Differences Between Multinational And Domestic Operations

The procedures and concepts discussed during this week’s module make valid points for both multinational and domestic operations. Though there are many similarities there are six main keys that differentiate the two. The difference include the different currency denominations, economic and legal ramifications, language differences, cultural differences, role of governments, and political risk. These factors combined contribute to how domestic and multinational firms handle cash, credit, and inventory management. The goals are similar for domestic and multinational firms in terms of cash management. The goals are â€Å"to speed up collections, slow down disbursements, and thus maximize net float.† (pg. 715) Then, the next goal is, â€Å"to shift cash as rapidly as possible from those parts of the business where it is not needed to those parts to where it is needed.† (pg. 715) The last goal is, â€Å"to maximize the risk-adjusted, after-tax rate of return on temporary cash balances.† (pg. 715) Though both have the same objectives multinational firms have more difficulties with cash management compared to domestic firms. This is where the six factors mentioned before come into place. For example, political risk can make it very difficult for multinational because the governments can put restrictions on funds expecting to be received by a firm. The rigidity of converting and transferring money can also make it difficult. 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