GMGT 1010 Lecture Notes - Lecture 26: Foreign Direct Investment

• School: University of Manitoba
• Department: General Management
• Course: GMGT 1010
• Professor: Brock V.Cordes

Document Summary

Foreign direct investment (fdi): the buying of permanent property and businesses in foreign nations. As the size of a foreign market expands, many firms increase fdi and establish a foreign subsidiary. Foreign subsidiary: a company owned in a foreign country by the parent company. Operates like a domestic firm, with production, distribution, promotion, pricing and other business functions under the control of the subsidiary s management. The subsidiary must observe the legal requirements of both the country where the parent firm is located (called the home country), and the foreign country where the subsidiary is located (called the host country) Advantages: company maintains complete control over any technology or expertise it may possess. Shortcoming: need to omit funds and technology within foreign boundaries. Should relationship with the host country falter, the firms assets could be expropriated (taken over by the foreign government)