...ABOUT FOREIGN DIRECT INVESTMENT Foreign direct investment (FDI) is a direct investment into production or business in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds. Foreign direct investment has many forms. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intra-company loans". In a narrow sense, foreign direct investment refers just to building new facilities. The numerical FDI figures based on varied definitions are not easily comparable. There are basically three types of FDI, these are: 1. Horizontal FDI arises when a firm duplicates its home country-based activities at the same value chain stage in a host country through FDI. 2. Platform FDI 3. Vertical FDI takes place when a firm through FDI moves upstream or downstream in different value chains i.e., when firms perform value-adding activities stage by stage in a vertical fashion in a host country. The foreign direct investor may acquire voting power of an enterprise in an economy through any of the following methods: * by incorporating a wholly owned subsidiary or company anywhere * by acquiring shares in an associated enterprise ...
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...PEST Analysis Political Canada is a democratic system with a parliament government. Canada’s system was adopted in 1848 and derives from that of the United Kingdom’s Parliament. Stephen Harper has served as Canadian Prime Minister since February 6th, 2006. Canada’s parliament has three distinct elements: the Crown, Senate and House of Commons. The Senate serves as the upper-chamber while the House of Commons serves as the lower-chamber. The members of the House of Commons are elected from their corresponding electoral district by receiving the largest number of votes. While Canada has many political parties, the most dominant are the Conservative Party of Canada and the Liberal Party of Canada. From 1996-2013, The World Bank rates Canada’s political stability at an average value of 1.01. As of 2011, they ranked 27th in the world and 5th in the North America at 1.06 behind Aruba, Barbados, Dominica and the Bahamas respectively. Contrary to popular belief, freedom of speech in Canada is not considered absolute. Under Section 1 of the Constitution Act of 1982, freedom of speech is given to Canadian citizens within certain limits. Although individuals have freedom of speech, it is not given freely of Government ramifications. In regards to foreign investors, Canada has a wealth of opportunity for global business. Canada offers a low tax establishment with corporate tax rates 13% below that of the United States. At a Federal corporate income tax rate of 16.5% and plans to reduce...
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...Flow of foreign direct investment: The amount of foreign direct investment undertaken over a given time period (normally one year). An example of foreign direct investment would be an American company taking a majority stake in a company in China. Stock of foreign direct investment: The total accumulated value of foreign-owned assets at a given time. For example, French enterprises have been significant foreign investors for McDonald’s; some 1,100 French multinationals account for around 8 percent of the global stock of foreign direct investment Common law system is based on tradition, precedent, and custom. Tradition refers to a country’s legal history, precedent to cases that have come before the courts in the past, and custom to the ways in which laws are applied in specific situations. It differs from a civil law system which is based on a detailed set of laws organized into codes. When law courts interpret civil law, they do so with regard to these codes. Factor endowments are the extent to which a country is endowed with such resources as land, labor, and capital. A simple example of a factor endowment with respect to land would be the presence of natural resources such as oil. Countries with abundant oil tend to export oil, focusing internal resources toward producing the factor they have in quantity. Angola is an extreme example of such specialization: oil accounts for 98% of its exports or for instance, as China's labor force has grown more skilled, wages have risen...
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...- North American Free Trade Agreement (with preamble, 22 chapters, 7 annexes, and articles) -procedural forms NAFTA has two supplements: the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC). Following diplomatic negotiations dating back to 1990 among the three nations, U.S. President George H. W. Bush, Canadian Prime Minister Brian Mulroney and Mexican President Carlos Salinas, each responsible for spearheading and promoting the agreement, ceremonially signed the agreement in their respective capitals on December 17, 1992.[5] The signed agreement then needed to be ratified by each nation's legislative or parliamentary branch. The agreement was then given to each country’s legislative in order to make changes and approve (protect American workers/U.S. partners must follow same environment practices and regulations like theirs). The Canada–United States Free Trade Agreement had been very controversial and divisive in Canada, and the 1988 Canadian election was fought almost exclusively on that issue. In that election, more Canadians voted for anti-free trade parties (the Liberals and the New...
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...economics at the University of Chicago’s Graduate School of Business; Dana Rapoport is an assistant economist and Kei-Mu Yi an economist at the Federal Reserve Bank of New York. Another significant feature of increased globalization is the internationalization of production. Rather than concentrate production in a single country, the modern multinational firm uses production plants—operated either as subsidiaries or through arm’s-length relationships—in several countries. By doing so, firms can exploit powerful locational advantages, such as proximity to markets and access to relatively inexpensive labor. There are currently more than 39,000 parent firms and 279,000 foreign affiliates worldwide, with a total foreign direct investment (FDI) stock equal to $2.7 trillion in 1995, compared with $1.0 trillion in 1987. Moreover, the value added of foreign affiliates—that is, their sales less materials costs— accounted for 6...
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...Backward vertical foreign direct investment with an example Backward FDI is investing in an industry which supplies your firm at home. Buying or building a supplier. For example, if Ford builds an engine production facility in Mexico which ships engines to it manufacturing site in Texas. This would be backward vertical FDI. Vertical foreign direct investment with an example Investment from one country into another (normally by companies rather than governments) that involves establishing operations or acquiring tangible assets, including stakes in other businesses. Vertical: when different stages of activities are added abroad. Forward vertical FDI is where the FDI takes the firm nearer to the market (for example, Toyota acquiring a car distributorship in America) and Backward Vertical FDI is where international integration moves back towards raw materials (for example, Toyota acquiring a tyre manufacturer or a rubber plantation). Common law system and how it differs from a civil law system Common law is based on tradition, precedent, and custom. When law courts interpret common law, they do so with regard to these characteristics. This gives a common law system a degree of flexibility that other systems lack because it allows the judge to interpret the law. Civil law system and how it differs from a common law system Civil law is based on a very detailed set of laws organized into codes. When law courts interpret civil law, they do so with regard to these codes...
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...Globalization Learning objectives • Explain why it is important for managers today to have a global perspective. • Explain the three components of globalization • Describe its effects on markets and production • Explain how technology and innovation in transportation have speeded up globalization • Discuss pros and cons of globalization This chapter is dedicated to introducing the student to the emergence of a new and integrated world of business in which the traditional barriers to cross-border trade and investment including distance, time zones, language, differences in national government regulation, culture and business systems recede in significance due to globalization. The discussion of contemporary issues in international business illustrates the unique challenges of international business. A review of macro-economic and political changes that have taken place in the last 30 years highlights the issues that a typical manager must address in a global market. Information technology and technological changes have put global markets within the reach of small firms in remote locations. In spite of all its benefits, globalization is not a panacea. Critics of globalization point out that it has adverse effects on some firms and individuals. The opening case chronicles the meteoric rise of Wal-Mart from its humble Arkansas beginnings in 1962 to a global retailing giant with $218 billion in sales in 2002. The closing...
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...Globalization Learning objectives • Explain why it is important for managers today to have a global perspective. • Explain the three components of globalization • Describe its effects on markets and production • Explain how technology and innovation in transportation have speeded up globalization • Discuss pros and cons of globalization This chapter is dedicated to introducing the student to the emergence of a new and integrated world of business in which the traditional barriers to cross-border trade and investment including distance, time zones, language, differences in national government regulation, culture and business systems recede in significance due to globalization. The discussion of contemporary issues in international business illustrates the unique challenges of international business. A review of macro-economic and political changes that have taken place in the last 30 years highlights the issues that a typical manager must address in a global market. Information technology and technological changes have put global markets within the reach of small firms in remote locations. In spite of all its benefits, globalization is not a panacea. Critics of globalization point out that it has adverse effects on some firms and individuals. The opening case chronicles the meteoric rise of Wal-Mart from its humble Arkansas beginnings in 1962 to a global retailing giant with $218 billion in sales in 2002. The...
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...Economics for Everyone: Going Global–FDI Fables–FDI in Multibrand Retail......................................................... 2 Special report - Business in India: Inbound and outbound deals: Their oyste ....................................................... 12 Growing confidence dented by politicians .............................................................................................................. 16 BEST CROSS - BORDER M&A DEAL .................................................................................................................. 18 The Literature on Chinese Outward FDI ................................................................................................................ 19 Page 1 of 36 © 2012 Factiva, Inc. All rights reserved. Economics for Everyone: Going Global–FDI Fables–FDI in Multibrand Retail Economics for Everyone: Going Global–FDI Fables–FDI in Multibrand Retail India Infoline News Service 5,801 words 2 May 2012 Indiainfoline News Service INFOIN English Copyright © 2012. Indiainfoline Ltd. FDI- Foreign Direct Investment Context: NEWS FDI in multi-brand retail to go ahead,TNN (TIMES OF INDIA) Govt says committed to multi-brand retail FDI FE BUREAU Aviation FDI: Cautious, Centre set to take allies on board, BUSINESS STANDARD India has been ranked at the third place in global foreign direct investments in 2009 and will continue to remain among the top five attractive destinations for international investors during 2010-11...
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...Chapter 12 – The Strategy of International Business Key Points of the chapter Strategy – is the actions managers take to attain the goals of the business (usually to maximize value for the shareholders/stakeholders). Value Chain – The operations of the firm compose the value chain which are the series of value creating activities that occur to create value. These actions include sales, production, IT, accounting etc. These activities are divided into support and primary activities. Primary Activities – Design, creation and delivery of the product. They are: 1. R&D 2. Production 3. Marketing 4. Sales Support Activities – Inputs that allow the primary activities to occur 1. Information Systems 2. Logistics 3. Human Resources Global Expansion Practices 1. Expand the market for your domestic products by selling internationally (Export) • Requires a company to tap into their core competencies 2. Move production to the most efficient countries to realize location economies • Some countries have a comparative advantage of production • Transportation costs and trade barriers must not be an issue • Location Economies is the value created by finding the most competitive place to produce product, therefore adding value i. Competitive can mean cheapest or best • Creates a global value web as opposed to a value chain 3. Serve expanded markets...
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...French Economy General Overview: The French economy is the fifth largest in the world and accounts for about a fifth of euro area GDP. France weathered the global crisis better than most advanced economies. This is explained by the economy being less open than e.g. Germany, a fairly solid financial sector, a large public sector and substantial fiscal stimulus. Exports amount to about 20% of GDP – about half of the euro area average – while government expenditures amount to about 55% of GDP. The government budget deficit as a share of GDP is higher than the euro area average and the debt-to-GDP ratio is only marginally below the euro area average. During the summer France announced austerity measures, aimed at ensuring fiscal sustainability. Significant reforms and privatizations have taken place in the past decades, but the government continues to own shares in corporations in a range of sectors. Key export markets are located in Europe, with Germany, Italy and Spain being the most important ones. About one third of all exports are going to economies outside Europe. The share of exports to Asia is small, but gradually increasing. Tourism is important (France is the most visited country in the world). France runs a current account deficit and has a large foreign debt. France is the leading agricultural producer and exporter in Europe. Nevertheless agriculture accounts for less than 4% of employment and 2% of GDP. The unemployment rate, which peaked in January 2010, is below the...
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...Investing in a Rebound The 2010 A .T. Kearney FDI Confidence Index® The Global Business Policy Council is a strategic service that assists chief executives in monitoring and capitalizing on macroeconomic, geopolitical, socio-demographic and technological change worldwide. Council membership is limited to a select group of corporate leaders and their companies. The Council’s core program includes periodic meetings in strategically important parts of the world, tailored analytical products, regular member briefings, regional events and other services. Global Business Policy Council A.T. Kearney, Inc. 8100 Boone Boulevard Suite 400 Vienna, Virginia 22182 U.S.A. 1 703 891 5500 telephone www.atkearney.com I n the two years since A.T. Kearney released its last Foreign Direct Investment Confidence Index, the global economy has faced unprecedented turmoil—a housing market collapse, a banking system teetering on the edge, rising unemployment and falling sales across almost all industries. In the 2010 FDI Confidence Index®, we examine the future prospects for international investment flows in the context of these tumultuous times. While conditions have improved, senior executives at the world’s largest companies remain wary of investing during the current climate, and few expect a full turnaround before 2011. Amid the economic downturn of the past two years, several emerging markets remain attractive to foreign investors. China, India and Brazil are in...
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...Int. J. of the Economics of Business, Vol. 8, No. 2, 2001, pp. 173 ± 190 The Eclectic (OLI) Paradigm of International Production: Past, Present and Future JOHN H. DUNNING ABSTRACT This article describes the origins, and traces the subsequent evolution of the eclectic paradigm from the mid-1950s to the present day. It does so in the light of the changing characteristics of MNE activity and of the global economic scenario. The article concludes by asserting that the eclectic paradigm still remains a powerful and robust framework for examining contextual specific theories of foreign direct investment and international production. Key words: Eclectic paradigm; FDI; MNEs; Strategy; International production; Alliances. JEL classifications: F21, F23, M21. 1. Its Origins Although the eclectic paradigm (or the eclectic theory as it was initially called) of international production was first put forward by the present author at a Nobel Symposium in Stockholm in 1976, its origins can be traced back to the mid-1950s. At that time, I was writing my PhD thesis, later to be published as a book (Dunning, 1958), on US direct investment in British manufacturing industry. Earlier research by Rostas (1948), Frankel (1955) and some Anglo ± American study teams1 had shown that the labour productivity in US manufacturing industry was, on average, 2 to 5 times higher than that in UK industry. The question this fact posed in my mind was: was this difference in productivity a reflection of the...
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...Would free trade agreements improve international trade by encouraging foreign direct investments and opening new markets (Name) (University) Table of contents 1 Introduction……………………………………………………………………………………...3 2 Literature review………………………………………………………………………………..3 2.1 The Changing Landscape of Regional Trade Agreements ……………………………...……3 2.1.1 Introduction………………………………………………………………………………….3 2.1.2 Evolution of the RTAs Landscape………………………………………………….……….4 2.1.3 Conclusion………………………………………………………………………………...6 2.1 Integrating Free Trade Agreements and the politics of Free trade Agreements…………….7 2.2.1 Introduction…………………………………………………………………………………7 2.2.2 MENA Region………………………………………………………………………………8 2.2.4 Conclusion………………………………………………………………………………...9 2.3 Arab Free Trade Area: Potentialities and Effects and the Impact of regional Trade Agreement and Trade Facilitation in the Middle East North Africa region…………………….10 2.3.1 Introduction………………………………………………………………………………..10 2.3.2 The Past……………………………………………………………………………………11 2.3.3 Conclusion…………………………………………………………………………………13 2.4 The North American Free Trade Agreement:Economic impacts of the agreement on United States of America and Mexico in comparison…………………………………………………14 2.4.1Introduction………………………………………………………………………………..14 2.4.2 About NAFTA……………………………………………………………………………15 2.4.3 Conclusion ……………………………………………………………………………….16 2.5 Effects of changes to USA-Korea Free Trade Agreements[FTA] On The Passenger Vehicle sector……………………………………………………………………………………………17...
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...Multinational Corporations and Foreign Direct Investment This page intentionally left blank Multinational Corporations and Foreign Direct Investment Avoiding Simplicity, Embracing Complexity Stephen D. Cohen 1 2007 1 Oxford University Press, Inc., publishes works that further Oxford University’s objective of excellence in research, scholarship, and education. Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Copyright # 2007 by Oxford University Press Published by Oxford University Press, Inc. 198 Madison Avenue, New York, New York 10016 www.oup.com Oxford is a registered trademark of Oxford University Press All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press. Library of Congress Cataloging-in-Publication Data Cohen, Stephen D. Multinational corporations and foreign direct investment: avoiding simplicity, embracing complexity / Stephen D. Cohen. p. cm. Includes index. ISBN-13 978-0-19-517935-4; 978-0-19-517936-1 (pbk.) ISBN 0-19-517935-8; 0-19-517936-6 (pbk.) 1. International...
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