Developing a Multinational Sporting Goods Corporation

1. Is Sports Exports Company a multinational corporation?

ANSWER: Sports Exports Company is a multinational corporation because it sells products to foreign countries.

2. Why are the agency costs lower for Sports Exports Company than for most MNCs?

ANSWER: Agency costs are lower because the owner and manager are the same. The owner does not have managers who are based in other countries (at least, not initially).

3. Does Sports Exports Company have any comparative advantage over potential competitors in foreign countries that could produce and sell footballs there?

ANSWER: The Sports Exports Company has a comparative advantage of applying an idea that has been successful in the U.S. to other countries. If football becomes a popular idea in foreign countries, the Sports Exports Company will be the first firm to benefit from the popularity. While other firms may then attempt to copy the idea, the Sports Exports Company will have established itself as the most well-known company for selling footballs in foreign markets by then. Also, the Sports Exports Company has a comparative advantage over the U.S. firms that produce the top-of-the-line footballs in the U.S. market in that it sells the footballs at a low price. Thus, if these firms attempt to pursue more international business someday, they will not necessarily be able to compete with the Sports Exports Company in foreign markets. The name recognition may not be as effective in foreign markets where the product has not existed.

4. How would Jim Logan decide which foreign markets he would attempt to enter? Should he initially focus on one or many foreign markets?

ANSWER: Jim would need to consider various factors, such as the potential demand for footballs in each country and the potential degree of competition in that country. He may also consider the volatility of the foreign currency in each country relative to the dollar.

While Jim may someday wish to...