Global Incorporated

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Global Incorporated
Pala Samba Mazoea Kundayo Balasundaram
Gautam Tyson Hendrix
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Global Incorporated

• The Growth of
• Multinationals
• The Internationalization of
• Accounting Firms

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Global Incorporated
History of the Growth of Multinationals

• 1880 1930
• Raw materials
• United Kingdom dominance
• 1930 1940
• Great Depression
• World Wars

• 1950s
• Emergence of United States
• 1980s
• Growth of Asian Countries

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Global Incorporated

• Jones Factors
• Overall Macro Economic Conditions
• Receptivity to Foreign Companies
• Capital Liberalization
• Trade Protectionist Policy
• Transportation and Communication

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Global Incorporated

• Multinationals and Natural Resources
• Mining Industry
• Petroleum and Oil
• Outsourcing
• Human Resources

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Global IncorporatedOrganizations

• IBRD IDA
• Against
• - Loans not Aid
• - One size fits all
• - GATT
• Against
• - Big Boys
• - Free trade not in best interest
• - Agriculture

• World Bank
• July 1st, 1944
• For
• Fund Generation
• Loans
• Grants
• WTO
• January 1st, 1995
• For
• WTO agreements
• Trade negotiations
• Trade disputes

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Global Incorporated Organizations

• IMF
• July 1st,1944
• Dos
• International Monetary Co-operation
• Growth of International Trade
• OECD
• 1961
• Provide data, analysis and forecasts
• Compare experiences

• Don'ts
• Dominated by Large players
• Keynesian approach
• Co-ordinate Policies
• Foster open trade

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Global Incorporated

• International Mergers and Acquisitions
• International mergers and acquisitions have grown
  at tremendous rate
• The overall merger activities represented by
  cross region are approximately to be 17 to 19
• Most significant cross-border mergers that have
  occurred are those of, BPs mergers with Amoco
  and DaimlerBenzs merger with Chrysler

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Global Incorporated

• International Mergers and Acquisitions
• Business factors that contributed the increase
  cross-border mergers and acquisitions
• -Pressures of international competition
  financial innovation
• -Economic growth and expansion
• -Political and economic integration
• -Technological changes
• -Deregulation and Privatization

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Global Incorporated

• International Mergers and Acquisitions
• Positive effects of mergers and acquisitions
• New or advanced technology is transferred to the
  country and to the company acquired
• New management practices are introduced in the
  areas of finance, marketing, human resources etc.
• The subsidiary gains access to new sources of
  capital
• The acquisition overcomes market entry barriers,
  reduces industry concentration levels stimulates
  competition
• Subsidiary exports are increased through gaining
  access to wider international distribution
  channels and the introduction of new products.

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Global Incorporated

• International Mergers and Acquisitions
• Other reasons for the Increase of Cross-Border
  Mergers and Acquisitions
• Political Stability
• Political stability and regulatory climate has
  been favorable in recent years
• Technological and Regulatory Changes
• cellular technologies
• Globalization of Industries and Markets
• Easy access to global market

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Global Incorporated

• Joint Ventures
• A cooperative partnership or joint venture is
  another strategy that has contributed the growth
  of multinationals
• Cross-border joint venture contributed to the
  market integration
• Help a company to strengthen its ability to
  penetrate, compete in, and integrate in global
  markets
• Bypass trade regulation and trade barriers

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Global Incorporated

• Joint Ventures
• International joint ventures are preferred by
  multinationals because of the following
  advantages
• Access to well-established distribution networks
• Access to established customer base
• Lower capital outlay than mergers and
  acquisitions
• Rapid returns
• Good creation of awareness and brand image
• Local partners provide know-how and market
  understanding
• Established demand through cross-selling to
  partner
• Easier to deal with local authorities

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Global Incorporated

• Privatization and Deregulation
• Deregulation and adaptation of privatization
  policies
• Transforming economies to a market structure
• Rapid transfer of enterprises from state to
  private ownership
• It provides opportunity to multinationals to
  enter into new market and expand their operation
  by acquiring state-owned companies

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Global Incorporated

• Strategic Business Alliances
• In 1990s strategic business alliances contributed
  tremendously in the growth of multinationals
• Especially in the service sector
• Essential for firms to survive and prosper in the
  intensifying global competition
• Alliances are popular because mergers and
  acquisitions are not possible due to authority
  regulation and government ownership
• Examples
• KLM Northwest Airlines
• British Airways USAir

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Global Incorporated

• Internationalization of Accounting firms
• The growth of multinationals have lent support to
  the expansion of services such as Accounting
  services
• Accounting firms overseas can traced back to the
  investments in North America and Asia in the 18Th
  19th century
• The movement took on a new meaning after WWII as
  firms strived for breakthrough to better serve
  their clients

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Global Incorporated

• Internationalization of Accounting firms
• Reasons
• Accounting Firms may internationalize because
  their clients internationalize- Henk Post
• This is a simplistic approach but there are
  others reasons explaining the trend.

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Global Incorporated

• Internationalization of Accounting firms
• Reasons
• The Desire to protect relationships with their
  home-based clients
• The exploitation of information asymmetries
  between buyers and sellers of services
• The transfer of competitive advantage to another
  country
• The competition amongst Accounting firms
• Mergers and acquisitions in the 1980s
• Big Eight, Big six, Big four

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Global Incorporated

• Internationalization of Accounting firms
• Entry Mode
• A relationship between motive and entry mode
• Accounting services are demander-located, the
  movement on the part of supplier.
• The level of involvement indicates the entry mode
  chosen
• The consensus is Foreign Direct Investment is the
  main form of entry.

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Global Incorporated

• Internationalization of Accounting firms
• Accounting firms as Multinationals ?
• International Accounting firms are not
  multinational corporations but multinational
  networks
• Hybrid structure with no equity base and financed
  through cost-contribution system
• Less management problems
• Bilateral cooperation to come with collective
  international business or marketing plan

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Global Incorporated

• Internationalization of Accounting firms
• Common features with MNCs
• Strategic and global thinking
• A combination of internationally integrated
  operations to remain competitive in the area of
  globalization
• Challenges for the international accounting firms
• The consistency of delivery of core services
• A stronger commitment to maintain a level of
  world wide quality.

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Global Incorporated

• Regulation Influence
• Many Separate Bodies throughout the World
• Most Influencing Body SEC
• IASB IAASB
• IOSCO
• IFAC
• Other Boards and Committees

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Global Incorporated

• Regulation Influence
• International Accounting Standards
• Securities Exchange Commission (SEC)
• Within the United States
• Working with many securities regulators around
  the world
• Encourage high quality accounting and auditing
  standards
• Enhance consistent application and enforcement of
  standards

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Global Incorporated

• Regulation Influence
• International Accounting Standards
• International Accounting Standards Board (IASB)
• Main body in establishing international
  accounting standards
• Reconstructed in 2001, now serves as full time
• Global accounting influence Along with FASB
• International Auditing Assurance Standards
  Board (IAASB)
• Main body in developing international auditing
  and assurance standards
• Develops standards in accordance with IASBs
  International Accounting Standard
• Works alongside the Ethics Committee (EC) to
  develop high quality standards

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Global Incorporated

• Regulation Influence
• International Accounting Standards
• International Organization of Securities
  Commission (IOSCO)
• Developed in 1983
• Committed to promoting high standards of
  regulation
• Looks over the IASB and the IAASB
• Members comment on the projected standards and
  interpretations
• International Federation of Accountants (IFAC)
• Worldwide organization for the Accounting
  Profession
• Sets international standards in Auditing,
  Education, Ethics, and Public Sector Financial
  Reporting
• Works along with other regulating and influential
  bodies

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Global Incorporated

• Regulation Influence
• International Accounting Standards
• Other Organizations with Power to Regulate and
  Influence
• World Bank
• Committee of European Securities Regulators
  (CESR)
• European Commission
• Ethics Committee (EC)
• Many Accounting Industry and User groups that
  deal with issues outside their countrys
  boundaries

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Global Incorporated

• Skills Qualifications
• International Accounting is a fairly new concept
• Proper education and training have yet been
  implemented
• Regulations have not been set
• Accountants with International Experience are
  rare
• A SEC Presentation Understanding Financial
  Infrastructure for Globalization
• As we enter 2005, there are not many people in
  the world that could consider themselves
  experts or even experienced with IFRS.
• Substantial training, open communication and
  information sharing about IFRS application will
  be needed to facilitate the growth and evolution
  of experience and knowledge.

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Global Incorporated

• Skills Qualifications
• Skills and Qualifications needed to Implement
  IFRS
• Great Deal of Specialized Education
• Also with new standards the issue of Continuing
  Education comes into play
• Ability to acquire application of the IFRS
• Interpretation
• Constant Regulation

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Global Incorporated

• Skills Qualifications
• Major Issues Concerning International Accounting
• Language and Cultural Barriers
• Different GAAPs regulating separate countries
• Must have knowledge of each
• Many accounts are recorded differently between
  countries
• Auditing Standards
• Variances in a countrys set of ethics and
  professional judgment standards

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Global Incorporated

• Major Players
• Key International Players in the development of
  International Accounting Standards
• World Trade Organization (WTO)
• SEC
• European Union (EU)
• United Nations (UN)

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Global Incorporated

• Major Players
• Issues regarding these Key Players
• SEC and the FASB not cooperating with the EU
• Both want new Standards bassed off their own set
  standards
• SEC thinks new standards wont be implemented
  very rigerously
• Wants strick system with little flexibility
• IASB followers believe flexibility is a positive
• EUs main objective is to keep EU rules in line
  with International Accounting Standards

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Global Incorporated