chapter 8 bus D 300

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Cshowalter
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296198
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chapter 8 bus D 300
Updated:
2015-03-13 10:28:12
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exam
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exam 2
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exam 2
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  1. greenfield investment 224
    which involves the establishment of a new operation in a foreign country
  2. flow of FDI
    refers to the amount of FDI under taken over a given time period ( normally a year)
  3. stock of FDI
    refers to the total accumulated value of foreign owned assets at a given time
  4. electric paradigm
    attempts to combine the two other perspectives into a single holistic explanation of foreign direct investment
  5. what is FDI
    • Foreign direct investment (FDI) occurs when a firm invests directly in facilities to produce or market a product in a foreign country
    •    Two forms of FDI:
    •      Mergers and acquisitions (M&As)
    •      Greenfield investments
  6. Mergers and acquisitions (M&As) Advantages
    • are quicker to excute than greenfield investments
    • easier and less risky for a firm to posses valuable strategic assets through acquisition
  7. Greenfield Investment Pros and Cons
    • Pros:
    • Greater flexibility to build the kind of subsidiary company: organizational culture , operating routines
    • Can yield greater long term returns
    • Cons:
    • Slower to establish a new subsidiary
    • Riskier due to uncertain future revenues and profits
  8. Licensing
    involves granting a foreign entity the right to produce and sell the firms product in return for a royalty fee on every unit sold
  9. situations where FDI should be preferred , as opposed to licensing
    by limiting import through quotas , government increases the attractiveness of FDI 230
  10. Multipoint competition
    arises when two or more enterprises encounter each other in different regional markets , national markets , or industries
  11. FDI benefits for host country : 240
    • Resource transfer effect- can supply technology , capital that can boost the economic growth rate
    • balance of payment effect- tracks both its payments to and its receipts from other countries
    • competition effect- the increase in competition lead to lower price witch increase economic welfare
  12. FDI cost for the host country: 240
    • adverse effect on competition- they dont want a foreign company to become more powerful then indigenous competiton
    • Adverse effect on the balance of payments-
    • National Sovereignty and Autonomy
  13. Host country policies
    • Restricting inward FDI
    • Ownership restraints only
  14. Negotiating for FDI
    • A host governments attitude toward FDI is critical when make FDI decisions
    •         Favorable attitude  > foucus more on incentive from the host gov
    •        Unfavorable attitude   > what you need to give up for FDI in the country

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