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Foreign Direct Investments (FDI)

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.

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Foreign Direct Investments (FDI)

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  1. Foreign Direct Investments (FDI) FDI= Direct investment in facilities to produce and/or sell goods & services

  2. Why FDI? Transacting within the confines of a corporation rather than open markets; Shifting assets across borders to create competitive advantage for the corporation Internalisation Theory The location of production depends on the stage of the cycle. Vernon’s Product Lifecycle Theory

  3. Why FDI? Knickerbocker’sTheory 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 Ownership Advantage Asset Based Adv Transaction Based Adv Location Advantage Pull Factors Push Factors Internationalisation

  4. FDI Approaches • Forward vertical FDI: Uses outputs from firm’s domestic operations Same industry as HQ Horizontal FDI Operations Inputs Outputs • Backward vertical FDI: enhances inputs into firm’s domestic operations Operations Inputs Outputs

  5. FDI Modes Entering Countries Sustaining operations in Countries Expanding Countries • Other Modes: • Export • Licensing • Partnerships • Franchising FDI Modes: Mergers & Acquisitions Greenfield (New Facility) Investment

  6. Which FDI Modes? Competition Rivalry Conditions International Strategy Requirements Exchange Value Cost/Return & Risk/Return Appropriateness Use Value Competitive Advantage Creation • Other Modes: • Export • Licensing • Partnerships, JV, Strategic Alliances • Franchising • etc FDI Modes: Mergers & Acquisitions Greenfield (New Facility) Investment

  7. How do Countries Influence FDI developments? • Create barriers: • High taxes • Trade quotas • Govt Policies * eg • Ownership controls • Performance requirements • Provides Incentives: • Tax Rebates • Subsidies • Low Interest rates • Govt Policies * • Economic zones eg free trade • * NB: Government policies  Political ideology: • The radical view – anti MNC • The free market view • The pragmatic nationalism view

  8. China’s Incoming & Outgoing FDI 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 China https://www.youtube.com/watch?v=z_M45NI24qU Source: http://www.heritage.org/research/testimony/chinese-outward-investment-better-information-required

  9. MNC China’s FDI in Africa (7.37m) - https://www.youtube.com/watch?v=LfOA2_2MORI

  10. 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

  11. 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 dev • Foster economic cooperation • 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

  12. 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. • How does it work? • What areas of involvement? • Select all of one topics and evaluate EU’s performance to date  insights of the PEC risks & issues management drivers? • 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? • From a citizen’s perspective, what are the + impacts? • 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

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