Sport Exports Company use to increase its presence in foreign markets by working with one or more foreign companies? (13 marks)