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FOREIGN DIRECT
INVESTMENT
Presented By:
Megha Poojari
Priya Roy
Bharath B S
Janmejaya Sahoo
Rego Ranzil
Raju Reddy
Ajay Kumar
1
CONTENTS
1. What is FDI
2. Background
3. Importance
4. Types
5. Video
6. FDI in India
7. Barriers to FDI
8. Case Study
9. Learning Outcomes
2
What is FDI?
• A company owning another company in a different country
• Foreign companies directly involved in day to day operations
• Foreign companies gain at least 10% voting power
• FDI is commonly made in Open Economies
• FDI involves more than just Capital Investments
3
BACKGROUND
• Successful theory given by Stephen Hymer in 1960s
• Different from Portfolio Investment
• Determinants of FDI :
1. Firm specific advantages.
2. Removal of Conflicts.
3. Internationalisation Strategy
4
IMPORTANCE
• Critical for developing and emerging market countries
• Their companies need multinational funding & expertise
• Their companies need Private Investments.
• Need for restructuring or refocusing in developed economies.
• Long term commitment
5
TYPES
HORIZONTAL FDI
• Most common type
• Company wants to get
stronger in market
• Homogeneous in Nature
• Eg: McDonald's, KFC
VERTICAL FDI
• Add value to the company
• Moves in different value
chains
• Different from main business
• Eg: McDonald's purchasing
large scale farms.
6
METHODS OF FDI
1. Greenfield Investment:
• Begins new venture by constructing new facilities.
• Build own factory in different countries.
• Train people to work in the organisation
• Provide offerings as per the culture of the host country
• Eg: Starbucks, McDonalds
7
METHODS OF FDI
2. Brownfield Investment:
• Short cut method
• Not starting from scratch
• Expand through cross border mergers and acquisitions.
• Eg: Tata Motor’s acquisition of Jaguar.
8
VIDEO
9
FDI IN INDIA
• According to DPIIT, total FDI investments in India was US
$33.49 Billion.
• Highest FDI equity flow was in Service Sector (US $6.59 Billion)
• India received the maximum FDI equity inflows from Singapore
($12.98 B), Mauritius ($6.02 B), USA ($2.34B), Japan ($2.21 B)
10
ROAD AHEAD
• India has become attractive emerging market
• Annual FDI inflows expected to rise US $75 Billion
• Indian Government aiming to achieve US $ 100 Million worth FDI
• World Bank stated private investments to grow by 8.8%
• Government is taking initiatives to ease the flow of FDI
11
12
BARRIERS TO FDI
1. Political Considerations
2. Infrastructure
3. Government Policies
4. Labour Laws
5. Industry Barriers
13
CASE STUDY (Failure)
TATA’S ACQUISITION OF CORUS
• Acquisition date: 2nd April, 2006 for $12 billion
• Corus renamed to Tata Steel Europe in 2010
• Acquisition was a part of Portfolio restructuring
• Reason for failure:
1. Cultural differences
2. Unhappy Investors
3. Overbidding
4. Lack of performance
14
Case study (success)
TATA’S ACQUISITION OF JLR
• Acquisition Date: June 2008 for 2.3 billion
• Brownfield Investment by Tata
• Reasons for Success:
1. Management
2. Right Time Funding
3. Cash Management
4. Product Innovation/ Expansion
5. Financial Performance
15
Concept review
• Beneficial for Developing Economies
• Beneficial for Developed Economies
• Promotes Competition
• Helps in developing strategies
16
BIBLIOGRAPHY
Source: UK essays (2018)
• https://www.ukessays.com/essays/economics/importance-
and-barriers-to-fdi-economics-essay.php
Source: Government of India (2018)
• https://dipp.gov.in/foreign-direct-investment/foreign-direct-
investment-policy
Source: Investopedia (2018)
• https://www.investopedia.com/terms/f/fdi.asp
17
18

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Concept review (fdi)

  • 1. FOREIGN DIRECT INVESTMENT Presented By: Megha Poojari Priya Roy Bharath B S Janmejaya Sahoo Rego Ranzil Raju Reddy Ajay Kumar 1
  • 2. CONTENTS 1. What is FDI 2. Background 3. Importance 4. Types 5. Video 6. FDI in India 7. Barriers to FDI 8. Case Study 9. Learning Outcomes 2
  • 3. What is FDI? • A company owning another company in a different country • Foreign companies directly involved in day to day operations • Foreign companies gain at least 10% voting power • FDI is commonly made in Open Economies • FDI involves more than just Capital Investments 3
  • 4. BACKGROUND • Successful theory given by Stephen Hymer in 1960s • Different from Portfolio Investment • Determinants of FDI : 1. Firm specific advantages. 2. Removal of Conflicts. 3. Internationalisation Strategy 4
  • 5. IMPORTANCE • Critical for developing and emerging market countries • Their companies need multinational funding & expertise • Their companies need Private Investments. • Need for restructuring or refocusing in developed economies. • Long term commitment 5
  • 6. TYPES HORIZONTAL FDI • Most common type • Company wants to get stronger in market • Homogeneous in Nature • Eg: McDonald's, KFC VERTICAL FDI • Add value to the company • Moves in different value chains • Different from main business • Eg: McDonald's purchasing large scale farms. 6
  • 7. METHODS OF FDI 1. Greenfield Investment: • Begins new venture by constructing new facilities. • Build own factory in different countries. • Train people to work in the organisation • Provide offerings as per the culture of the host country • Eg: Starbucks, McDonalds 7
  • 8. METHODS OF FDI 2. Brownfield Investment: • Short cut method • Not starting from scratch • Expand through cross border mergers and acquisitions. • Eg: Tata Motor’s acquisition of Jaguar. 8
  • 10. FDI IN INDIA • According to DPIIT, total FDI investments in India was US $33.49 Billion. • Highest FDI equity flow was in Service Sector (US $6.59 Billion) • India received the maximum FDI equity inflows from Singapore ($12.98 B), Mauritius ($6.02 B), USA ($2.34B), Japan ($2.21 B) 10
  • 11. ROAD AHEAD • India has become attractive emerging market • Annual FDI inflows expected to rise US $75 Billion • Indian Government aiming to achieve US $ 100 Million worth FDI • World Bank stated private investments to grow by 8.8% • Government is taking initiatives to ease the flow of FDI 11
  • 12. 12
  • 13. BARRIERS TO FDI 1. Political Considerations 2. Infrastructure 3. Government Policies 4. Labour Laws 5. Industry Barriers 13
  • 14. CASE STUDY (Failure) TATA’S ACQUISITION OF CORUS • Acquisition date: 2nd April, 2006 for $12 billion • Corus renamed to Tata Steel Europe in 2010 • Acquisition was a part of Portfolio restructuring • Reason for failure: 1. Cultural differences 2. Unhappy Investors 3. Overbidding 4. Lack of performance 14
  • 15. Case study (success) TATA’S ACQUISITION OF JLR • Acquisition Date: June 2008 for 2.3 billion • Brownfield Investment by Tata • Reasons for Success: 1. Management 2. Right Time Funding 3. Cash Management 4. Product Innovation/ Expansion 5. Financial Performance 15
  • 16. Concept review • Beneficial for Developing Economies • Beneficial for Developed Economies • Promotes Competition • Helps in developing strategies 16
  • 17. BIBLIOGRAPHY Source: UK essays (2018) • https://www.ukessays.com/essays/economics/importance- and-barriers-to-fdi-economics-essay.php Source: Government of India (2018) • https://dipp.gov.in/foreign-direct-investment/foreign-direct- investment-policy Source: Investopedia (2018) • https://www.investopedia.com/terms/f/fdi.asp 17
  • 18. 18