Homework Help
Homework Help
View Details
Assignment Help
Assignment Help
View Details
Online Tutoring
Online Tutoring
View Details
Home » Economics Homework Help » International Economics » Foreign Direct Investment
Foreign Direct Investment
In a global economy today, FDI is becoming more important than trade as a mode of international economic transaction. There are two categories of investment: direct investment and portfolio investment. Portfolio investment (i.e. devoid of control) has its own importance in a firm financial management and strategy. It is also an influencing factor affecting exchange rate.

IMF defined FDI as “investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor. The investor’s purpose being to have an effective voice in the management of the enterprise.” (IMF 1977). FDI refers to an investment in a foreign country that involves some degree of control and participation in management. The FDI corresponds with investment undertaken by a multinational enterprise in a foreign country. It should not be misconstrued with portfolio investment, which is solely motivated by profit through financial investment and does not seek management control.

Motivations/objectives for FDI

Business firms are motivated to indulge in FDI with the following objectives:

(i) Sales expansion

(ii) Resource acquisition

(iii) Diversification

(iv) Competitive risk minimization

FDI may be distinguished into:

1. Horizontal foreign investment (HFI): it refers to investment of a firm in a foreign country to produce the same product which produces in its home country.

2. Horizontal FDI: implies that FDI is undertaken in the same industry by the firm as it operates in at home. For example Electrolux Swedish firm the manufacturing of household appliances (such as washing machines refrigerators dishwashers and so on) invested in Asia and Eastern Europe for producing similar household appliances is the case of horizontal FDI.

3. HFI implies geographical spatial diversification of the firm product the

4. It represents intra enterprise product transfer in the process of integration in marketing.

5. Vertical foreign investment (VFI): it is meant of integration process in the production there may be backward vertical investment or forward vertical integration:

6. Backward vertical integration (BVI): implies that the firms directly invest in a foreign country to produce intermediate goods that are meant to be used as inputs in ties domestic production porches in extractive investment in petroleum or minerals usually there is BVI.

7. Forward vertical investment (FVI): implies that the firm invests in a foreign country in producing the final stage goods or assembly of the product to market it directly to the foreign buyers. FVI, thus, involves establishment of an assembly plant or sales branch for exports.

Services: - Foreign Direct Investment Homework | Foreign Direct Investment Homework Help | Foreign Direct Investment Homework Help Services | Live Foreign Direct Investment Homework Help | Foreign Direct Investment Homework Tutors | Online Foreign Direct Investment Homework Help | Foreign Direct Investment Tutors | Online Foreign Direct Investment Tutors | Foreign Direct Investment Homework Services | Foreign Direct Investment




Submit Your Query ???
Topics
Comparative Costs-Goods Comparative Costs-Countries Economic Integration Customs Union Equilibrium Customs Union Dynamic Effect Customs Union Pure Theory Euro-Dollar Market Euro-Dollar-Benefits, Effects Exchange Control Effect Exchange Control Exchange Control Methods Exchange Control Procedure Price Equalization Intra Industry Trade Factors Ohlin- Two Country Model Intra-Industry Trade Foreign Direct Investment Industry Argument Diversification Free Trade Infant Industry Argument Non-Economic Arguments Employment Promotion Argument Protection As Trade Policy Protection-Developing Countries Non-Tariff Barriers Origin Of Gatt Tariff Negotiations Effects Of Quotas Quotas Vs Tariffs Quotas- Nature, Purpose Import Quotas Types Heterogeneous Markets Internal, International Trade International Trade Theory International Transactions Trade- Pure, Monetary Theory Capital Movement Factors Capital Movements Role Capital Movements International Development Ass. International Finance Corp. The World Bank International Liquidity Adequacy IMF, International Liquidity International Liquidity Paper Gold Revaluation Of Gold SDRS Salient Features SDRS Operations Symmetry- Monetary System Triffins Radical Transformation IMF Achievements IMF Objectives, Functions IMF Structure Quotas IMF Nature Modern International Trade International Trade Development Product Cycle Hypothesis Constant Factor Supply Product Price Increase Effect Vent-for-Surplus Approach Foreign Trade Gains Trade Gains Nature Factors Determining Gain Size Sources Of Gain Factor Proportion Theory Factor Proportions Assumptions Trade Modern Theory Factors Proportions Shortcomings Absolute Cost Advantage Gold Standard Mechanism Underdevelop Comparative Costs Comparative Costs Doctrine Comparative Advantage Doctrine Gold Standard Advantages International Gold Standard Gold Standard Game Rules International Cartels Price Discrimination, Dumping