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Questions and Answers
What is one primary driver of Foreign Direct Investment (FDI)?
What is one primary driver of Foreign Direct Investment (FDI)?
Which theory explains the reasons behind Foreign Direct Investment (FDI) related to product development stages?
Which theory explains the reasons behind Foreign Direct Investment (FDI) related to product development stages?
What is a significant consideration for a company when deciding between purchasing a company or building a new facility abroad?
What is a significant consideration for a company when deciding between purchasing a company or building a new facility abroad?
Governments may intervene in Foreign Direct Investment primarily to:
Governments may intervene in Foreign Direct Investment primarily to:
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Which of the following is NOT a management issue associated with Foreign Direct Investment?
Which of the following is NOT a management issue associated with Foreign Direct Investment?
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Study Notes
Foreign Direct Investment (FDI)
- FDI is the acquisition of physical assets or a substantial ownership stake in a foreign company to gain managerial control.
- It's a significant strategic decision, influenced by factors similar to trade decisions.
- Key drivers for FDI include globalization, mergers and acquisitions (M&A), and entrepreneurial ventures.
Theories of Foreign Direct Investment
- International Product Life Cycle Theory explains FDI decisions based on product stages.
- Market imperfections theory addresses situations where market mechanisms are inadequate.
- Market power theory suggests FDI as a way to expand market control.
Management Issues in FDI
- Maintaining control over foreign operations is crucial.
- Companies must decide whether to acquire existing entities ("purchase") or establish new ones ("build").
- FDI can lead to cost savings in production.
Government Intervention in FDI
- Governments often intervene in FDI decisions to manage the balance of payments, a component of the national accounting system.
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Description
Explore key concepts surrounding Foreign Direct Investment (FDI), including its theories, management challenges, and government interventions. This quiz covers essential drivers of FDI and its implications for market control and strategic decision-making.
