FDI - foreign direct investment Flashcards

1
Q

what are the 4 types of FDI?

A
  1. offshoring
  2. foreign mergers
  3. foreign acquisitions
  4. transfer pricing
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2
Q

what is offshoring?

A

when a company moves its processes/services to another country overseas to take advantage of low labor costs

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3
Q

what are foreign mergers?

A

when two TNCs from different countries join together as one entity

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4
Q

what are foreign acquisitions?

A

when one TNC takes over a TNC in another country

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5
Q

what is transfer pricing?

A

the setting of price when transferring goods/services between controlled/related parts of the TNC

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6
Q

example of offshoring?

A
  • Coca-Cola locating factories and plantations in India, El Salvador, and Cambodia
  • Dole setting up plantations and factories in Costa Rica
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7
Q

example of foreign mergers?

A
  • Royal Dutch Shell has headquarters in the UK and Netherlands
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8
Q

example of foreign acquisitions?

A
  • UK Cadbury taken over by US Craft
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9
Q

example of transfer pricing?

A
  • Starbucks and Amazon channel pricing through subsidized companies in low-tax countries like Ireland
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10
Q

what 3 ways do national governments try to increase FDI?

A
  1. privatization: the selling of state-owned assets to TNCs
  2. free-market liberalization: like the China Open Door Policy
  3. encouraging business start-ups: via SEZs with low taxes, subsidies, and labour costs to attract TNCs
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11
Q

what is the sovereign wealth fund?

A

government-owned investments and banks, normally associated with China and countries with large oil revenues like Qatar

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12
Q

what does Qatar own in London/the UK?

A
  • Sainsbury’s and Harrods
  • largest shareholder of Barclays
  • 95.5% of countries’ oil and gas imports
  • 20% London stock markets
  • the Olympic Village
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