FDI: Foreign Direct Investment

Question 1

What are some top countries with FDI outflows?

Answer 1

U.S., Japan, Germany, China.

Question 2

What is one drawback of cross-border acquisitions compared to Greenfield investments?

Answer 2

Integration challenges and potential cultural clashes.

Question 3

What is a Greenfield investment?

Answer 3

Establishing a new operation from scratch in a foreign country.

Question 4

What is a common market?

Answer 4

A free trade area with free movement of labor and capital.

Question 5

What are the benefits of regional integration?

Answer 5

Increased trade, political stability, economic growth, market access.

Question 6

What is one major reason companies choose FDI over exporting?

Answer 6

To avoid tariffs and trade barriers.

Question 7

How can FDI help reduce currency risk?

Answer 7

Earnings and costs are in the same local currency.

Question 8

Example of a foreign Greenfield investment in the U.S.?

Answer 8

BMW manufacturing plant in South Carolina.

Question 9

What are the 5 levels of regional integration?

Answer 9

Free trade area, customs union, common market, economic union, political union.

Question 10

What’s one argument against letting Walmart enter India via FDI?

Answer 10

It could harm millions of small, unorganized retailers.

Question 11

Why is the Super Bowl mentioned in this session?

Answer 11

It shows how global events and marketing reflect international business dynamics.

Question 12

How is trade related to FDI?

Answer 12

Tariffs may encourage FDI as firms seek to avoid import restrictions.

Question 13

What are government incentives that may attract FDI?

Answer 13

Tax breaks, subsidies, land grants, relaxed regulations.

Question 14

What is the relationship between FDI and regional integration?

Answer 14

Integration increases attractiveness for FDI due to market size and stability

Question 15

What is an economic union?

Answer 15

A common market with coordinated economic policies.

Question 16

What percentage of India’s retail sector is unorganized?

Answer 16

94% (only 6% is organized retail).

Question 17

What is FDI stock?

Answer 17

Total value of foreign assets accumulated over time.

Question 18

Example of a U.S. Greenfield investment abroad?

Answer 18

Tesla Gigafactory in Germany.

Question 19

What is a political union?

Answer 19

Full integration of member states including political governance.

Question 20

What is an example of political risk affecting FDI?

Answer 20

Asset loss in Venezuela or Russia due to instability.

Question 21

Why is proximity to customers important in FDI?

Answer 21

It helps improve service, responsiveness, and brand presence.

Question 22

What are the two key metrics in FDI?

Answer 22

FDI flow (new investments) and FDI stock (accumulated investment).

Question 23

What is AFCFTA?

Answer 23

African Continental Free Trade Area – aims to boost intra-African trade.

Question 24

What is a Cross-Border Acquisition?

Answer 24

Buying or merging with an existing foreign company.

Question 25

What’s one argument in favor of Walmart entering India via FDI?

Answer 25

It may lower prices and modernize retail infrastructure.

Question 26

What industries often require FDI as the only viable entry mode?

Answer 26

Retail, natural resources (e.g. mining), automotive manufacturing.

Question 27

What is geographic risk diversification in FDI?

Answer 27

Spreading operations across regions to reduce overall risk.

Question 28

What does a customs union do?

Answer 28

Eliminates internal tariffs and sets a common external tariff.

Question 29

What is Regional Economic Integration?

Answer 29

Agreements among countries to reduce trade barriers and increase cooperation.

Question 30

What does exchange rate volatility mean for FDI?

Answer 30

It can affect investment decisions due to uncertainty in currency values.

Question 31

What are some pros of FDI for companies?

Answer 31

Market access, avoid trade barriers, control, reduced currency risk, resource access.

Question 32

Why is economic integration attractive to investors?

Answer 32

Larger unified markets, stable regulations, reduced trade friction.

Question 33

What are reasons foreign firms invest in the U.S.?

Answer 33

Large market, skilled labor, stable government, legal protections.

Question 34

What are some top countries receiving FDI inflows?

Answer 34

U.S., China, Singapore, Brazil.

Question 35

What are common factors that attract FDI?

Answer 35

Market size, skilled labor, natural resources, infrastructure, political stability, low costs.

Question 36

What is the main dilemma India faces with retail FDI?

Answer 36

Supporting growth vs. protecting small shops.

Question 37

What is Foreign Direct Investment (FDI)?

Answer 37

When a firm invests directly in new facilities to produce and/or market in a foreign country.

Question 38

What is ASEAN?

Answer 38

Association of Southeast Asian Nations – promotes regional cooperation and trade.

Question 39

What is the goal of the African Continental Free Trade Area (AFCFTA)?

Answer 39

To boost trade within Africa and create a single continental market.

Question 40

How does the availability of skilled labor affect FDI?

Answer 40

It attracts firms that rely on technical expertise and innovation.

Question 41

Why might a country hesitate to join a regional economic bloc?

Answer 41

Fear of losing sovereignty or harming local industries.

Question 42

What does the USMCA stand for?

Answer 42

United States-Mexico-Canada Agreement.

Question 43

What is the European Union (EU)?

Answer 43

A regional bloc with economic and political integration, including a common currency.

Question 44

What is unique about the EU compared to other trade agreements?

Answer 44

It includes political integration and a shared currency (euro).

Question 45

What is a free trade area?

Answer 45

A group of countries that eliminate tariffs between each other but maintain independent trade policies.

Question 46

Why might FDI be controversial in developing countries?

Answer 46

Risk of harming local businesses, labor exploitation, profit repatriation.

Question 47

What are some cons of FDI for companies?

Answer 47

High financial commitment, political risk, complexity, long-term inflexibility.

Question 48

How does regional integration affect small and medium enterprises (SMEs)?

Answer 48

It opens new markets but may also expose them to foreign competition

Question 49

What factors influence whether FDI makes sense?

Answer 49

Company size, risk tolerance, product type, management goals, resources.

Question 50

What are the challenges of regional integration?

Answer 50

Loss of sovereignty, uneven gains, regulatory coordination, domestic opposition.