The document summarizes the main reasons firms engage in international investment through foreign direct investment, including horizontal foreign direct investment to serve local markets better and vertical foreign direct investment to access lower cost inputs. It discusses how the choice of entry mode is influenced by ownership advantages, internalization advantages, and location advantages, and notes that foreign direct investment allows firms to have more control but also carries some risks from changes in the macroenvironment of the host country.

1. Laura Carolina Arellano Florez
Angie Vanessa Cortés Cárdenas

2. Explains the flow of
investment capital into and
out of a country by
investors who want to
maximize the return on
their investments.

3. DETERMINANT
FACTORS TO
IDENTIFY THE TARGET
MARKET, ACCORDING
TO THE ENTRY MODE.

4. Main reasons to motivate a firm to
engage in an INTERNATIONAL
INVESTMENT
(HFDI) Horizontal Foreign Direct
Investment
(FDI) Foreign
Direct
To serve a local market better
Investment, to
serve to the local (VFDI) Vertical Foreign Direct
markets, through: Investment.
To get lower cost imputs

5. VERTICAL
FOREIGN DIRECT
INVESTMENT
(VFDI)
HORIZONTAL
FOREIGN DIRECT Involves the
INVESTMENT splitting of the
(HFDI) vertical chain of
production (the
Is either to value chain) an
improve the firm's locating parts of the
competitive position chain in a low-cost
in the market or to location.
reduce the costs
associate with
supplying the
foreign market.

6. The choice of an entry mode is
also influenced by two factors:

8. Ownership
Advantage
The net ownership
advantages give
international firms
absolute adventage
over firms in
almost all locations.

9. Internalization
Can be organized
«internally», under
arm’s-length
contracts with
independent local
producers.

10. Location
Advantages
An international
company is likely to
invest in the most
advantageous and
attractive location.

12. ADVANTAGES DISADVANTAGES
The type of
control can be We can find risks
decided
We have an Macroenvironment
alliance's of a country can
possibility or change for the
independent company
We have the
option to choose
the market