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Foreign Direct Investment and Collaborative Venture (Factors relevant…
Foreign Direct Investment and Collaborative Venture
Types of foreign direct investment
Level of integration
Nature of ownership
Green investment vs. mergers and acquisitions
International collaborative venture
Consortuim
Cross-licensing agreement
Motivates for Foreign Direct Investment
Market seeking motive
Follow key customer
Compete with key rivals in their own markets
Gain access to new markets or oppurtunities
Efficiency seeking motive
Avoid trade barriers
Locate production near customers
Reduce sourcing and production costs
Take advantage of government incentives
Resources or assets seeking motive
Access raw materials
Gain access to knowledge or other assets
Access technology & managerial know on how available in a markets
Factors relevant selecting FDI location
Infrastructural factor
Profit rentation factor
Economic factor
Legal and regulatory factor
Political and governmental factors
Market factors
Human resource factor
Barriers to retailers success abroad
Culture and language barriers
Strong loyalty to indigenous retailers
Legal and regulatory barriers
Retailers often must develop sources of suppy
Key features of FDI
Substantial risk and uncertainty
Implies local presence and operation
Represent substantial resources commitment
Firma invest in countries provide specific comparative advantages
International investment & collaboration
FDI : Strategy in which the firm establishes a physical presence abroad by acquiring productive assets such as capital, technology, labor, land, plant, and equipment
International collaborative ventures : A cross border business alliances in which partnering firms pool their resources and share costs and risks of a venture
Joint venture : A form of collaboration between two or more firms to create a jointly-owned entreprise