...Running head: A SUCESSFUL FDI ASSIGNMENT 1 A SUCCESSFUL FDI BY Darrell Gilbert Strayer University Dr. Sol Drescher International Business 305 May 01, 2011 The Creation of Globe Diesel Inc Globe Diesel is a Multinational Enterprise that is known for its innovative production of heavy duty construction equipment. Established in 1985 Global Diesel gained its recognition through the production of high quality construction equipment, super sized diesel engines, and other construction related services. Currently based in the United States, Globe Diesel has provided equipment for construction contractors throughout the west coast area and overseas. Their tangibles include financial, physical and technological resources that include an inventory of raw materials, steel, rubber, hydraulics and engine components. In addition, the well established company over the years has acquired human, innovative, and reputational resources which give them a competitive advantage. Consideration this, Globe Diesel has undertaken the activities in mass production of super sized construction machines such as dump trucks, excavators, cement trucks, and earth movers. Although Globe Diesel operates ten manufactures located throughout the United States, the challenging task of managing multiple activities in the production of construction machinery could prove to be troublesome, not to mention that machinery of this size and magnitude are costly to produce. These factors were influential...
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...Foreign Direct Investment (FDI) Policy As a Stimulator to Irish Economy Had Several Drawbacks Summary While Ireland has been extremely successful at attracting inward investment, facts and figures suggest that too much focus has been placed on foreign direct investment (FDI), to the detriment of the domestic economy. Since the influx of foreign companies in the 1960s FDI has continued to make important contributions to the Irish economy, however Ireland’s over reliance on FDI as a stimulator of economic growth has not been without its drawbacks, which will be especially severe in the coming future. The policy led to a yawning gap between Ireland’s GDP and GNP, lead to a low investment share of Irish national income, increased transfer pricing and instigated high dependence on foreign firms and economies. Background Ireland is one of the most successful countries in the European Union (EU) for attracting FDI and the “Celtic Tiger” era of the 1990’s was largely due to these investments and increased inflows to the country. The country was able to attract enormous FDI due to a low corporation tax rate, access to a skilled low wage multilingual labour availability, geographical benefits, fiscal and political stability, ease of doing business and access to European Union (EU) markets. Instability from overreliance on multinationals * High dependency of Irish manufacturing on foreign MNCs is the major source of instability for the economy. * The danger is that external...
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...MNC's Effect on Local Businesses in Retailing Sector (India) Contents Abstract 1 Introduction 2 Literature Review 2 Effect of MNC’s into Indian Retail Market 5 Advantages 5 Disadvantages 7 Hypothesis 8 Conceptual Model 8 Conclusion 10 References 10 Abstract Globalization paved the way for entrepreneurs to expand their wings beyond their respective counties. MNCs exploit the business opportunities in other countries based on the FDI policies in those countries. This has both advantages and disadvantages to the target country. The MNCs have their impact on the economy and people of countries in which they operate business. This paper focuses on the impact of MNCs on local businesses in retail sector in India. The report review existing literature which provides insights into FDI policies in India, the level of FDI allowed by Indian government with respect to single –brand and multi-brand foreign companies, the advantages, opportunities, risks, threats and disadvantages of allowing MNCs into retailing sector in India. Introduction Retailing is the business taking up by individuals or families in India. Generally mom and pop kind of businesses operate in retail sector. The retail sector has tremendous growth in India. Moreover retailing is a profitable business in India. Since India is the country with huge population, naturally it is the correct destination to foreign investors to get profits from the market. India has been traditionally depending...
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...Cemex’s Foreign Direct Investment 1. Which theoretical explanation (or explanations) of FDI best explains CEMEX’s FDI? 1. Internalization theory best explains CEMEX’s FDI because CEMEX entered into many countries and bought domestic cement businesses instead of licensing. CEMEX has a great system and needs to protect it from competitors. 2. What value does CEMEX bring to a host economy? Can you see any potential drawbacks of inward investment by CEMEX in an economy? 2. The value is that CEMEX has a “Midas touch” that transforms a cement business into a thriving business. This brings great stimulation to the host economy and also helps in the construction field, which in turn helps to build cities and civilization. No, CEMEX would do well to invest inwardly, yet, CEMEX is better at acquisitioning businesses. 3. CEMEX has a strong preference for acquisitions over greenfield ventures as an entry mode. Why? 3. Acquisitions are solid because the business in the host economy already knows the demographics and the market. CEMEX just has to make the business better with little research. A greenfield venture would prove risky and not cost effective. 4. Why do you think CEMEX decided to exit Indonesia after failing to gain majority control of Semen Gresik? Why is majority control so important to CEMEX? 4. A licensing is very dangerous. CEMEX only have a 25% push with Semen Gresik. It did not have full control and the methods of CEMEX would be...
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...“The effects of FDI on the Indian Insurance Industry” Abstract Chapter-1 1.1 Introduction In the world of increased competition and rapid technological changes, globalization has played a complimentary role over the past years. Globalization has encouraged more and more multinationals to adopt FDI. According to Charles W.L. Hill (1998) “FDI occurs when a firm invests directly in facilities to produce and market a product in a foreign country”. The growth of FDI is more than the growth of world trade and world output so role played by FDI in world economics is very vital. Patterson, N. and Montanjees, M. (2004) say that FDI is the most favoured form of external finance for the reason that it is non-debt creating, non- volatile and the outcome depends upon the projects performance initiated by investors. FDI is advantageous because it facilitates international trade and transfer of technology, knowledge and skills. The purpose of this study is to investigate factors that attract FDI. De Mello (1999) asserts that scope for business in a country, opportunities for expansion, market size etc are some of the factors that attract FDI. Growth rate of a company or an industry leads to magnetism of more and more investment as investors know that their investment is safe enough. According to Dunning, J. (1981) Availability of valuable and unique resources in an industry such as cheap production capacity, cheap skilled labour and advanced technology which are necessary for running...
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...In the previous months we have been working on the expansion of our product and the possibility of entering the U.K market. Now, once we have decided which market are we entering, when are we doing so and on what scale, we should focus in how are we doing the entry. In order to take the best alternative possible we analyzed the various modes for entering foreign markets, assessing both the advantages and disadvantages. If we decide to export we wont need to invest in establishing manufacturing operations in the host country and we could benefit from the learning curve. Drawbacks to this are that the transport cost could be higher than the benefit that we will obtain; the trade barriers (customs tariffs or quotas) that the UK may have can slowdown the trade to the point of being unprofitable. In the other hand, expanding through a turnkey project will be a good choice if we are entering a country where FDI is complicated. However this method is risky because it could create strong competitors and it won't have sense if the company is planning a long-term presence in the market. Other way to entry is using licensing, as licensor is a good option because it implies a low development cost and risk, contrasting with the lack of control over technology this could have and the inability to engage in global strategic coordination. Similar advantages will have a franchisee, but with a longer-term view and not only granting intangible property but also the ''know-how'' for doing...
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...capitalize on demand in developing countries and its knowledge of developing company’s needs, and finally, to increase its value by acquiring inefficient companies and transferring its skills to those companies. Cemex plans to continue its foreign expansion, and believes that China and India will be important markets in the future. Discussion of the case can revolve around the following questions: Which theoretical explanation, or explanations, of FDI best explains Cemex’s FDI? Cemex is a cement company it is consentingly exporting. It is difficult to export because of the weight of the product. Cemex can expand into new markets, but they would either need to get a license of a local company or make an investment in the market directly. Cemex’s success is due in part to its top notch customer service, and relationship with distributors, but these advantages could be difficult to allocate, the company will probably choose to invest directly. What is the value that Cemex brings to the host economy? Can you see any potential drawbacks of inward investment by Cemex in an economy? Cemex has sixty percent of the market in Mexico and is the third largest company of the world. Cemex bring to a host economy to acquire companies and then transfer technological, management, and marketing know-how to the new units, improving their performance. It has brought several companies back to full production. Cemex has a strong preference for acquisitions over greenfield ventures as an...
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...Discuss the benefits and drawbacks to both parts of China of the close relationship between Hong Kong and mainland china Hong Kong has enjoyed the benefits of being a capitalist economy and independent from mainland China for over 150 years under British colony without much relationship with China. Even though Hong Kong is now part of China with a strong tie, the Chinese central government valued having a successful capitalist economy in the greater China, consequently they have agreed to preserve the capitalist economy in the Sino-British agreement 1984. In this agreement, China has agreed on preserving the capitalist economy for 50 years after the return of Hong Kong on the 1st July 1997. Hong Kong is now one of the two Special Administrative Regions (SAR) in China having an independent economy with ties to mainland China. This decision had a positive influence on both the Chinese and Hong Kong economy and contributed towards the rapid growth of the Chinese economy and the expansion of Hong Kong as a financial centre in the recent years because now Chinese firms are able to easily reach the international market from Hong Kong. On the other hand, it still has drawbacks and potential threats from China having strong relationship, a free-trade agreement with a capitalist economy such as; large firms with large sums of liquidity and stability moving out of mainland China to preserve its wealth. This paper will discuss the benefit and drawbacks to both parts from an economics...
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...multinational enterprise and the labor cost is cheaper than other nations with the same skilled workers like Switzerland and Netherlands and to conclude a very good system of transportation and logistics to move products toward major markets in Europe easily and quickly. In the Ireland economy FDI have played a central role. I would say an essential role for the economy. The lack of the corporate sector has been an active proponent for the Ireland government to attracts FDI, in fact a large part of the Ireland GDP is product by foreign firms, for instance Google, Apple, IBM and so on; this depend on the fact that a huge part of the Ireland work force works in the foreign company. 2) How we can see from the Irish case, a lot of countries during the years started to subsidize foreign direct investments and different firms started an aggressive export oriented strategy. This was led by the large potential profits that this strategy could create: by the host country point of view in fact (as it’s evident from the Irish case) the investments of foreign firms create profits, new jobs, development of research sector and more investments. But, there are also some drawbacks in this strategy: for example, an FDI- focused policy could yield little in terms of creating a vibrant domestic economy, too focused on the attraction of foreign firms. Thus, if the policy is not accompanied by a...
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...Currency Depreciation – a concern for the Indian Economy The Indian Rupee has marked a significant depreciation against the US dollar marking a new risk for Indian Economy. Till the beginning of the current financial year very few had ever expected Rupee to depreciate to so low levels. On October 21, 2011, the rupee crossed Rs. 50/$ for the first time this year touching new lows of Rs.53.72/$ on 14th December 2011. What is even more interesting to note is that when other countries are trying to keep their currencies devalued, India is trying to prevent depreciation of its currency. As Indian currency has sharply depreciated not only against the US dollar, but also against the other currencies of the world, a myriad of factors can be associated with this devaluation of this currency. There are supposedly four factors behind the recent scenario: * Flight of foreign funds from the Indian market. * Slowdown in the capital inflows. * Higher global crude oil prices, which widens the current account deficit and also increase dollar buying by oil companies. * Recovery of US dollar. As the downbeat forces have played strong over the last few months, investor risk-appetite has contracted, thereby increasing the demand for safe haven such as US treasury, gold and the greenback. Secondly a prospective decline in inflows on the capital account of the balances of payments could further be associated with the depreciation in rupee. The most possible impact of the devaluation...
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...e Table of Content Declaration of Originality 2 Acknowledgements 3 Introduction 4 Economic Integration: Definition 5 Background of Free Trade in the South Pacific 6 PICTA 7 PACER 7 Advantages and benefits of Economic Integration 9 Drawbacks of Regional Economic Trade 11 Resolution 15 Conclusion 17 Bibliography 18 Appendices 19 Declaration of Originality We declare that this is our original work and all borrowed works had been cited and referenced. s11061729 Elizabeth Pearl Blakelock s11074679 Ranjeeta Devi s93005349 Mosese Vosarogo Acknowledgement We acknowledge our Instructor Mr Atishwar Pandaram for for the learning, Mr William Kurt of Cost-U-Less for allowing us time to interview him and for the valuable information and also Mr Aslam Janiff of Kundan Singh Supermarket and Andrew Powell Rajendras FoodTown Supermarket for giving their time to attend to us. Introduction In this project, we will attempt to highlight the implications of free trade amongst the south pacific island countries that are under the auspices of the 'The Pacific Islands Forum'. PIF is an inter-governmental organization that aims to enhance cooperation between the independent countries of the Pacific Ocean...
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...analysed the relationships and effects between the developing countries’ economy development and the information technology. Firstly, from James (2001) point of view, there is a ‘cumulative causation’between foreign direct investment and exports and economic growth. Heclaimed that foreign direct investment (FDI) had a huge influence on the export performance of the developing countries, the degree of exports stimulates economy growth thus attract more FDI. There are some evidences exist to prove his claim. China isone of the good examplesto indicate that. Song and Zhang (2001) stated that there was a strong link between foreign direct investment and exports in China. Exports which generated by FDI had attracted more FDI into China. It also provided the evidence that only 1 percentage of FDI level changed in 2000 was related to 0.29 percentages rise in exports in 2001 (Song and Zhang). Moreover, foreign investment has played a vital role in both China’s economy and fast growth (Whalley&Xin, 2010). According according to Whalley and Xin (2010), their research result has shown that ‘China’s growth rate may have been around 3.4 percentage points lower in the past few years’ without FDI(Whalley&Xin, 2010). While on the other hand, this ‘cumulative causation’ application may be affected by current global situation. The export-led growth strategy for those least developed countries seem to be not so effective in recent years. According to Stewart (2011), Unctadsuggeststhat the least developed...
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...Macroeconomics Assignment | | Topics from the Union Budget 2014-15 of India 1. What will be the effect of increasing the FDI limit in insurance sector from 26 to 49%? 2. How CAD has improved through restriction on non-essential import and slow-down in overall aggregate demand? 3. Why inflation is measured with reference to WPI and not CPI? Increasing the FDI limit would essentially mean increased inflow of US dollars in India. The increased dollars will increase investment in the insurance sector which will increase employment and hence the increased taxes to the government. The increased investment will also result in more corporate taxes which again will result in increased taxes to government. These taxes will increase the government spending through public utilities which essentially means increase in GDP. Also, since increased dollars will increase the supply of dollars, the Rs/$ rate will decrease and hence it would make imports cheaper which will reduce the trade deficit and improve the GDP. Current Account Deficit is basically excess of Outflow of foreign exchange in both goods and invisibles transactions over such Inflow. This means that the country is spending more on foreign goods and services than selling its own goods and services to foreigners. In other words the import of the foreign goods and services is more than export. To reduce the deficit, India restricted the import of non-essential items such as fridges and TVs which resulted...
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...in the WIR 2014, the reason that developing and emerging economies have attracted FDI, and why will SDGs have a significant resource implication for future investment decisions of MNEs. 2. The recent trends discussed in the WIR 2014 1. Global FDI flows Global FDI flows increased by 9 percent in 2013 to $1.45 trillion, up from $1.33 trillion in 2012. Although the share of developed economies in total global FDI flows remained low, it is expected to rise over the next three years to 52 per cent. Global inward FDI stock rose by 9 per cent, reaching $25.5 trillion. It reflects the rise of FDI inflows and strong performance of the stock markets in many parts of the world. 2. FDI inflows FDI inflows rose 9 percent in 2013 revealed a moderate pickup in global economic growth and some large cross-border M&A transactions. The increase of FDI inflows was widespread in all major economic groupings − developed, developing, and transition economies. Developed countries’ FDI inflows grew by 9 percent, reaching $566 billion. Developing economies reached a new high of $778 billion, accounting for 54 percent of global inflows. Developing Asia remained the world’s largest recipient region of FDI flows, and China remained the recipient of the second largest flows in the world. In 2013, APEC absorbed half of global flows, similar to the G-20, while the BRICS received more than one fifth. Besides, FDI flows to Latin America and the Caribbean registered a 14 percent increase....
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...FDI reforms – Challenge or Issue Dona Cherian C201276364 In the Indian economy, the contribution of retail and wholesale trade alone to the GDP growth is at a whopping 14 %. This figure in itself is indicative of the importance of this sector in the growth of India’s economy. It is double that of the next service sector contribution; construction at a7.3% growth rate. The retail sector is divided into organised (malls, hypermarkets etc.) and un-organised sectors (kiranas, convenience stores, pavement vendors) wherein the latter constitutes almost 98% of all retailing trade in the country. The coming of FDI would bring on a higher percentage of organised sector into the entire retailing industry which is where the question of good or bad arises. The people who talk against the FDI policy have many reasons that they put forward to justify their cause. One of the main reasons here is the fact that the drastic increase in the organised retail market would almost wipe out the domestic unorganised sector and the advantageous situations that it has in our country. As the aforesaid figures show us, this sector accounts for 98% of India’s entire retail industry, which makes this argument quite scary. The kirana stores in India are characterised by great neighbourhood locations and unbeatable access. With ever-increasing traffic congestion, this is a huge customer benefit. Our country lends itself to neighbourhood solutions better than countries that have wider open spaces and lower...
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