Small Business Dilemma

Direct Foreign Investment Decision by the Sports Exports Company

Jim Logans business, the Sports Exports Company, continues to grow. His primary product is the footballs he produces and exports to a distributor in the United Kingdom. However, his recent joint venture with a British firm has also been successful. Under this arrangement, a British firm produces other sporting goods for Logans firm; these goods are then delivered to that distributor. Logan intentionally started his international business by exporting because it was easier and cheaper to export than to establish a place of business in the United Kingdom. However, he is considering establishing a firm in the United Kingdom to produce the footballs there instead of in his garage (in the United States). This firm would also produce the other sporting goods that he now sells, so he would no longer have to rely on another British firm (through the joint venture) to produce those goods.

Given the information provided here, what are the advantages to Logan of establishing a firm in the United Kingdom?

Given the information provided here, what are the disadvantages to Logan of establishing a firm in the United Kingdom?

Internet/Excel Exercises I need help with the internet/exccell exercise

IBM has substantial operations in many countries, including the United States, Canada, and Germany. Go to finance.yahoo.com/q?s=ibm.

Click on Historical Prices. (Or apply this exercise to a different MNC.) Set the date range so that you can obtain quarterly values of the U.S. stock index for the last 20 quarters. Insert the quarterly data on a spreadsheet. Compute the percentage change in IBMs stock price for each quarter. Next go to finance.yahoo.com/stock-center/ and click (under U.S.) on S&P Composite 1500 Index, which represents the U.S. stock market index, so that you can derive the quarterly percentage change in the U.S. stock index over the last 20 quarters. Then run a regression analysis with IBMs quarterly return (percentage change in stock price) as the dependent variable and the quarterly percentage change in the U.S. stock markets value as the independent variable. (Appendix C explains how Excel can be used to run regression analysis.) The slope coefficient serves as an estimate of the sensitivity of IBMs value to the U.S. market returns. Also, check the fit of the relationship based on the R-squared statistic.

Go to finance.yahoo.com/stock-center/ and click (under Europe) on DAX, which represents the German stock market index. Repeat the process described in exercise 1 so that you can assess IBMs sensitivity to the German stock market. Compare the slope coefficient between the two analyses. Is IBMs value more sensitive to the U.S. market or the German market? Does the U.S. market or the German market explain a higher proportion of the variation in IBMs returns (check the R-squared statistic)? Offer an explanation of your results.