Foreign Direct Investment (FDI).:

What is the difference between foreign direct investment inflow and outflow?

What factors influence FDI?

What are the potential advantages and costs of an FDI to a host country?

What are the potential advantages and costs of an FDI to the source country?

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Related questions

Problem 2: Exporting vs FDI: The Proximity Concentration Trade-Off.

Your firm wants to sell its product in each of several foreign countries, and you must decide whether to do so by exporting or by producing locally for that market through FDI. Suppose that in each country the demand for the product is the same, and is given by:

P = 15 - Q,

Where P is the price your firm charges in that country in dollars and Q is the quantity sold there. In addition, the marginal cost of production in any country is the same and is equal to $4 per unit. Wherever you choose to produce, your firm is a monopolist. To produce in a foreign country, your firm must incur a fixed cost equal to $21. On the other hand, to produce here and export to a country that is d miles away requires a transport cost of (d/1000) dollars per unit shipped.

a. If you export to a given country located at a distance d, what would the quantity sold, the price charged, and the profits be? (all as a function of distance)

b. If you sell in a given country by setting up a subsidiary, what would the quantity sold, the price charged, and the profits be?

c. For what values of d will your profit-maximizing decision be the export option? The FDI option?

blackimpala768

An advantage of choosing exporting as a mode of entry into foreign markets is that a firm:

A. can avoid the cost of establishing manufacturing operations in the host country.

B. shares the development costs and risks with its host partner.

C. can earn returns from process technology skills in countries where FDI is restricted.

D. has access to local partner's knowledge.

E. has the ability to engage in global strategic coordination.

viridianfox817

1. Use the globalEDGE website (http://globalEDGE.msu.edu) to complete the following exercise: a. Your company is considering opening a factory in Latin America and management is evaluating Brazil in particular. Find the Country Commercial Guide for Brazil as prepared by the U.S. Department of Commerce. This is a fair length document and you will need only scan it. Chapter 6 on Investment Climate will be most relevant. Prepare a short report that provides some useful information revealed to you about the foreign direct investment (FDI) climate or regulations in Brazil.