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Direct Foreign Investment

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Presentation on theme: "Direct Foreign Investment"— Presentation transcript:

1 Direct Foreign Investment

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

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