direct foreign investment
DESCRIPTION
Direct Foreign Investment. Motives for Direct Foreign Investment. 1. Revenue-Related Motives a. Attract New Sources of Demand b. Enter Profitable Markets c. Exploit Monopolistic Advantages d. React to Trade Restrictions e. Diversify Internationally. - PowerPoint PPT PresentationTRANSCRIPT
Direct Foreign Investment
Motives for Direct Foreign Investment
1. Revenue-Related Motivesa. Attract New Sources of
Demandb. Enter Profitable Marketsc. Exploit Monopolistic
Advantagesd. React to Trade Restrictionse. Diversify Internationally
Motives for Direct Foreign Investment
2. Cost-Related Motives: Reduce Costsa. Fully Benefit From Economies of Scaleb. Use Foreign Factors of Productionc. Use Foreign Raw Materialsd. Use Foreign Technologye. React to Exchange Rate Movements
Motives for Direct Foreign Investment
3. Comparing Benefits of DFI among Countries
Summary of Motives for Direct Foreign Investment
Motives for Direct Foreign Investment
4. Comparing Benefits of DFI Over Time Countries
the choice of target countries for DFI has changed over time
Benefits of International Diversification
1. Diversification Analysis of International Portfolios a. Comparing Portfolios along the Frontier
b. Comparing Frontiers Among MNCs
2. Diversification Among Countries
13.3
Risk-Return Analysis of International Projects
13.4
Risk-Return Advantage of a Diversified MNC
Decisions Subsequent to DFI
1. Need for frequent review2. Decision on use of Subsidiary profits by the subsidiary or headquarters
3. Importance of economic conditions in the subsidiary’s country
Host Government Views of DFI1. Incentives to Encourage DFI
Host Government Views of DFI2. Barriers to DFI
a. Protectiveb. “Red Tape” Barriersc. Industry Barriersd. Environmental Barrierse. Regulatory Barriersf. Ethical Differencesg. Political Instability
Host Government Views of DFI
3. Government-Imposed Conditions to Engage in DFIa. Environmental Regulationsb. Labor Policy Restrictionsc. Requirements to Use Local Partsd. Output and Local Competition Restrictions