International FActor Movements & MNE's
8 important questions on International FActor Movements & MNE's
Multinational Enterprises (MNEs)
Foreign Direct Investment (FDI)
· Parent company acquires or constructs new plants and equipment overseas
· Parent company shifts funds abroad to finance an expansion of its foreign subsidiary
· Earnings of the parent company’s foreign subsidiary is reinvested in a plant expansion.
Motives for Foreign Direct Investment (FDI)
· Higher rates of private investment
· Economic growth and job creation
· Generates spillovers
· Improved management and better technology
· Higher average labor productivity
· Higher wages
· Stimulates exports of machinery and other capital goods (source country è host country).
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Supplying Products to Foreign Buyers: Economies of scale
o Licensing agreement or foreign direct investment: When the foreign quantity demanded is relatively large.
Country Risk Analysis
· Financial risk analysis (25%)
· Economic risk analysis (25%)
· Composite country risk rating
International Country Risk Guide
· Moderate risk, 50–79 points
· High risk, 0–49 points.
Joint venture (three types)
· A business joining hands with local private interests (Honeywell U.S. & Mitsubishi Office Machinery Company in Japan)
· Businesses with local government.
Immigrants are motivated to work abroad due
o Noneconomic factors: politics, war, and religion.
The question on the page originate from the summary of the following study material:
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