International business trade and foreign direct investment

1. MODULE 2: INTERNATIONAL BUSINESS
TRADE AND FOREIGN DIRECT
INVESTMENT

2. 2.4 FOREIGN DIRECT INVESTMENT
Foreign direct investment (FDI), the
acquisition of foreign assets with the intent
to control and manage them. refers to an
investment in or the acquisition of foreign
assets with the intent to control and
manage them.

3. CATEGORIES OF INTERNATIONAL
INVESTMENT
 a. Portfolio Investment - investment in a company’s stocks,
bonds, or assets, but not for the purpose of controlling or
directing the firm’s operations or management.
 Example: if you have a 401(k), an individual retirement
account and taxable brokerage account, you should look at
those accounts collectively when deciding how to invest
them.

4. b. Foreign Direct Investment - investing assets directly into a foreign country’s
buildings, equipment, or organizations. Also refers to investment in or the
acquisition of foreign assets with the intent to control and manage them.
Example: A U.S- based cellphone provider buying chain of phone store in china.
An American technology company builds and operate a data center in Canada.
This is a foreign direct investment from American to Canada

5. TYPES OF FDI
 a. Inward FDI - refers to investments coming into the
country.
 Example: Mexico has received a great dealof inward
investment from US multinational companies, which then
produce goods in Mexico that can be sold to US consumer.
 b. Outward FDI - investments made by companies from a
country into foreign companies in other countries.
 Example: some companies will make a greenfield investment
which is when a parent company creates a subsidiary in a
foreign country.

6. c. Horizontal FDI - occurs when a company is trying to open up a new
market.
Example: Toyota assemble cars in both the United States and China
d. Vertical FDI - is when a company invests internationally to provide
input into its core operations—usually in its home country. When a firm
brings the goods or components back to its home country, this is referred
to as backward vertical FDI. When a firm sells the goods into the local or
regional market, this is termed forward vertical FDI.
Example: Hershey's, a US chocolate manufacturer may look to invest in
cocoa producers in Brazil.

7. KINDS OF FDI
 a. Greenfield FDI - occur when multinational corporations enter into
developing countries to build new factories or stores. These new facilities are
built from scratch—usually in an area where no previous facilities existed.
 Example : Suppose there is a company ABC Inc. which is having its
headquarters in the US. The company conduct research to know the demand
for its product in the country of India. After conducting the research in the
Indian market, it is found that there is a huged demand for the product of the
company in India, and it can get a good customer base over there, so, the
management of the company decided to expand its business by creating its
subsidiary company in India and starts the operations there from the ground
level by constructing new production facilities, distribution hubs,and the
offices

8. b. Brownfield FDI - is when a company or government entity
purchases or leases existing production facilities to launch a new
production activity.
Example: The Sugar Beach in Toronto, Canada, is an example Of
brownfield investment in which the pre-existing parking lot of Jarvis
Street Slip was converted to a beach park on-looking lake Ontario.

9. THANK YOU & GOD BLESS
EVERYONE