...Determining FDI Potential: Are National Policies and Incentives Sufficient? Foreign direct investment (FDI) is increasingly becoming a preferred form of capital flows to developing countries in recent years, as compared to other forms of capital flows. The reasons for this are not hard to seek. In the context of the gloom and despair of the heavy debt burden plaguing these countries, FDI promises to be the bright ray of hope for harnessing capital flows to the country’s economic development without the pangs of capital repayment with interest. In this context Feldstein and Razin (2000) and Sodka (forthcoming) note that the gains to host countries can take several other forms: • FDI allows transfer of capital and technology, which is not possible through financial investment in goods and services. • FDI also promotes competition in the domestic input market • Profits generated by FDI contribute to the corporate revenue in the host country • Operation of new ventures by FDI leads to employee learning in the host country who learn how to manage and operate the businesses. This contributes to human capital development of the host country. • Profits generated by FDI contribute to tax revenues in the host country FDI is different from other major types of external private capital flows in that it is motivated largely by the investor’s long-term prospects for making profits in production activities that they directly control. Foreign bank lending and...
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... The region accounted for the majority of acquisitions of U.S. companies so far this year. Emerging market to developed market transactions fell to their lowest level since 2005. Many high growth market companies are taking a ‘wait and see’ approach before investing in developed economies because many of them are experiencing varying degrees of economic uncertainty,” said Barnes. “The United States continues to remain the developed market of choice for (these) deals due to its many positive attributes including market size, plentiful resources, and skilled workforce,” he said. * Foreign direct investment (FDI) is the single largest source of capital inflows for developing countries. In industrialized countries, the size of FDI inflows ranges from zero to almost half the size of gross fixed capital formation. Surprisingly, the impact of exchange rate variability on FDI rarely enters debates over exchange rate management or monetary policy. One reason for this omission could be the lack of conclusive evidence regarding the impact of exchange rate variability on the investment behavior of multinational firms. A long list of studies provide patches of evidence that multinational firms are likely to consider the level and volatility of exchange rates before investing in overseas branches, but yield conflicting theoretical predictions and empirical results. In the study the results shows that The results show that while interest rate volatility both at home and abroad are positively...
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...Globalization and Economic Interdependence: 1. What does globalization mean? Globalization is the acceleration and extension of the interdependence of economic and business activities across national boundaries, in other words a development on one side of the globe will have consequences on another. As a consumer, it means more choices, generally lower prices, and increasingly blurred national identity for products and services. How do the statistics of world trade and direct investment show the trend of globalization? Globalization allows for countries to expand outside of their own country for resources. With this being done, more and more countries are able to interact in world trade and direct investment, which correlate to the trend of globalization increasing. 2. What are the main drivers of globalization? Accelerated technological change, liberation of trade and investment and investment in many countries, and entrepreneurship and competition among firms (location economies, economies of scale, and economies of scope). How do location economies, economies of scale and economies of scope motivate firms to expand their operations overseas? Location economies refer to the cost efficiencies that a firm can achieve by locating some of its activities overseas. Such cost efficiencies can result from lower labor or raw material costs, superior labor skills, or elimination of transport or tariff costs. Economies of scale refer to the reduction of average production costs due...
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...Introduction Businesses are increasingly looking to expand into farther flung overseas markets like India, expecting to achieve rates of growth which are rarely achieved in saturated and depressed Western markets. However, it is important that businesses consider carefully the different types of expansion models available to them and are prepared to take a flexible approach to their international expansion strategy, taking account of local legal restrictions and fast changing consumer habits and expectations. As this briefing note explains, the choice of a corporate expansion model or an arm's length expansion model such as franchising can have a direct impact on a business's ability to engage in e-commerce within the local market. India is a case in point, where, despite the recent growth in online sales, the Indian Government has reaffirmed its policy on e-commerce in the retail sector, which restricts foreign brands from participating in local e-commerce if they hold shares in the Indian operating company. The Need for a Consistent Approach to Multi-Channel Retailing Historically, the majority of brands expanding internationally have been preoccupied with the "bricks and mortar" channel of distribution, based upon an assumption that the target local market is less technologically mature. This may have been a fair assumption as recently as three to five years ago, and it is still holds true in an increasingly limited number of countries. However, improvements in access...
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...The Fundamentals of International Business | | Assignment question: There are several theories that seek to explain why FDI takes place. These theories try to explain why firms go to the trouble of acquiring or establishing operations abroad. Such theory includes Dunning’s Eclectic Paradigm, Vernon’s Life Cycle and Knickerbocker’s Model to name a few. Your academic paper should illustrate the use of such theories to evaluate the rationale for foreign direct investment for a leading player in your chosen industry. | | | | Student: Matteo Noris ID: 10224550 Course: (BA) International Business Assignment Due Date: 25th January 2012 Unit Tutor: Agnieszka Chidlow Matteo Noris ID: 10224550 Fundamentals of the International Business Submission Date: Wednesday 25th January 2012 Weighting: 30% of the total mark for the Unit * Chosen Assignment Question : 2 Foreign Direct Investment There are several theories that seek to explain why FDI takes place. These theories try to explain why firms go to the trouble of acquiring or establishing operations abroad. Such theories include Dunning’s Eclectic Paradigm, Vernon’s Life Cycle and Knickerbocker’s Model to name a few. Your academic paper should illustrate the use of such theories to evaluate the rationale for foreign direct investment for a leading player in your chosen industry. Contents Page Contents Page 2 Abstract 3 Introduction 3 Main Body 4 Conclusions 8 References...
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...tool 18. product life cycle 19. media plan 20. test marketing 21. export pricing 22. role of small scale industries in developing nation 23. role of SIDBI 24. role of EXLM bank 25. study of financial institute 26. mutual fund 27. Privatization insurance, road, ports etc. 28. waste management 29. trade union movement in India 30. labour welfare scheme 31. working capital management 32. cash management / fund management 33. importance of budget 34. invisible exports 35. tourism industries 36. brand equity 37. bench marking 38. co-operative movement in Agro-product 39. marketing Agro-product 40. DOT COM company in future 41. IT Parks 42. South East Asian origin 43. FDI 44. Regional Grouping / Trade Block 45. SEZ 46. packing need 47. social forestory 48. comparative study of industries (either financial angle or marketing angle or techno angle) 49. marketing of SSI produt 50. warehousing 51. transport 52. IATA – role function 53. communication and custom service 54. universal bank 55. credit cards 56. health economics 57. Body language 58. role of financial institutions in industrial development 59. NBFC's 60. GDR's / ADR's 61. debt markets 62. securitization 63. commercial paper 64. forex and treasury 65. performance appraisals 66. private sector banks 67. comparative study of 2 financial institutions 68....
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...Introduction 3 1.1. FDIs and Entry in China 3 1.2. Research Contribution 3 1.3. Research Method 3 2. Literature review 4 2.1. FDIs 4 2.2. Macro Environment 5 2.3. Timing of entry 6 3. Discussion 6 3.1. Introduction of Cases 6 3.2. Motives of Entering China 7 3.3. Joint Venture in China 8 4. Conclusion 9 4.1. Implications 9 4.2. Limitations 9 4.3. Research Outlook 9 5. References 9 1. Introduction 2.1. FDIs and Entry in China How should MNEs enter China? MNEs are usually presented with multiple entry choices, namely export, licensing agreements, franchising and FDIs. While each mode presents advantages and disadvantages, FDIs cause MNEs to make direct investments and be directly present in foreign countries, as opposed to indirect investments and presence through other modes of entry, hence the name “foreign direct investment”. But with direct presence in a foreign country MNEs are subject to both formal and informal institutions, and those institutions will directly influence a company’s decisions and it’s mode of entry (Ingram, Silverman 2002). MNEs have to decide whether to go as a first or late mover and due to what kind of motivation they decide to do FDIs in China. In countries with a weak institutional framework, Meyer et al. (2009) find that MNEs should choose the Joint Venture FDI mode of entry, or if local resources are not needed, Greenfield. While China holds many restrictions on FDIs, several industries enjoy...
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...Foreign Exchange Reserves • ‘Only' the foreign currency deposits and bonds held by central banks and monetary authorities. Literal Definition Generic Definition • Total of a country's gold holdings and convertible foreign currencies held in its banks, plus special drawing rights (SDR) and exchange reserve balances with the International Monetary Fund (IMF). Foreign Exchange Reserves Sovereign Bonds Foreign Currency Deposits Gold Deposits Special Drawing Rights IMF Drawing Rights Foreign Exchange Reserves Foreign Exchange Reserves Outflows Repatriation of investments and profits Payment of Loans Inflows Bilateral Aids Loans Payment of Interest Investments Payment for Imports Payment from Exports Foreign Exchange Reserves- Change in Treatment Formerly consisted of only gold and Silver After Breton Woods Agreement , US dollar also became part of foreign currency 1944-1968 USD was convertible to gold by Federal Reserve System 1968-1973 Only Central Bank could convert reserves to gold Post 1973 Reserve can’t be converted to gold Impact of Foreign Exchange By means of foreign exchange reserve country can control the Exchange rate To make domestic currency more stable • Country can purchase domestic bonds using foreign reserves To reduce the value of domestic currency • Can purchase foreign notes by that foreign reserves FOREIGN EXCHANGE RESERVE MANAGEMENT Foreign Exchange Reserve Management •...
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...Factors Affecting Global Economy of Harley Davidson Abstract This study will analyze globalization strategy of Harley Davidson. Harley Davidson is an American heavyweight motorcycle manufacturer. It has already established a brand name in Europe but now wants to expand dealership network across Asia. Harley Davidson is known for manufacturing heavyweight motorcycles but now they want to manufacture all types of motorcycles. Later part of the study will explain about internet business model. This report will discuss application of internet in terms of digital marketing. Harley can use different components of digital marketing to expand their business. Finally this study will focus on competitive advantage that Harley can get by using digital marketing medium. Table of Contents Motivations/Risks Associated with Global Expansion Strategy 5 Motivation 5 Risk 6 Competitive Advantage in Global Market 8 Entry Strategies for Global Expansion 8 Internet Approach Strategy 10 How the Internet Adds Value 10 Internet Business Models 11 Brokerage Model 11 Advertising Model 11 Infomediary Model 11 Merchant Model 11 Community Model 11 Subscription Model 12 Competitive Strategies 12 Leverage e-business Capabilities 13 References 14 Harley Davidson Harley Davidson is an iconic motorcycle brand headquartered in Milwaukee,USA. It was founded in 1903 by William S. Harley and Arthur Davidson. Harley Davidson was one of the major two...
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...cycle 16. media plan 17. test marketing 18. export pricing 19. role of small scale industries in developing nation 20. role of SIDBI 21. role of EXLM bank 22. study of financial institute 23. mutual fund 24. Privatization insurance, road, ports etc. 25. waste management 26. trade union movement in India 27. labour welfare scheme 28. working capital management 29. cash management / fund management 30. importance of budget 31. invisible exports 32. tourism industries 33. brand equity 34. bench marking 35. co-operative movement in Agro-product 36. marketing Agro-product 37. DOT COM company in future 38. IT Parks 39. South East Asian origin 40. FDI 41. Regional Grouping / Trade Block 42. SEZ 43. packing need 44. social forestory 45. comparative study of industries (either financial angle or marketing angle or techno angle) 46. marketing of SSI produt 47. warehousing 48. transport 49. communication and custom service 50. universal bank 51. credit cards 52. health economics 53. Body language 54. role of financial institutions in industrial development 55. NBFC's 56. GDR's / ADR's 57. debt markets 58. securitization 59. commercial paper 60. forex and treasury 61. performance appraisals 62. private sector banks 63. comparative study of 2 financial institutions 64. need and importance of...
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...trade to obtain raw materials and goods that are either unavailable in their own country or too expensive to produce. Trade increases a country’s total output, and offers greater variety and lower prices to consumers. Nations restrict international trade to help their own economies and to protect their domestic companies from competition with foreign rivals. They do this by imposing taxes, surcharges, tariffs, quotas, embargoes, and sanctions on the goods of foreign companies. Groups of nations form trading blocs to protect their own trade interests (EU, ASEAN, NAFTA, and Mercosur). International business activities can include importing, exporting, licensing, franchising, strategic alliances, joint ventures, and foreign direct investment (FDI). Outline I. Fundamentals of International Trade Companies in different countries compete for customers with companies in other countries in our global marketplace. II. Why Nations Trade A. Economies of scale – By producing and selling more units, companies can purchase raw materials at reduced prices by buying in large quantities and distributing them more efficiently. B. Absolute advantage – occurs when a country can produce goods more efficiently than any other country. C. Comparative advantage theory – suggests...
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...PARADIGM INTERNATIONAL OF THEECLECTIC PRODUCTION: A RESTATEMENT SOMEPOSSIBLE AND EXTENSIONS JohnH. Dunning* Universityof Reading and Rutgers University Abstract.Thisarticlereviewssome of the criticisms directed towards of the eclecticparadigm international over production the pastdecade, and restatesits maintenets.The secondpartof the articleconsiders a numberof possibleextensionsof the paradigm concludesby and that it remains robustgeneralframework explaining "a for asserting not of andanalysing onlythe economic rationale economic production and to but manyorganisational impact issuesin relation MNEactivity as well." INTRODUCTION The concept of the eclectic paradigmof international production'was first put forwardby the presentauthorin 1976 at a presentation a Nobel Symposium to in Stockholmon TheInternational Allocationof EconomicActivity.2 intention The was to offera holisticframework which it was possibleto identifyand evaluate by of the significance the factorsinfluencing both the initialact of foreignproduction and by enterprises the growthof such production. choice of the word eclectic The was an ambitiousyet deliberate one. It was meant to convey the idea that a full of of activities enterprises explanation the transnational needsto drawupon several strandsof economic theory;and that foreigndirect investmentis just one of a numberof possiblechannelsof international economicinvolvement, each of which is determined...
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...The entry of foreign banks into emerging markets: an application of the eclectic theory Janek Uiboupin and Mart Sõrg University of Tartu Abstract In the current paper we discuss the applicability of the eclectic theory in explaining the entry of foreign banks into the Central and Eastern European (CEE) markets. We modify the Dunning’s eclectic model by adding the special case of financial liberalization and timing of foreign entry for emerging markets. In the empirical analysis we use a survey based study to analyze the entry process of foreign banks. Bank level data from Bankscope database is also used to analyze the financial advantages of foreign banks. The empirical analysis showed that the eclectic paradigm with modifications to ownership and location-specific advantages is applicable to explain the entry of foreign banks into transition markets. The analysis also indicated that the entry of foreign banks is more intensive during banking crises in the CEE countries. 1. Introduction The internationalization process of firms has been intensively studied since the 1960s. Due to the increase in international capital flows, foreign direct investments and international trade at that time, active development of international banking also began. In the transition countries, international banks have operated only since the beginning of the 1990s, after a significant liberalization of the financial market and elimination of entry barriers. At present foreign banks1 already have more...
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...Track 5: FDI Location, Clusters and Spillovers Workshop Paper Foreign Investment and the Sustainability of Malaysian Bumiputera (Indigenous) Technology-Based Firms Umar Haiyat Abdul Kohar School of Management, RMIT University, Melbourne, Australia Email: umarhaiyat.abdulkohar@rmit.edu.au Associate Professor Adela McMurray School of Management, RMIT University, Melbourne, Australia Email: adela.mcmurray@rmit.edu.au Dr. Konrad Peszynski School of Business Information Technology, RMIT University, Melbourne, Australia Email: konrad.peszynski@rmit.edu.au 1 Foreign Investment and the Sustainability of Malaysian Bumiputera Technology-Based Firms ABSTRACT In the new global economy, the importance of inward foreign investment towards a country’s economic growth has become a central issue, especially amongst developing countries. Nevertheless, there is a paucity of literature addressing the implications of foreign investment towards the sustainability of business amongst Malaysian Bumiputera (Indigenous) new technology-based firms (NTBFs). Utilizing Weick’s (1989) conceptual theory building approach, this study provides a foundation for conceptualizing the implications of foreign investment in Malaysian Bumiputera new technology-based firms. Through systematic documentary analysis of the development of foreign investment activities in Malaysia prior to independence (1957) until 2009, our consolidated findings yield a conceptual model showing the implications...
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...in finance, insurance and real estate services for all of the countries. Secondly, by far the majority of investment projects are carried out in Europe and North America which are almost equal in terms of frequency of investments. Thirdly, Icelandic firms use horizontal integration strategies and they diversify risk. Irish firms use lateral integration strategies and diversify risk. Finally, MNCs from Israel tend to diversify risk and use horizontal integration strategies. Keywords: OFDI, MNC, Horizontal integration, Vertical integration, Lateral integration, SMOPEC, Iceland, Ireland, Israel, Introduction “Foreign Direct Investment (FDI) is one of the main engines of growth for national economies. In particular, many small and medium sized countries have grown through promoting and attracting FDI. At the same time FDI enables a country to better integrate in an intensive globalized economic environment and face successfully the...
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