Exam 15: Foreign Direct Investment and Collaborative Ventures

An arrangement whereby the firm owns, or seeks to own, multiple stages of a value chain for producing, selling, and delivering a product or service is termed as ________.

Which of the following is a trend seen in the modern international economy?

Stability of currency must be considered before selecting the location for FDI.

Explain why FDI is a particularly risky foreign entry strategy. How is FDI different from international portfolio investment?

International Business Class (Scenario) Students in Professor Manning's international business class have been assigned the task of explaining the different types of FDI. Professor Manning formed groups among students. The groups are to research their assigned topic and present their information to the class using examples of real-world firms for illustration. Jessica Hanson is the leader of Group A; Manu Patel is the leader of Group B; and Mario Witherspoon is the leader of Group C. -During her presentation, Jessica describes how two automakers joined forces and formed a separate firm by pooling their assets. Which of the following topics was most likely assigned to Group A?

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 by building a factory near Tokyo?

Foreign direct investment is the least risky entry strategy.

Host-country governments often pressure MNEs to undertake acquisition over greenfield investments.

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 should most likely be considered in making the decision to expand ABC operations into the Asian market?

How does the acquisition of a foreign company most likely benefit a focal firm in the foreign market?

Many international firms are investing in local communities and establishing global standards of fair treatment for workers in an effort to be socially responsible.

Which of the following best explains why some service industry firms most likely enter foreign markets through FDI?

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 questions is most important for Ciao managers to evaluate in their decision regarding the location of the new manufacturing facility?

Explain the difference between vertical FDI and horizontal FDI. Provide examples of firms that successfully utilize each type of FDI.

A firm that owns the activities performed in a single stage of its value chain is demonstrating ________.

Cross-licensing agreements are a type of project-based, nonequity venture in which the partners agree to allow access to licensed intellectual property developed by the other on preferential terms.

Which of the following represents a human resource factor that firms must consider when selecting an FDI location?

Vertical integration is an arrangement in which the firm owns, or seeks to own, the activities performed in a single stage of its value chain.

A merger is a special type of acquisition.

Discuss four strategies that managers can employ in order to increase the chances of a successful collaborative venture.