Exam 15: Foreign Direct Investment and Collaborative Ventures

A firm that pursues foreign direct investment to take advantage of government incentives is demonstrating a(n) ________ motive.

With increasing output, the per-unit cost of production increases.

New markets, new resources, and improved efficiency are the three main motives for firms to enter foreign markets through FDI.

A form of collaboration between two firms to form a new, jointly owned enterprise is defined as a joint venture.

Equity joint ventures have the simplest management structure.

Project-based, nonequity ventures are difficult to set up.

Home Depot made a greenfield investment when it entered the Mexican market by purchasing Home Mart, a domestic store chain.

A firm most likely enters the home market of a foreign competitor in order to ________.

Which of the following is a disadvantage of equity joint ventures?

The purchase of an existing company or facility is known as a(n) ________.

Avoiding trade barriers is classified as a market-seeking motive for FDI.

Explain why MNEs prefer acquisition instead of greenfield FDI. Why do foreign governments encourage greenfield FDI?

ABC Appliance (Scenario) The ABC Appliance Corporation is a Florida-based manufacturer of refrigerators, dishwashers, and other large household appliances. ABC takes advantage of NAFTA, and as a result, the firm has loyal customers across North America. ABC managers would like to expand into the Asian market, but are unsure of the best way to do so. ABC managers are meeting to discuss various possibilities for entering the Asian market. -Which of the following most likely supports a decision to enter the Asian market through a project-based, non-equity collaborative venture with an Asian appliance manufacturer to create an environmentally-friendly dishwasher?

Discuss three reasons for firms seeking new market opportunities. Illustrate each with an example of a firm that sought a new foreign market for that particular motive.

The complexity of the tax system is one of the factors to be considered in selecting FDI locations.

Which of the following is the most likely motive behind firms in the mining industry wanting to enter new foreign markets?

Describe the advantages of international collaborative ventures, and describe the potential risks of collaboration.

Discuss resource and asset-seeking motives for FDI. Why might a company favor acquisition over greenfield investment as an FDI approach?

The level of taxes in a country is a part of the ________ factor that is considered when selecting an FDI location.

Ciao Manufacturing Location (Scenario) An Italian car company, Ciao, has made plans to expand its operations by building a manufacturing facility in a foreign market. Ciao has been very successful selling its small, economical, and stylish cars in Italy and Spain, and firm managers believe that Ciao cars will be equally profitable in other markets. Ciao managers are trying to determine whether Canada or Russia would be the best location for a new automobile manufacturing facility. -Which of the following most likely supports the decision by Ciao managers to build a plant in Russia?