...How Exxon Mobil would manage its FDI in an emerging market Investment decisions by firms are subject to rigorous planning and coordination and when they cater to the firms’ interests in expanding its business beyond the borders of its home country, the parameters for analysis change. The company has to think beyond its own domestic construct and towards a more broad-based approach. Multinationals have to consider a completely new array of factors which range across the home country, the foreign country and even the distance in between. In today’s world of interconnectedness, FDI has been facilitated through the use of modern technology and the transferability of technology across boundaries. The global trading environment allows for investment flows across countries. While countries may be wary of imports, FDI is always welcomed as it leads to job creation within an economy and a boost to GDP. The FDI decision would itself be one needing intense planning, strategizing and thorough analysis. The factors which determine investment decisions by large firms vary across countries and it is up to the firms to determine whether the costs incurred by the variances among these parameters would be worth the price of admission. The cost benefit analysis has to be thorough given that the company is exploring new markets which could be considered a whole new world within the context of the company. Stepping out of the bounds of its own industrial and economical context and towards a global...
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...trends discussed 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...
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...Introduction 3 1.1. FDIs and Entry in China 3 1.2. Research Contribution 3 1.3. Research Method 3 2. Literature review 4 2.1. FDIs 4 2.2. Macro Environment 5 2.3. Timing of entry 6 3. Discussion 6 3.1. Introduction of Cases 6 3.2. Motives of Entering China 7 3.3. Joint Venture in China 8 4. Conclusion 9 4.1. Implications 9 4.2. Limitations 9 4.3. Research Outlook 9 5. References 9 1. Introduction 2.1. FDIs and Entry in China How should MNEs enter China? MNEs are usually presented with multiple entry choices, namely export, licensing agreements, franchising and FDIs. While each mode presents advantages and disadvantages, FDIs cause MNEs to make direct investments and be directly present in foreign countries, as opposed to indirect investments and presence through other modes of entry, hence the name “foreign direct investment”. But with direct presence in a foreign country MNEs are subject to both formal and informal institutions, and those institutions will directly influence a company’s decisions and it’s mode of entry (Ingram, Silverman 2002). MNEs have to decide whether to go as a first or late mover and due to what kind of motivation they decide to do FDIs in China. In countries with a weak institutional framework, Meyer et al. (2009) find that MNEs should choose the Joint Venture FDI mode of entry, or if local resources are not needed, Greenfield. While China holds many restrictions on FDIs, several industries enjoy...
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...ABC Limited should choose a suitable market entry strategy before they enter India. There are five models of entry, including exporting, licensing, franchising, specialized modes and foreign Direct Investment (Griffin and Pustay, 2013). Appendix table 1 shows advantages and disadvantages of different modes of entry. Foreign Direct Investment is one of the modes of entry and it is suitable entry model for ABC Limited. Because according to compare with them, Foreign Direct Investment maintains more control and high profit potential in Business than others (details in table 1). Foreign Direct Investment refers to an investment made by business enterprise in one country into a company in another country (Oxford Reference, 2009). It...
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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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...STRATEGIES FOR EMERGING MARKETS The class discussion started with the problems faced by the developing countries in the emerging markets and then the strategies to manage guarded globalization were discussed. In this present economic scenario, it is not easy for the companies of developing markets to get an easy hold in emerging markets. They have to face several hurdles and the major is the government and policymakers regulations. Pfizer’s patent problem in India and lowering of drug prices by the Chinese government to make more drugs local signify this. Increased population, rising salaries, modern transportation and communication technologies drove many developing countries towards emerging markets. But after global recession, emerging markets have resented towards guarded globalization. Governments are becoming wary of opening more industries to multinational companies and are concentrating more on protecting local interests. They chose the countries with which they want to do the business, pick the sectors in which they will allow the capital investment and promote state owned companies which they want to. They are being selective. A country’s political scenario has become crucial in deciding with which country they want to trade as financial services, telecommunication, information technology, food sectors have been politicized. At the same time, welcoming foreign investment in few sectors triggers nation-wide protests. In India, allowing FDI in retail was a big issue...
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...interesting ones for us. The first presentation we listened to was about economic freedom's effects in host countries and FDI. The objective was investigating the influence of economic freedom in foreign direct investment. In this poster there were 6 different variables and hypothesis and they're tested with statistical analysis. After these analysis we saw that hypothesis one, which is "Trade and investment barriers will be inversely related to the inflow of FDI." was the only one that rejected while other ones were supported. With these informations the conclusion of the research was that MNE's prefer the countries that have least government intervention which is equal to political freedom. The next presentation was about growth and if it attract FDI. The main purpose of the research was to investigate if success in economic growth attract FDI. To investigate this the researchers used theories about how economic growth either attract, deterrent or is neutral towards FDI. To investigate this they used a quantitative approach that is based on 946 observations from 140 empirical studies. The results gave that that growth is a significant determinant of FDI but decides of the partial correlation is rather small. They also found that the economic growth is more important for developing countries. The conclusion gave that economic growth is an important determinant for FDI. The third presentation was about influence of international trade agreements on...
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...international markets – products are sold across borders; the resources used in production can come from anywhere in the world; communication is instantaneous; and financial markets are inextricably linked, as the events of 2008 demonstrate. Individual businesses operate across borders in a variety of ways – they can do this directly, through the formation of strategic alliances or through merger and takeover. It is clear then that businesses need to be aware of the global context of their markets. Having read this chapter you should be able to: G G G G Learning outcomes understand the difference between globalisation and internationalisation outline the main elements of globalisation illustrate the role of the multinational enterprise introduce the implications of globalisation for business Key terms Capital market flows Consortium Cross-subsidisation Customs union Emerging economies Foreign direct investment (FDI) Franchising Free trade area Globalisation Hyperglobalisation Internationalisation International trade Joint venture Licensing Multinational enterprise (MNE) Regionalism Regional trade agreements (RTAs) Strategic alliance Transfer pricing Transformationalism Globalisation versus internationalisation 39 Introduction Businesses operate in a global context: even if they do not trade directly with other countries, they might be affected by a domestic shortage of skilled labour or may be subject to developments on the global financial markets. There...
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...If the conditions in sub-Saharan Africa are arguably worse, why are South African firms investing there? Foreign direct investment (FDI) flowing into sub-Saharan Africa from firms operating in other developing countries have sharply increased in recent years. These new flows have significantly changed the composition of FDI in the region compared to a years ago when FDI was mostly from multinationals hailing from the former colonial powers, France and the United Kingdom. Figures 3.3 and 3.4 demonstrate respectively the major investors for overall FDI and manufacturing FDI in the five sample countries. As the composition of investors has changed and the variety of investor groups in terms of size of firms, sectors, capital intensity, and business models has increased – so has the diversity of the motives and drivers of investment of the different groups. At the end of 2002 [based on total FDI stock] South Africa was the third largest foreign investor in Africa after the United Kingdom ($20 billion) and the USA ($19 billion). Furthermore, in 2005 South Africa was the largest source of new FDI into Africa. South African investors have a very large presence in the extractive industries on the continent, however, a fair amount of this investment dates back more than two decades. Since the advent of democracy in South Africa, South African firms have tended to spearhead moves into the establishment of capital-intensive business services such as telecommunications and banking, and...
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...management in Moscow and constituted the primary qualitative data. Research questions are posed for further examination of conditions in Russia and the effects of such conditions on the entry mode decisions of MMEs. The study finds economic conditions to be the only important determinant of entry modes for large multinational manufacturing companies investing in Russia with other country factors playing no role in their choices. INTRODUCTION With the expansion of global business activity, the ability to analyze the key characteristics of potential host countries becomes increasingly important. The key to successful international market entry is an understanding of differences in conditions that exist when comparing one market to another. While developed countries still remain the major destination for foreign direct investment (FDI), emerging economies have become increasingly important locations for MMEs’ production. Changes...
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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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...Base of the pyramid (BOP) Economies where people make less than $2,000 per capita per year. BRICA Brazil, Russia, India, and China. Emerging economies term that has gradually replaced the term "developing countries" since the 1990s. Emerging markets A term that is often used interchangeably with "emerging economies." Expatriate manager A manager who works abroad, or "expat" for short. Foreign direct investment (FDI) Investment in, controlling, and managing value-added activities in other countries. Global Business Business around the globe. Globalization The close integration of countries and peoples of the world. Gross domestic product (GDP) The sum of value added by resident firms, households, and governments operating in an economy. Gross national income (GNI) GDP plus income from non-resident sources abroad. The term used by the World Bank and other international organizations to supersede the term GNP. Gross national product (GNP) GDP plus income from non-resident sources abroad Group of 20 (G-20) The group of 19 major countries plus the European Union (EU) whose leaders meet on a biannual basis to solve global economic problems. International business (IB) (1) A business (or firm) that engages in international (crossborder) economic activities and/or (2) the action of doing business abroad. International...
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...international subcontracting process, as well as with some connected issues such as fragmentation of the production process, international production relocation, de-industrialisation in developed countries and industrialisation in newly industrialising, now coined emerging countries. In the second place, it aims at finding how global strategy differentiates from traditional MNC strategies and how much outsourcing fits with such global strategy. The last section of the article briefly screens the economic impact of outsourcing on the world trade structure – with the two enlightening snapshots of global trade in sports goods and European Union 15’s outward processing trade with Central Eastern European countries (CEECs)-, as well as on home developed and host emerging countries. The article conclusion is that outsourcing has grown faster than world trade in the past two decades and has skyrocketed during the very last years because it is a cornerstone of a new global strategy adopted by multinational companies since the late 1980s. KEY WORDS: Offshoring, outsourcing, new strategy of multinational companies. JEL CLASIFICATION: F14, J23, L6. Conference on International Outsourcing and the European Union: Impact on the domestic market, scenarios and strategies, Madrid, 28-29 October 2008. * Papeles de Europa 18 (2009):...
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...Foreign Direct Assessment: Analyzing the Mobility of FDI Models in Emerging Markets Kyle Himmelwright & Damian Zaccaria, Villanova Business School In this article, the authors will explore foreign direct investment in emerging markets. Applying a two prong investment model, they’ll assess three emerging Southeast Asian marketplaces; Indonesia, Thailand, and Malaysia. Additionally, they’ll explore the impact a variety of explicit and implicit factors have on the outcome. The research will indicate which of the three markets has the most potential for investment. Keywords: Foreign Direct Investment (FDI), emerging markets, investment, economic factors, growth, defense Foreign direct investment (FDI) plays a prominent and growing role in the global marketplace. FDI is defined as an investment made by a company or entity based in another country. The investment provides the firm with an opportunity to access new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing (Goingglobal.com 2015). Accurately assessing marketplace factors is essential when evaluating whether to invest in a foreign market, especially when it comes to making decisions requiring foresight and conviction. “The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.” Rupert Murdoch’s quote concisely illustrates the current state of the global marketplace; it simply isn't as big as...
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...Introduction There is a rising trend outward FDI (OFDI) from emerging market, mostly dominated by countries such as China and India (Gao, Liu, & Zhou, 2013). China’s outward FDI increased from $27 billion in the year 2000 to $230 billion by the end of the year 2009. Since the late 1990s, India’s OFDI has increased to $77 billion by the end of the year 2009 (Buckley, Forsans, & Munjal, 2012). Porter’s national competitive advantage emphasizes productivity growth as the focus of success in international trade. John Dunning went on to explain in detail the drivers of OFDI using his eclectic theory of ownership, location, and internalization advantage including four major motives: market-seeking, resource-seeking, efficiency-seeking and strategic asset seeking (Gao, Liu, & Zhou, 2013). Market seeking Firms aim to capitalise on ownership of well-established brands, marketing skills and overseas distribution networks by seeking large foreign markets (Buckley, Forsans, & Munjal, 2012). Since China’s WTO accession, because of over-capacity in some sectors, Chinese manufacturers have started to invest in developed countries as well as in developing countries. Shanghai Automobile Industry Corp. bought over 50 percent stake in Korean Ssangyong Motor Co. in 2004, and TCL acquired the colour TV manufacturing from French Thomson in 2004 in order to expand their markets and achieve economies of scale. CDC Software, a wholly owned subsidiary of Chinese CDC Corporation, acquired...
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