Foreign Direct Investments (FDI)
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Foreign Direct Investments (FDI) FDI = Direct investment in facilities to produce and/or sell goods & services
description
Foreign Direct Investments (FDI). FDI = Direct investment in facilities to produce and/or sell goods & services. Why FDI?. Transacting within the confines of a corporation rather than open markets; Shifting assets across borders to create competitive advantage for the corporation. - PowerPoint PPT Presentation
Transcript of Foreign Direct Investments (FDI)
Foreign Direct Investments (FDI)
FDI = Direct investment in facilities to produce and/or sell goods & services
Why FDI?
Internalisation Theory1. Transacting within the confines of a corporation
rather than open markets; 2. Shifting assets across borders
to create competitive advantage for the corporation
Vernon’s Product Lifecycle Theory
The location of production depends on the stage of the cycle.
Why FDI?
Knickerbocker’s Theory of FDI
FDI is a reflection of strategic rivalry between firms in the global marketplace Example as applied in Porter’s diamond model
Dunning eclectic theory
OwnershipAdvantage
Asset Based Adv
Transaction Based Adv
LocationAdvantage
Pull Factors
Push Factors
Internationalisation
FDI Approaches
Same industry as HQ Horizontal FDI
Inputs Operations Outputs
Inputs Operations Outputs Backward vertical FDI:
enhances inputs into firm’s domestic operations
Forward vertical FDI:
Uses outputs from firm’s domestic operations
FDI Modes
Mergers & AcquisitionsGreenfield (New Facility) Investment
FDI Modes:Other Modes:• Export• Licensing• Partnerships• Franchising
Entering Countries
Sustaining operations in
Countries
Expanding Countries
Which FDI Modes?
Mergers & AcquisitionsGreenfield (New Facility) Investment
FDI Modes:Other Modes:• Export• Licensing• Partnerships, JV,
Strategic Alliances• Franchising• etc
International Strategy Requirements
Exchange Value Cost/Return & Risk/Return Appropriateness
Use Value Competitive Advantage Creation
Competition Rivalry Conditions
How do Countries Influence FDI developments?
Provides Incentives:• Tax Rebates• Subsidies• Low Interest rates• Govt Policies *• Economic zones eg free trade
Create barriers:• High taxes• Trade quotas• Govt Policies * eg
o Ownership controlso Performance requirements
* NB: Government policies Political ideology:• The radical view – anti MNC• The free market view• The pragmatic nationalism view
China’s Incoming & Outgoing FDI
Source: http://www.heritage.org/research/testimony/chinese-outward-investment-better-information-required
Source: http://www.china.org.cn/business/2011-07/18/content_23008646.htm
Dec 2011 Youtube (2.07m)Multinational Corporates Take A Second Look at Chinahttps://www.youtube.com/watch?v=z_M45NI24qU
MNC
China’s FDI in Africa (7.37m) - https://www.youtube.com/watch?v=LfOA2_2MORI
Assignment 1
As exemplified by the European Union (EU), regional economic integration is replete with political, economic & cultural danger. Discuss through the use of valid, real-life examples.
EU is s an economic and political union of 28 member states.
Institutional members include the:• European Commission, • Council of the European Union, • European Council,• Court of Justice of the European Union• European Central Bank• Court of Auditors,• European Parliament.
http://europa.eu/eu-life/index_en.htm
Assignment 1
As exemplified by the European Union (EU), regional economic integration is replete with political, economic & cultural danger. Discuss through the use of valid, real-life examples.
Economic Political & social dev1. Foster economic cooperation2. Policies development
• Development aid• Environment sustainability• One internal European market• Human rights & equality• Transparent & democratic
institutions
Source: http://europa.eu/about-eu/index_en.htm
Assignment 1
As exemplified by the European Union (EU), regional economic integration is replete with political, economic & cultural danger. Discuss through the use of valid, real-life examples.
1. How does it work?2. What areas of involvement?
• Select all of one topics and evaluate EU’s performance to date insights of the PEC risks & issues management drivers?
3. How effective is EU’s Governance Capacity?• How effective has been its decision
making?• How effective is its members’
compliance to the Rule of Law via its treaties, legislative regulations and policies implementation?
4. From a citizen’s perspective, what are the + impacts?
5. What unit’s topics/ concepts may be applied?
Use your research findings to identify the PEC risks & issues and supporting examples faced by:
•EU countries•EU citizens
Reorganise your research & analysis findings to design argumentative logic of your response to the Assignment
