1. Direct Foreign Investment
DFI

2. DFI WHY? Strategic - Market Seekers - Raw Material Seekers
- Production Efficiency Seekers
- Knowledge Seekers
- Political Safety Seekers

3. DFI Economic Sustainable competitive advantage in the home
market that is transferable
- Economies of Scale and Scope
- Managerial and Marketing Expertise
- Advanced Technology
- Financial Strength
- Differentiated Products
- Competitive Home Market

4. DFI Behavioural Reasons - Outside Request - Fear of Losing Market
- ‘Bandwagon’
- Competition in Home Market

5. DFI Ways To Go Exporting - low political risk - low agency costs
- low investment
But
- low ability to ‘internalise’
- danger of loss of market to imitators

6. Licensing and Management Contracts
- low investment
- lower risk
But
- loss of quality control
- create competitor
- agency costs

7. DFI Joint Venture - local understanding
- senior and middle management in place
- access to local markets (financial)
But
- which partner?
- differences of view re dividends etc
- ability to rationalise production on a world basis

8. DFI The OLI Paradigm Owner specific advantages, not easily copied
Location specific advantages, labour, raw
materials etc
Internalisation, possession of proprietary
information

9. DFI Strategic Alliances - sharing costs - lower risk But
- risk of sharing technology
- issue of control

10. DFI Acquisition versus Greenfield - quicker - gaining technology
- under valuation of target firm
But
- pay too much
- implementation
- government intervention