Foreign Direct Investments (FDI) FDI FDI = Direct investment in facilities to produce and/or sell goods & services

Why FDI? Internalisation Theory 1.Transacting within the confines of a corporation rather than open markets; 2.Shifting assets across borders to create competitive advantage for the corporation Vernon’s Product Lifecycle Theory The location of production depends on the stage of the cycle.

Why FDI? Knickerbocker’s Theory of FDI FDI is a reflection of strategic rivalry between firms in the global marketplace Example as applied in Porter’s diamond model Dunning eclectic theory Ownership Advantage Asset Based Adv Transaction Based Adv Location Advantage Pull Factors Push Factors Internationalisation

FDI Approaches Same industry as HQ  Horizontal FDI Inputs Operations Outputs Inputs Operations Outputs Backward vertical FDI : enhances inputs into firm’s domestic operations Forward vertical FDI : Uses outputs from firm’s domestic operations

FDI Modes Mergers & Acquisitions Greenfield (New Facility) Investment FDI Modes: Other Modes: Export Licensing Partnerships Franchising Entering Countries Sustaining operations in Countries Expanding Countries

Which FDI Modes? Mergers & Acquisitions Greenfield (New Facility) Investment FDI Modes: Other Modes: Export Licensing Partnerships, JV, Strategic Alliances Franchising etc International Strategy Requirements Exchange Value  Cost/Return & Risk/Return Appropriateness Use Value  Competitive Advantage Creation Competition Rivalry Conditions

How do Countries Influence FDI developments? Provides Incentives: Tax Rebates Subsidies Low Interest rates Govt Policies * Economic zones eg free trade Create barriers: High taxes Trade quotas Govt Policies * eg o Ownership controls o Performance requirements * NB: Government policies  Political ideology: The radical view – anti MNC The free market view The pragmatic nationalism view

China’s Incoming & Outgoing FDI Source: Source: Dec 2011 Youtube (2.07m) Multinational Corporates Take A Second Look at China

MNC China’s FDI in Africa (7.37m) -

Assignment 1 As exemplified by the European Union (EU), regional economic integration is replete with political, economic & cultural danger. Discuss through the use of valid, real-life examples. EU is s an economic and political union of 28 member states. Institutional members include the: European Commission, Council of the European Union, European Council, Court of Justice of the European Union European Central Bank Court of Auditors, European Parliament.

Assignment 1 As exemplified by the European Union (EU), regional economic integration is replete with political, economic & cultural danger. Discuss through the use of valid, real-life examples. Economic  Political & social dev 1.Foster economic cooperation 2.Policies development Development aid Environment sustainability One internal European market Human rights & equality Transparent & democratic institutions Source:

Assignment 1 As exemplified by the European Union (EU), regional economic integration is replete with political, economic & cultural danger. Discuss through the use of valid, real-life examples. 1.How does it work?How does it work? 2.What areas of involvement?What areas of involvement? Select all of one topics and evaluate EU’s performance to date  insights of the PEC risks & issues management drivers? 3.How effective is EU’s Governance Capacity?How effective is EU’s Governance Capacity How effective has been its decision making? How effective is its members’ compliance to the Rule of Law via its treaties, legislative regulations and policies implementation? 4.From a citizen’s perspective, what are the + impacts?From a citizen’s perspective, what are the + impacts 5.What unit’s topics/ concepts may be applied? Use your research findings to identify the PEC risks & issues and supporting examples faced by: EU countries EU citizens Reorganise your research & analysis findings to design argumentative logic of your response to the Assignment