Multinational business Week 4 tutorial Economic impact of FDI.

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Presentation transcript:

Multinational business Week 4 tutorial Economic impact of FDI

Agenda  Revision  Applying the concept

Revision question  What is foreign direct investment (FDI)? Why has FDI increased significantly over the last two decades?

Revision question  What are the various types of foreign direct investment (FDI)? Distinguish between acquisition and greenfield investment.

Revision question  What are the major motives for undertaking foreign direct investment (FDI)?

Revision question  Governments frequently provide incentives to encourage foreign firms to invest within their national borders. Why would a government encourage inward FDI?

Revision question  What factors should management consider when deciding where in the world to establish a production or assembly facility? A sales subsidiary? A regional head quarters?

Revision question  Discuss the economic effects, negative and positive, of foreign direct investment (FDI) in the host country.

Revision question  Discuss the role of national liberalisation policies in attracting foreign direct investment (FDI).

Applying the concept  Job at MobileTV: small manufacturer of TV sets installed in cars and boats  Does all its manufacturing in Britain and Canada, lacks cost advantages and its prices are relatively high  Business declining: part of problem is the growing volume of cheap imports from emerging markets  You decided to study the problem and believed that the Mobile TV should move much of its manufacturing to Mexico. But top management knows nothing about FDI.  Prepare a report to management detailing the advantages of establishing a production base in Mexico. Why should the firm be interested in foreign manufacturing? Finally make a recommendation as to which type of FDI MobileTV should use in Mexico.