The document discusses Foreign Direct Investment (FDI). It defines FDI as investment by foreign companies in domestic manufacturing, services, or other businesses for the long term. It outlines the different terms related to foreign investment and provides a schematic representation of FDI. It also discusses the governance and routes of FDI in India, including automatic and government routes. It lists sectors that are prohibited, restricted, or allowed for FDI and provides reasons why economies and multi-national corporations seek FDI. Finally, it outlines different modes of FDI including exporting, foreign production, licensing, and wholly owned subsidiaries.
To introduce the idea of exporting and profile its elements
To introduce the idea of importing and profile its elements
To identify the problems and pitfalls that challenge international traders
To identify the resources and assistance that helps international traders
To discuss the idea of an export plan
To outline the practice of countertrade
Unit 1: Environmental Context of International Business, Framework for analyzing international
business environment – Domestic, foreign and global environments and their impact on
international business decisions.
Global Trading Environment: World trade in goods and services – Major trends and developments;
World trade and protectionism – Tariff and non-tariff barriers; Counter trade.
Unit 2: International Financial Environment: Foreign investments -Pattern, Structure and effects;
Movements in foreign exchange and interest rates and then impact on trade and investment flows.
Unit 3: International Economic Institutions and Agreements: WTO, IMF, World Bank UNCTAD,
Agreement on Textiles and Clothing (ATC), GSP, GSTP and other International agreements;
International commodity trading and agreements.
Unit 4: Multinational Corporations and their involvement in International Business: Issues in
foreign investments, technology transfer, pricing and regulations; International collaborative
arrangements and strategic alliances.
Unit 5: Regional Economic Groupings in Practice: Regionalism vs. multilaterallism, Structure and
functioning of EC and NAFTA; Regional economic cooperation. Emerging Developments and
Other Issues: Growing concern for ecology; Counter trade; IT and international business.
Unit 1: Environmental Context of International Business, Framework for analyzing international
business environment – Domestic, foreign and global environments and their impact on
international business decisions.
Global Trading Environment: World trade in goods and services – Major trends and developments;
World trade and protectionism – Tariff and non-tariff barriers; Counter trade.
Unit 2: International Financial Environment: Foreign investments -Pattern, Structure and effects;
Movements in foreign exchange and interest rates and then impact on trade and investment flows.
Unit 3: International Economic Institutions and Agreements: WTO, IMF, World Bank UNCTAD,
Agreement on Textiles and Clothing (ATC), GSP, GSTP and other International agreements;
International commodity trading and agreements.
Unit 4: Multinational Corporations and their involvement in International Business: Issues in
foreign investments, technology transfer, pricing and regulations; International collaborative
arrangements and strategic alliances.
Unit 5: Regional Economic Groupings in Practice: Regionalism vs. multilaterallism, Structure and
functioning of EC and NAFTA; Regional economic cooperation. Emerging Developments and
Other Issues: Growing concern for ecology; Counter trade; IT and international business.
To introduce the idea of exporting and profile its elements
To introduce the idea of importing and profile its elements
To identify the problems and pitfalls that challenge international traders
To identify the resources and assistance that helps international traders
To discuss the idea of an export plan
To outline the practice of countertrade
Unit 1: Environmental Context of International Business, Framework for analyzing international
business environment – Domestic, foreign and global environments and their impact on
international business decisions.
Global Trading Environment: World trade in goods and services – Major trends and developments;
World trade and protectionism – Tariff and non-tariff barriers; Counter trade.
Unit 2: International Financial Environment: Foreign investments -Pattern, Structure and effects;
Movements in foreign exchange and interest rates and then impact on trade and investment flows.
Unit 3: International Economic Institutions and Agreements: WTO, IMF, World Bank UNCTAD,
Agreement on Textiles and Clothing (ATC), GSP, GSTP and other International agreements;
International commodity trading and agreements.
Unit 4: Multinational Corporations and their involvement in International Business: Issues in
foreign investments, technology transfer, pricing and regulations; International collaborative
arrangements and strategic alliances.
Unit 5: Regional Economic Groupings in Practice: Regionalism vs. multilaterallism, Structure and
functioning of EC and NAFTA; Regional economic cooperation. Emerging Developments and
Other Issues: Growing concern for ecology; Counter trade; IT and international business.
Unit 1: Environmental Context of International Business, Framework for analyzing international
business environment – Domestic, foreign and global environments and their impact on
international business decisions.
Global Trading Environment: World trade in goods and services – Major trends and developments;
World trade and protectionism – Tariff and non-tariff barriers; Counter trade.
Unit 2: International Financial Environment: Foreign investments -Pattern, Structure and effects;
Movements in foreign exchange and interest rates and then impact on trade and investment flows.
Unit 3: International Economic Institutions and Agreements: WTO, IMF, World Bank UNCTAD,
Agreement on Textiles and Clothing (ATC), GSP, GSTP and other International agreements;
International commodity trading and agreements.
Unit 4: Multinational Corporations and their involvement in International Business: Issues in
foreign investments, technology transfer, pricing and regulations; International collaborative
arrangements and strategic alliances.
Unit 5: Regional Economic Groupings in Practice: Regionalism vs. multilaterallism, Structure and
functioning of EC and NAFTA; Regional economic cooperation. Emerging Developments and
Other Issues: Growing concern for ecology; Counter trade; IT and international business.
The idea of an “investment development path” (IDP) was introduced by John H. Dunning (1981a) as a dynamic approach within the paradigm of ownership, locational and internalization advantages (OLI).The IDP hypothesizes an association between a country’s level of development (proxied by GDP per capita) and its international investment position (net foreign direct investment (FDI) stock, i.e. outward minus inward direct investment stocks).
As the country develops, the conditions for domestic and foreign companies change, affecting the flows of inward and outward FDI.However, inward and outward FDI affect the economic structure as well – there is a dynamic interaction between the two.
Governments can influence a country’s conditions by creating public goods on which competitiveness can be based (Buckley and Casson, 1998).
India’s economic development and the inward and outward FDI, initially do show a pattern which is similar to first two stages of the IDP theory. As expected in the initial stage, FDI inflows are much higher as compared to outflows, showing decreasing NOIpc. However, suddenly in 1998, the outward investment started increasing. This trend continued until the year 2000, thereafter it took a reverse direction. In the year 2006 there were some large takeovers by Indian firms. The Assocham study expects the FDI outflows to be higher than the FDI inflows in the year 2007-08. This is something that is expected to happen in the fourth or fifth stage of IDP. This is where India’s development path slightly differs from the IDP that was shown in Dunning, and Dunning and Narula’s studies. Apparently, the main reason for this diversion is that, India’s FDI outflows are more firm-specific, and most of the outflow in 2006 was caused by Tata Steel and Hindalco. Rather than the FDI inflows, it is the competitive atmosphere and removal of barriers like licence etc, that has contributed more to India’s increase in GDP. The FDI inflows for India are very small and did not grow as fast as it did for China, owing to some macro level factors like infrastructure, speed of regulation change, power-shortage in many parts of the country, red tape etc. This has mainly lead to the situation where the FDI outflows are more firm-specific, rather than representing a trend for the whole nation, and most probably, that is the reason why India’s FDI outflows are sporadically too high in certain years, than would have expected in the IDP framework.
Foreign Direct Investment (Theories of FDI)Mamta Bhola
the opening up of the national frontiers has led to a tremendous cross border movement of capital. This has led to a large number of MNC's that have invested foreign capital in a number of countries. MNC's through FDI have expanded their business operations to a large extent.
Exporting, Importing, and Countertrade: Studycase of 3M and Pakistan Export P...Silvio Adriano
Exporting, Importing, and Countertrade: Studycase of 3M and Pakistan Export Processing Zone
Gizti Diah Huzaifah & Silvio Adriano S.S
International Business subject
Faculty of Economics and Business
Universitas Gadjah Mada
2014
01 Globalization and International BusinessBrent Weeks
To define globalization and international business and show how they affect each other
To understand why companies engage in international business and why international business growth has accelerated
To discuss globalization’s future and the major criticisms of globalization
To become familiar with different ways in which a company can accomplish its global objectives
To apply social science disciplines to understanding the differences between international and domestic business
The idea of an “investment development path” (IDP) was introduced by John H. Dunning (1981a) as a dynamic approach within the paradigm of ownership, locational and internalization advantages (OLI).The IDP hypothesizes an association between a country’s level of development (proxied by GDP per capita) and its international investment position (net foreign direct investment (FDI) stock, i.e. outward minus inward direct investment stocks).
As the country develops, the conditions for domestic and foreign companies change, affecting the flows of inward and outward FDI.However, inward and outward FDI affect the economic structure as well – there is a dynamic interaction between the two.
Governments can influence a country’s conditions by creating public goods on which competitiveness can be based (Buckley and Casson, 1998).
India’s economic development and the inward and outward FDI, initially do show a pattern which is similar to first two stages of the IDP theory. As expected in the initial stage, FDI inflows are much higher as compared to outflows, showing decreasing NOIpc. However, suddenly in 1998, the outward investment started increasing. This trend continued until the year 2000, thereafter it took a reverse direction. In the year 2006 there were some large takeovers by Indian firms. The Assocham study expects the FDI outflows to be higher than the FDI inflows in the year 2007-08. This is something that is expected to happen in the fourth or fifth stage of IDP. This is where India’s development path slightly differs from the IDP that was shown in Dunning, and Dunning and Narula’s studies. Apparently, the main reason for this diversion is that, India’s FDI outflows are more firm-specific, and most of the outflow in 2006 was caused by Tata Steel and Hindalco. Rather than the FDI inflows, it is the competitive atmosphere and removal of barriers like licence etc, that has contributed more to India’s increase in GDP. The FDI inflows for India are very small and did not grow as fast as it did for China, owing to some macro level factors like infrastructure, speed of regulation change, power-shortage in many parts of the country, red tape etc. This has mainly lead to the situation where the FDI outflows are more firm-specific, rather than representing a trend for the whole nation, and most probably, that is the reason why India’s FDI outflows are sporadically too high in certain years, than would have expected in the IDP framework.
Foreign Direct Investment (Theories of FDI)Mamta Bhola
the opening up of the national frontiers has led to a tremendous cross border movement of capital. This has led to a large number of MNC's that have invested foreign capital in a number of countries. MNC's through FDI have expanded their business operations to a large extent.
Exporting, Importing, and Countertrade: Studycase of 3M and Pakistan Export P...Silvio Adriano
Exporting, Importing, and Countertrade: Studycase of 3M and Pakistan Export Processing Zone
Gizti Diah Huzaifah & Silvio Adriano S.S
International Business subject
Faculty of Economics and Business
Universitas Gadjah Mada
2014
01 Globalization and International BusinessBrent Weeks
To define globalization and international business and show how they affect each other
To understand why companies engage in international business and why international business growth has accelerated
To discuss globalization’s future and the major criticisms of globalization
To become familiar with different ways in which a company can accomplish its global objectives
To apply social science disciplines to understanding the differences between international and domestic business
Review of FDI Policies in India and China: Analysis and InterpretationVandanaSharma356
Foreign Direct Investment (FDI) is a wide word that encompasses any long-term investment made in the host nation by a non-resident enterprise. Typically, the investment is undertaken over a lengthy period of time with the purpose of maximizing the host nation's advantages, such as superior (and cheaper) resources, consumer market access, or direct access to the host country. All talent improves efficiency. This long-term cooperation will benefit both the investor and the host nation. If the investor makes the same investment in his own nation, he will obtain a larger return, but the host country will profit by boosting the transfer of knowledge or technology to its workforce, putting more pressure on his local business to compete. Foreign firm that can develop the sector as a whole or serve as an example for other companies thinking about investing in the host nation.
Doing Business in India Simplified. Interesting information on Why India is attractive investment destination?, India's Industrial Policy, FDI in India, FII in India, Exchange Control Regulations in India, ADRs, GDRs, Laws governing business in India, Important regulatory authorities for Foreign Investment, Various Growth Sectors of Economy for Foreign Investments, Tax Regime of India, etc.
Doing Business in India Simplified. Interesting information on Why India is attractive investment destination?, India's Industrial Policy, FDI in India, FII in India, Exchange Control Regulations in India, ADRs, GDRs, Laws governing business in India, Important regulatory authorities for Foreign Investment, Various Growth Sectors of Economy for Foreign Investments, Tax Regime of India, etc.
Safalta Digital marketing institute in Noida, provide complete applications that encompass a huge range of virtual advertising and marketing additives, which includes search engine optimization, virtual communication advertising, pay-per-click on marketing, content material advertising, internet analytics, and greater. These university courses are designed for students who possess a comprehensive understanding of virtual marketing strategies and attributes.Safalta Digital Marketing Institute in Noida is a first choice for young individuals or students who are looking to start their careers in the field of digital advertising. The institute gives specialized courses designed and certification.
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Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
Acetabularia Information For Class 9 .docxvaibhavrinwa19
Acetabularia acetabulum is a single-celled green alga that in its vegetative state is morphologically differentiated into a basal rhizoid and an axially elongated stalk, which bears whorls of branching hairs. The single diploid nucleus resides in the rhizoid.
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
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Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
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Introduction to AI for Nonprofits with Tapp NetworkTechSoup
Dive into the world of AI! Experts Jon Hill and Tareq Monaur will guide you through AI's role in enhancing nonprofit websites and basic marketing strategies, making it easy to understand and apply.
4. FDI
Investment of foreign companies, institutions
and governments in domestic manufacturing/
Services / other business for a long period of
time.
Investment of Indian companies, institutions
and governments in foreign manufacturing/
Services / other business for a long period of
time.
Dr Raju Indukoori
4
5. FDI Governance
FDI policy announced by the Government
of India
Provisions of the Foreign Exchange
Management Act (FEMA) 1999
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7. 1.Automatic Route
Foreign investor or the Indian company
does not require any approval from
• RBI
• Government of India
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8. 2. Government Route
Prior approval of the following are required
Government of India
Ministry of Finance
Foreign Investment Promotion Board (FIPB)
Dr Raju Indukoori 8
9. Prohibited FDI
1. Chit fund Business
2. Nidhi Company.
3. Agricultural or plantation activities
4. Real estate business / Farmhouse construction.
5. Trading in Transferable Development Rights (TDRs).
6. Print Media: Partnership / Sole Proprietary
7. Retail Trading
8. Atomic Energy
9. Lottery Business
10. Gambling and Betting
Dr Raju Indukoori 9
10. Restricted FDI
1. Small Scale Industrial (SSI) Units : 24%
2. Asset Reconstruction Company (ARC) : 49%
3. Stock Acquisition is subject to Industry Cap.
Dr Raju Indukoori 10
11. Economy Need for FDI
Boost business
Income growth
Employment opportunities
Innovation
Technology
Foreign Exchange reserves
To meet unavoidable imports
Fund FDI from India
To be part of global village
Boost foreign trade
Showcase Brand India
Dr Raju Indukoori
11
13. MNCs Need for FDI
1. Boost profits
2. Cost reduction
3. Exploit foreign opportunities
4. International presence
Dr Raju Indukoori
13
14. MNCs Need for FDI
1. Boost profits
Monopolistic opportunities
Enter profitable markets
Attract new demand segments
Dr Raju Indukoori
14
15. MNCs Need for FDI
2. Cost reduction
Economies of Scale
Low cost of factors of production
Dr Raju Indukoori
15
16. MNCs Need for FDI
3. Exploit foreign opportunities
Natural resources : India exploited by European companies.
Cheap labor : BPO, KPO, in India and Philippine
Tax advantages : No tax, Tax holidays and incentives
Consumer mindset/Behavior : Foreign brands are qualitative
Dr Raju Indukoori
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17. MNCs Need for FDI
4. International presence
React to trade restrictions with a subsidiary
Diversification to gain business cycles and
Create international brand
Dr Raju Indukoori
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18. Forms of FDI
Horizontal
Same product extended to a foreign country.
Vertical
Different product extended in value chain
Platform
Same product for the purpose of export.
Dr Raju Indukoori 18
19. FDI Modes
1. Exporting
2. Production Abroad
3. Licensing
4. Management Contracts
5. Foreign Asset Control
6. Joint Ventures
7. Strategic Alliance
8. Wholly owned Subsidiary
9. Acquisition
10. Green Field Investment
Dr Raju Indukoori 19
20. MNCs FDI
Channels
Exploit Existing Competitive
Advantage Abroad
Change
Competitive Advantage
Licensing /
Management Contract Foreign Asset Control
Acquisition of a
Foreign Enterprise
Greenfield
Investment
Production at Home:
Exporting
Production Abroad
Joint Venture /
Strategic Alliance
Wholly-Owned
Affiliate
Foreign
Investment
Dr Raju Indukoori
20
Foreign
Presence
21. 1. Export
There are several advantages to limiting a firm’s
activities to exports as it has none of the unique risks
facing FDI, Joint Ventures, strategic alliances and
licensing with minimal political risks.
The amount of front-end investment is typically lower
than other modes of foreign involvement.
Some disadvantages include the risks of losing markets
to imitators and global competitors.
Dr Raju Indukoori 21
22. 2. Abroad Production
Invest in Production unit in a foreign country to
serve the local market
The management, control and ownership is still
with the company in parent country.
This happens due to operational and economic
benefits
Dr Raju Indukoori 22
23. 3. Licensing
It is a popular method for domestic firms to profit from
foreign markets without the need to commit sizeable
funds
It is more advantageous when local consumers prefer
local brands.
Disadvantages
Some times License fees are more than than FDI profits
Possible loss of quality control
Establishment of a potential competitor in third-country
markets
Risk that technology will be stolen
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24. 4. Management Contracts
Similar to licensing
Provide foreign cash flow without significant foreign
investment or exposure.
Lessen political risk because the repatriation of
managers is easy
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25. 5. Foreign Asset Control
Buy one division of a company
It is similar to buying one company but limited to one
asset or department
Ex : Lafarge India bought Cement division of Tata Steel
Dr Raju Indukoori 25
26. 6. Joint Venture
Shared ownership in a foreign business
It is more advantageous when local consumers prefer
local brands.
Advantages
Better understanding of local markets, risks, customs and
government institutions.
Capable mid-level management
Helpful when some countries do not allow 100% foreign
ownership
Local partners have their own contacts and reputation which
aids in business
Dr Raju Indukoori 26
27. Joint Ventures
Disadvantages
Increased political risk if the wrong partner is
chosen.
Divergent views about the need for cash dividends,
or the best source of funds for growth (new
financing versus internally generated funds).
Transfer pricing issues.
Difficulties in the ability to rationalize production
on a worldwide basis.
Dr Raju Indukoori 27
28. 7. Strategic Alliance
1. Two firms exchange a share of ownership with
one another.
2. Partners exchange a share of ownership in
addition to creating a separate joint venture
to develop and manufacture a product or
service
3. Joint marketing and servicing agreements in
which each partner represents the other in
certain markets.
Dr Raju Indukoori 28
29. 8. Wholly owned Subsidiary
The MNC enters the foreign shores with
its full presence in terms of investment,
technology, production, operation, brand,
etc.
Many MNCs like Unilever, IBM, Pepsi, Coca
Cola, Bata, etc. came to India.
Dr Raju Indukoori 29
30. 9. Acquisition
Quick and cost effective way to obtain
technology and/or brand names.
Variety of channels to acquire.
Some firms often pay too high a price or
utilize expensive financing to complete a
transaction.
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31. 10. Green Field Investment
It is establishing a production or service facility
starting from the ground up.
It is time consuming and needs to look at long
gestation period.
FDI has full ownership, control, risk and
accountability.
Dr Raju Indukoori 31
32. FDI Benefits
Risk Sharing : Joint Venture and Strategic Alliance
Market Entry : Acquisition
Tapping new markets : Exports, licensing and Strategic Alliance
Brand loyalty : Production and Green Field Projects.
Foreign Presence : Export, Licensing, Joint Venture and Strategic
Alliance
Global Brand : Asset Control, Acquisition, Wholly owned subsidiary
Economies : Foreign Production, Joint Ventures
Dr Raju Indukoori 32
33. Key Factors for FDI
Low correlation : Portfolio performance of FDI portfolio.
Socio Cultural : Race, Cast, Religion, Language, Customs and Traditions.
Government Policy : Supportive, comfort zone, tough but profitable
Political Structure : Unstable government, social unrest, strong opposition
Economic Indicators : GDP, GDP Growth Rate, Interest Rates, Stock Market indices,
Inflation, Unemployment, Economic Development and Cost of living.
FDI Barriers: Red tape, Government interventions, Anti MNC/ FDI, Patriotism,
Nationalism.
FDI Trends
Target countries and continents
Paradigm shift in FDI flows
Weekly or quarterly FDI Data analysis
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