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Slide 3.1
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
The Tri...
Slide 3.2
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
The Tri...
Slide 3.3
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Objecti...
Slide 3.4
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Introdu...
Slide 3.5
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Table 3...
Slide 3.6
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Reasons...
Slide 3.7
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Foreign...
Slide 3.8
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Some re...
Slide 3.9
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
FDI and...
Slide 3.10
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Table ...
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Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Table ...
Slide 3.12
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Triad ...
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Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
The tr...
Slide 3.14
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Figure...
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Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
The wo...
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Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Table ...
Slide 3.17
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Table ...
Slide 3.18
Alan M Rugman and Simon Collinson, International Business, 5th
Edition, © Pearson Education Limited 2009
Key re...
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international business Alan. M. Rugman

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  1. 1. Slide 3.1 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 The Triad and international business Chapter 3
  2. 2. Slide 3.2 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 The Triad and international business • Objectives • Introduction • Reasons for FDI • FDI and trade by triad members • The triad and regional business strategy • The world’s regional automotive industry.
  3. 3. Slide 3.3 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Objectives • Describe the major reasons for FDI. • Explain the role of triad-based MNEs in worldwide FDI and trade. • Relate select examples of inter-triad MNE business activity. • Discuss the economic interrelationships among triad members.
  4. 4. Slide 3.4 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Introduction • Most FDI and trade is conducted by MNEs. • MNEs from the triad continue to dominate international business. • The triad is the basic unit of analysis in international business.
  5. 5. Slide 3.5 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Table 3.1 Ten years of intra-regional FDI in the triad, 1993–2002 Note: EU intra-regional FDI is FDI stocks within Europe as a whole. NAFTA intra-regional FDI is US and Canada stocks within NAFTA. Asia intra regional FDI is Japan, South Korea, Australia and New Zealand stocks within Asia Source: Authors’ calculations based on OECD, International Direct Investment Statistics Yearbook, 2004
  6. 6. Slide 3.6 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Reasons for FDI
  7. 7. Slide 3.7 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Foreign direct investment • FDI is the ownership and control of foreign assets. • FDI usually involves the ownership, whole or partially, of a company in a foreign country: a foreign subsidiary. • FDI is different from portfolio investment, which is the purchase of financial securities in other firms for the purpose of realizing a financial gain when these marketable assets are sold.
  8. 8. Slide 3.8 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Some reasons for FDI • Increase sales and profits. • Enter rapidly growing markets. • Reduce costs. • Gain a foothold in economic blocs. • Protect domestic markets. • Protect foreign markets. • Acquire technological and managerial know-how.
  9. 9. Slide 3.9 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 FDI and trade by triad members • The triad accounts for about 80% of world FDI. • Two important FDI destinations are: – Intra-regional: from one triad member to another – Inter-regional: from one triad member to the geographic region that surrounds it. (e.g. from the US to the Americas).
  10. 10. Slide 3.10 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Table 3.3a Ten years of triad FDI *EU15 numbers are in outward stocks of FDI by every EU15 member and thus include intra-EU15 FDI Sources: Authors’ calculations; United Nations, World Investment Report 1998, pp. 379–400; United Nations, World Investment Report 2006, pp. 303–306
  11. 11. Slide 3.11 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Table 3.3b Ten years of triad trade *EU includes intra-EU FDI. Note: Exports are calculated by including freight and insurance while imports do not include freight and insurance Sources: Authors’ calculations and International Monetary Fund, Direction of Trade Statistics Yearbook, 2006 (Washington, DC: IMF, 2006), pp. 2–5; International Monetary Fund, Direction of Trade Statistics Yearbook, 2002 (Washington, DC: IMF, 2002), pp. 2–5
  12. 12. Slide 3.12 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Triad FDI clusters • A group of developing countries usually located in the same geographic region as a triad member and having some form of economic link to this member. – The US tends to be a dominant investor in Latin America, and countries such as Mexico and Brazil are part of its FDI cluster. – The EU tends to be a dominant investor in Eastern Europe and countries like the Czech Republic and Poland are part of its FDI cluster.
  13. 13. Slide 3.13 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 The triad and regional business strategy • MNEs pursue market opportunities within their own triad as well as that of the other members. • International expansion does not necessarily mean “global” expansion. • The nature of international business is regional, not global. – For example, Wal-Mart has 94.5% of its sales in North America, and only about 20% of Wal-Mart’s stores are located outside of North America.
  14. 14. Slide 3.14 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Figure 3.1 Wal-Mart’s globalization: regional distribution of stores Note: Data are for 2004. US stores include 53 stores in Puerto Rico Source: Wal-Mart, Annual Report, 2004.
  15. 15. Slide 3.15 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 The world’s regional automotive industry • There are 30 automotive firms in the world’s largest 500 firms. – None of these are global firms! • 23 of the 30 firms are home-region based, with an average of 60 % of their sales as intra-regional. • There are 2 host-region oriented and 5 bi-regional automotive firms on the list.
  16. 16. Slide 3.16 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Table 3.4 The regional nature of the motor vehicles and parts industries, 2005 *Weighted intra-regional sales average is weighted according to revenues Note: Data are for 2005; Goodyear Tire & Rubber, Lear, China FAW Group and Shanghai Automotive are included in the largest 500 companies, but their regional sales data are not either available or enough to determine their regional characteristics Source: Authors’ calculations and the individual annual reports of each company
  17. 17. Slide 3.17 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Table 3.4 The regional nature of the motor vehicles and parts industries, 2005 (Continued) *Weighted intra-regional sales average is weighted according to revenues Note: Data are for 2005; Goodyear Tire & Rubber, Lear, China FAW Group and Shanghai Automotive are included in the largest 500 companies, but their regional sales data are not either available or enough to determine their regional characteristics Source: Authors’ calculations and the individual annual reports of each company
  18. 18. Slide 3.18 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Key reasons for the automotive industry’s regional operations • The auto industry operates in “clusters” of localized activity within each major triad region. • Auto firms are strongly embedded in downstream activities and after-sales markets. • Cultural barriers across regions. • Fuel. • Different environmental regulations. • Tariffs.  Local competitors are more adept at meeting the demands of their regional markets.

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