...Dianet Perez Garcia Politics of International Investment May 1, 2012 Foreign Direct Investment Risk Analysis on Cuba Background: Cuba is an island in the Caribbean. La Habana is the capital of Cuba and its biggest city. Cuba is not an industrialized country and it mainly consists of farms. Cuba is the largest island in the Caribbean and the most populated with a population of over 11 million people. Cuba is a totalitarian communist country and has been ruled by Fidel Castro since 1959. Raul Castro has succeeded Fidel Castro and is now president. In 2008 Fidel Castro renounced his presidency after becoming ill and passed his presidency on to Raul Castro, his brother and Vice President. Raul Castro now performs all roles. The country has suffered oppression and the effects of Castro’s dictatorship for over 50 years now. Cuba’s largest profit comes from their tourism and from the export of sugar cane and tobacco. The population is majorly Catholic. Cuban citizens have recently been given the right to purchase, own and pass on property. This totalitarian communism, which maintain control of all information and for purposes of their own benefit and to maintain their desired image publish incorrect numbers to the public and withhold information on a regular basis. Political Indicators 2012 2017 1. Political Stability 6 6 Although there have not been major changes in recent years, Cuba’s government is highly unpredictable. Being that the government...
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...and Country Risk: What kind of Interaction?” Supervisor: Professor D. Kyrkilis Stavroula Samara stav_samara@windowslive.com Foreign Direct Investment and Country Risk Table of Contents Abstract…………………………………………………………………………………………………………………….4 Introduction………………………………………………………………………………………………………………4 Foreign Direct Investment…………………………………………………………………………………………6 The Definition……………………………………………………………………………………………………………6 The Types………………………………………………………………………………………………………………….8 The Multinational Corporations………………………………………………………………………………..9 The Effects………………………………………………………………………………………………………………11 The Final Remarks…………………………………………………………………………………………………..13 Country Risk……………………………………………………………………………………………………………14 The Definition………………………………………………………………………………………………………….15 Various approaches of the literature on country risk (table)……………………………………17 The Historical Background………………………………………………………………………………………17 Country Risk Types and Measurements…………………………………………………………………..18 The Factors……………………………………………………………………………………………………………..22 Country Risk Assessment…………………………………………………………………………………………23 Risk Measures (table)………………………………………………………………………………………………25 The Methods…………………………………………………………………………………………………………..27 How does Country Risk matter for FDI?.......................................................................29 FDI and Country Risk: A Research……………………………………………………………………………33 The Data…………………………………………………………………………………………………………………33 2 Foreign Direct Investment and Country Risk The Concept...
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...Executive summary. The greenfield FDI is a form of direct investment where a parent company starts a new business in a foreign country by setting up new operational facilities. In addition to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees. In order to decide which country is better for ‘greenfield’ foreign direct investment via sole ownership, the advantages and disadvantages of the countries should be considered. For example, China is a developing country, and during the past 30 years, China’s rapid economic development shows that China has a strong power in developing economic. In recent decades, China stays on one of the leading positions in direct investment and therefore a lot of investments to this country are considered to be profitable for any company or investor. The reasons are simple: the growth of the economy and a large number of different projects. Foreign direct investment in China, due to stable growth potential of the economy and a huge production resources, aimed at both the external and the internal market.The innovative ability is a great attraction for investment managers around the world. In contrast, a lot of foreign investors had chosen China for investment and this resulted in a very big competition. Nevertheless, USA is a successfully developed country. And its economy is the top one in the world. As the most important country in the first world countries, the USA...
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...Essay 1 Although the potential market in China is very attractive to FDI, it still have many risks that stopping the FDI decide to invest in China. In order to further attract inward FDI and optimize its structure to meet China’s goals of economic development, there are few measures that the China government should take, including providing more knowledge about the market, providing more networking and connections and enhance the investment environment of China. Taking these measures can effectively attract more inward FDI to invest in China. First of all, many FDI has lack of knowledge about the market which make them afraid of investing in China. Therefore I suggest that the China government can provide more information about the market such as the history of investment of the target market, the development of the target market and the structure of the target market. This can help FDI gaining more knowledge about the target market and thus can lower the risk of failure investment. Moreover, being insensitive to Chinese culture, social norms is also one of the major factor that lead to failure investment for FDI. I suggest that the China government can hold some forums or talks introducing the culture of China and the difference between western and Chinese culture. Secondly, lacking of networking and connections in China will also stop the FDI invest in China. Since most of the FDI has lack of the knowledge about the market, they need to find networking or connections...
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...“FDI Strategy: Clean Harbors’ Entry Into Brazil” Student: Class: ITB 305 Professor: “FDI Strategy: Clean Harbors’ Entry Into Brazil” According to Clean Harbor’s website, Clean Harbors “is the leading provider of environmental, energy and industrial services throughout North America” (Clean Harbors, n.d.), located in Norwell, Massachusetts. Clean Harbors serves a multitude of entities, including several Fortune 500 companies, thousands of private firms, and scores of government offices on federal, state, and local levels. Perhaps Clean Harbor’s largest area of expertise is the management and recycling of hazardous waste produced by various industries, most notably it’s used oil recycling through its Satety-Kleen subsidiary. The company currently has substantial operations throughout North America, including the United States, Mexico, Canada, and Puerto Rico. Founded in 1980, it employs a workforce of 13,180 employees as of December 31, 2012 (Clean Harbors, n.d.). In addition to the management and recycling of hazardous waste, Clean Harbors also offers hazardous material management and disposal services including the collection, packaging, recycling, treatment and disposal of hazardous and non-hazardous waste, and a wide variety of environmental cleanup services on customer sites or other locations on a scheduled or emergency response basis (Clean Harbors, n.d.). While Clean Harbors has enjoyed success in the markets it currently operates...
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...(see table 1.1) along with emails from the president, Matsumoto Toyo, spurred the genesis of the factors involved in choosing a country to internationalize to. The most important factor Elecdyne needs to consider is cost minimization, which determines if there is cost reductions associated with internationalizing to a specific country. The next factor is access to technology and determines the likelihood of accessing technological expertise within a country. Elecdyne also needs to consider not only having access to new markets, but also the size of the markets being targeted. Additionally, political and economic risk factors are important due to the fact that Elecdyne cannot afford to take high risks. Political risk is the "risk of a change in political institutions stemming from a change in government control, social fabric, or other non-economic factor"; Economic risk is defined as "the potential for detrimental changes in fundamental economic policy goals (fiscal, monetary, international, or wealth distribution or creation)1. Lastly, the culture-fit factor needs to be considered because it determines how much organizational conflict will be generated due to differences between the Japanese culture and the host culture....
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...are not part of a global network. Every firm has to think of itself as a global company, if for no other reason than because it has to meet competition from global companies. This changes the entire strategy of the firm. In the future, we expect that all of you will be involved in managerial decision making that will take you beyond the realms of your geographical territory. This course on International Business Management will have the focus on helping you make better international decisions. Aside from the opportunities offered by globalisation, there are also many risks in entering into the global market. This course will attempt to address, in a structured format, the ways and possibilities of addressing these risks. The basic philosophy behind this course is to develop a holistic understanding of international business, appreciating the risks, and developing competence in using tools to mitigate that risk. In order to extract the most benefit from this course you will need to be actively engaged. You will gain marks, up to 10% of the total score for the course, by attending and...
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...Department of Management, Marketing and Logistics Boler School of Business John Carroll University University Heights OH 44118 Phone: FAX: Email: (216) 397-3094 (216) 397-1728 smudambi@jcu.edu DIVERSIFICATION AND MARKET ENTRY CHOICES IN THE CONTEXT OF FOREIGN DIRECT INVESTMENT Abstract Multinational enterprises consider many factors when making decisions in the context of foreign direct investment (FDI). In deciding what to produce, the multinational enterprise (MNE) must decide whether to diversify or to concentration on its main line of business. This paper offers insights into influences on this choice, and identifies a number of conditions under which diversification is more likely to be chosen. Factors affecting the foreign entry mode decision are also analyzed. The international business literature has generally treated these strategic choices as independent. This paper introduces a more realistic selection model, in which the diversification choice and the entry mode choice are made sequentially and are therefore related. The model is tested using a data set of FDI into the United Kingdom by MNEs in engineering and related industries. The analysis indicates a strong relationship between the diversification choice and the entry mode decision. In virtually all cases, the statistical significance of the selection model is higher than that of the independent model, indicating an improvement over previous research. Overall, the choice of a diversification strategy has a...
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...Key risks for Investment in India * On the quality parameter of properties, India was lacking across major estate types. * Do not have financially strong infrastructure for building new properties and supporting new investments * Political risk in involved in Indian investments as it is difficult to come to any decision in the coalition government and sometimes it leads to much delay in the projects. * On Foreign exchange currency risk, Indian currency is more volatile and thus devaluation can lead to greater loses. * Indian Bond markets are not fully developed. * Investments in property and Infrastructure sectors are less risky than as compared to other sectors. * There are restrictions on investments in Kashmir, as it is military affected area. * Risk due to terrorism can decrease investor’s confidence. Similarly Maoists activities are and obstacles for investments certain regions of India. * There is legislation risk involved in India. As it has been the case with Vodafone deal where Indian government came with retrospective tax proposal to dole out tax from Vodafone deal. * Monetary policies keep on changing in India on regular basis. Key risks for Investments in China * Like India, estate types(across all major), China lacks on quality aspect of properties. * China is riskier on political aspect. Communist government policies fears a bigger threat for Investment in China and all the types of protests are simply tackled and...
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...ANALYSE THE OVERALL ATTRACTIVENESS IN FRANCE. benefits to invest in france The France Attractiveness Scoreboard is a comparative and objective analysis based on nine groups of economic attractiveness criteria, corresponding to those most commonly compared by business leaders. In contrast to international rankings based on composite competitiveness indicators and opinion surveys that provide patchy analysis far removed from the reality observed by investors on the ground, it provides comparative and objective analysis of the main criteria against which France's investment attractiveness can be judged. Structural advantages are fundamental to France's investment attractiveness The France Attractiveness Scoreboard demonstrates that France's structural advantages are fundamental to its investment attractiveness, and that the reforms underway are boosting the competitiveness of the French economy. France's key advantages are its market size and location, highly qualified and productive workforce, capacity for innovation and involvement in R&D, beneficial administrative and regulatory environment and high quality of its energy mix. Positive impacts of reforms already tangible The competitiveness and employment tax credit (CICE) in force since January 1, 2013 is already actively reducing labor costs. The French National Institute for Statistics and Economic Studies (INSEE) has reported a fall in the labor...
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...The concept of ‘internationalization’ is strongly related to a process of involvement and accurate decision making regarding the entry or expansion into new or existing markets taking into consideration dynamic factors and limitations that could influence the entrepreneur. As Buckley J. and Ghauri N. (1999:85, 86) state, the meaning is used to describe how growth of international businesses is mainly dependant on the ‘inward-outward interlink’, thus acquiring foreign commitment over time through a six dimension pattern. The framework suggests that the success of international companies is linked to foreign operation methods and the change tendency as well as sales objects and targeted markets, organizational structure and personnel together with finance and technology. Therefore, in terms of analysing the start-up for a new venture, entrepreneurs should focus on developing and integrating the abovementioned and as Oviatt and McDougall (2004:31) indicate, gain the competitive advantage through resource utilisation and output sale in multiple countries. In order to achieve that, proactive strategies such as alliances, manufacturing capacity or marketing expertise should be taken into consideration as suggested by Buckley and Casson (1976:4) and consistent with a value added approach rather than asset owned. Therefore, the strategy is more concerned with small and medium size firms which start up locally and then mature to become consistent with the MNE theory and foreign direct...
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...6:10-9 Commerce Building 260306 Yee-Tien (Ted) Fu Undergraduate: Tuesdays 9:10:noon Commerce 260508 Autumn 2009 (3 units) Course Objective This course examines important issues in the rapidly evolving area of international financial markets. It focuses on various aspects of international portfolio management and open-economy macroeconomics, and is a natural extension to the theories and practical issues explored in Investments and/or Finance. This course is aimed at students wishing to acquire a sound understanding of the main opportunities in international investments. For example, the relevance of hedging in the management of currency risk will be studied in light of theoretical results and empirical evidence. We will also briefly cover foreign direct investment (FDI), since in general, the revenue generated from FDI by U.S. firms is about three times as large as the revenue generated from the exporting of U.S. goods by U.S. firms. Due to the ever increasing importance of international corporate governance, there is a corresponding need to decipher and use information in financial reports. At least one class meeting and one case study will touch on some key issues in international financial reporting and analysis, such as financial disclosure/transparency, incentives for off-balance sheet liabilities, hedge accounting, lease accounting, footnote disclosures, and intercorporate equity investments, and international financial reporting differences. We will...
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...of the host nation, maximizing the investment return and minimizing the risks which could have a negative impact on the financial performance of the Ruritanian project. Firstly, the national economy environment will be discussed based on the national GDP growth and inflation rate; secondly, there is a discussion on the foreign exchange risks of Rutitania Crown against international currency; third, the issue of joining the Euro zone will be analyzed in terms of benefits and drawbacks; next, the taxation effect in the investment decision making will be accessed and finally there will be a discussion on the political environment. THE NATIONAL ECONOMY AND THE IMPLICATIONS FOR THE PROJECT 2.1 The Relationship between National Economy and the Foreign Direct Investment (FDI) The economic growth of the host nation has always had a positive relationship with the foreign direct investment decision making. The positive effect of host country economic growth on investment decision making has been supported by various studies (Ericsson and Irandoust, 2000; Dhakal, Kamal and Upadhyaya, 2007; Barrell and Pain, 1996; Grosse and Trevino, 1996; Taylor and Sarno, 1999; Trevino et al., 2002). Traditionally the economic growth of the host nation induces FDI inflow when FDI is seeking consumer markets, or when the economic growth leads to greater economies of scale and, increased cost efficiency of the project. The FDI is more likely to exist in healthy and open economies with steady growth...
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...resources. However, companies routinely exaggerate the attractiveness of foreign markets, which leads to expensive mistakes. This essay shall discuss the opportunities and risk associated with distance in international expansion. According to Ghemawat (2001), distance between two countries can manifest itself along four basic dimensions: cultural, administration, geographic and economic. Geographic distance, for instance, affects the costs of transportation and communications and is particularly importance to companies that deal with heavy or bulky products. Cultural distance, by contrast, affects consumer’s product preferences. It is a crucial consideration for any consumer goods or media company but it is much less important for a cement or steel business. Administrative distance involves historical and political associations shared by countries that greatly affect trade between them. Economic distance states that the wealth or income of consumers is the most important economic attribute, which creates distance between countries and has a marked effect on the levels of trade and types of partners a country trades with. The opportunities and risk associated with distance are based on the four dimension stated above where differences in each dimension can either be an opportunity to exploit or a risk to consider when companies decide to globally expand. For example, large economic distances between two countries can be an opportunity for companies to gain competitive advantage...
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...INTRODUCTION Country risk refers to the risk of investing or lending in a country, arising from possible changes in the business environment that may adversely affect operating profits or the value of assets in the country. For example, financial factors such as currency controls, devaluation or regulatory changes, or stability factors such as mass riots, civil war and other potential events contribute to companies' operational risks. This term is also sometimes referred to as political risk; however, country risk is a more general term that generally refers only to risks affecting all companies operating within or involved with a particular country. Many investors choose to place a portion of their portfolios in foreign securities. This decision involves an analysis of various mutual funds, exchange traded funds (ETFs), or stock and bond offerings. However, investors often neglect an important first step in the process of international investing. When done properly, the decision to invest overseas begins with determining the riskiness of the investment climate in the country under consideration. Country risk refers to the economic, political and business risks that are unique to a specific country, and that might result in unexpected investment losses. This country risk analysis is a fundamental step in building and monitoring an international portfolio. Investors that use the many excellent information sources available to evaluate country risk will be better prepared...
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