大三下 金融FDI

Franchising
• Companies with brand name products ( such as KFC and Burger King ) move offshore by granting foreigners the exclusive right to sell their products in a designated area. The parent company provides the technical expertise pertaining to the production process as well as marketing assistance for an initial fee and subsequent royalties that are related to turnover.
History of FDI
• 1953-1973: Fast growth in FDI mainly from USA to developing countries • 1973-1983: Slow growth of FDI & a movement away from developing countries • Mid-1980s on: Fast growth in FDI
M&A
• Advantages over green-field: 1. it is cheaper, particularly if the acquired project is a loss-making operation that can be bought cheaply 2. it allows the investor to bolster their competitive positions in the world market by acquiring special assets from other firms or by using their own assets on a larger scale.
Hale Waihona Puke Licensing1. Definition: It may be defined as the supply of
technology and know-how or may involve the use of a trademark or a patent for a fee.
2. Advantages:
Motivations for Foreign Direct Investment
• FDI can improve profitability and enhance shareholder wealth, either by boosting revenues or reducing costs. Revenue-Related Motives • Attract new sources of demand, especially when the potential for growth in the home country is limited. • Enter profitable markets. • Exploit monopolistic advantages, especially for firms that possess resources or skills not available to competing firms. • React to trade restrictions.
FDI
• Three forms: 1. green-field investments 2. cross-border mergers and acquisitions 3. joint ventures
Green-field investments
• Definition: occur when the investing firm establishes new production, distribution or other facilities in the host country. Advantages: job-creating potential and value-added output
– from Japan in late 1980s – from USA, Europe & S.E. Asia in 1990s
• 1990s: Increase in FDI flows into some developing countries, especially China, S. & E. Asia & Latin America • Deepening integration in EU has encouraged FDI into the EU • NAFTA has encouraged FDI into Mexico
– FDI implies the acquisition and exertion of a ‘significant control’ over a foreign firm. – For purposes of the BoP, countries record as FDI those enterprises in which the percentage of foreign ownership is between 10-25%.
Foreign Direct Investment
– ‘Significant Control’ – - Not clear - Different thresholds (percentage of foreign ownership between 10% – 25%) - US, Japan and Australia – 10% equity threshold - France, Germany and United Kingdom: higher threshold - Other countries, such as Belgium and the Netherlands: no specific number
Group 6: 孙志超 张攀 范秋燕 黎艳玲
What is FDI?
• An investment project is classified as direct investment if the investor acquires ‘significant control’ over a firm (Moosa, 2006).
Approaches to International Business
Commmon sequence that firms use to develop foreign markets for thier products:
1. Export of the goods produced in the source country. 2. Licensing a foreign company to use a process or product technology. 3. Foreign distribution of products through a subsidiary. 4. Foreign ( international ) production, which is the production of goods and services in a country that is controlled and managed by firms headquatered in other countries.
FDI & Portfolio Investment
• FDI – the movement of long term capital in which the owner of the asset has significant control over the investment (corporations setting up foreign branches or subsidiaries, or buying substantial shares in foreign firms) • Portfolio Investment – the purchases and sales of corporate stocks, corporate bonds, government bonds, and other bonds
Motivations for Foreign Direct Investment
Cost-Related Motives • Fully benefit from economies of scale. • Use cheaper foreign factors of production. • Use foreign raw materials, especially if the MNC plans to sell the finished product back to the consumers in that country. • Use foreign technology. • React to exchange rate movements, such as when the foreign currency appears to be undervalued. FDI can also help reduce the MNC’s exposure to exchange rate fluctuations. • Diversify sales/production internationally.
It offers one way to circumvent entry barries to FDI. Under these circumstances licensing offers an opportunity to generate revenue from foreign markets that are otherwise inaccessible. The licese owner may often not have the capital , experience or risk tolerance associated with FDI.