Please enable JavaScript.
Coggle requires JavaScript to display documents.
International Resources Movement & Multinational Cooperations - Coggle…
International Resources Movement & Multinational Cooperations
Motives for international portfolio investment
Refers to the purchase of securities & other financial assets such as stocks & bonds by investors from 1 country to another country.
The basic motives for international portfolio investment are to earn higher return abroad.
In other words, the motive is to yield maximization & to equalize returns internationally.
The residents from 1 country will purchase bonds of another country if the returns on bonds are higher in the other country.
International Capital Flow
defined as the stream of financial capital in monetary fund's that travels freely between nations in the open global economy these funds
Financial investment refers to the purchase of foreign & domestic financial assets
Assets can include stocks bonds or any other interest varian account
countries openly trade domestic investors looking to earn money on their investment are free to invest in foreign assets
Impact of inbound capital flow
Cause a country's capital account to move towards a surplus
increases the volume of loanable funds
supply money in domestic economy
stimulate investment spending by firm
lead to real GDP growth & increase value of domestic currency.
impact outbound capital flow
cause a country's capital account to move towards the deficit
decreases the volume of loanable fund
cause deflation combined with decrease in consumption & the depreciation of the country's currency in the foreign market.
Horizontal integration
the production abroad of a differentiated product that is also produced at home
the resident of nation do not borrow from other nations & themselve make real investment in their own nation rather than accept direct investment from abroad
Vertical integration
allows a corporation to obtain controlof a needed raw material & thus ensure interrupted supply at lowest possible cost
to obtain control of a needed raw material
Tyoes of investment
Portfolio investment
Direct investment
Determinants of FDI
Market size
Openness
labor cost
stable policies & democracy
infastructure & key technology
taxes / incentives
availability of natural resources.
Multinational Cooperation
are the firms that own, control or manage production-several country
have centralized head office- coordinate global management
a multinational company own ans manages its business in 2 or more countries
why MNCs exist?
concentrated on R& D
Competitive advantage of a global network
MNCs can control and change to their advamtage
Problem created by MNCs in home country
loss of domestic jobs
reduce technological advantage in home country
transfer pricing
Problems created by MNCs in host country
absorb entrepeneurial talent and local savings
siphoning off R & D funds
MNCs dominate economies
Advantages for host country
beneficial to both, the home as well as the host countries
technological & administrative skills required for operation of MNCs
MNCs create more opportunities for employment in home country
Advantages for host country
increase in capital investment by MNCs
host country help by exporting more & importing less
MNCs make it possible to have standard quality productsin all the host countries