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Duoc Hau Giang

By | September 2013
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Eun & Resnick 4e
CHAPTER 16 Foreign Direct Investment and Cross-Border Acquisitions

Global Trends in FDI
Why Do Firms Invest Overseas?
Trade Barriers
Imperfect Labor Market
Intangible Assets
Vertical Integration
Product Life Cycle
International Finance in Practice: Linear Sequence in Manufacturing: Singer & Company Shareholder Diversification Services
Cross-Border Mergers and Acquisitions
Political Risk and FDI
International Finance in Practice: DaimlerChrysler: The First Global Car Colossus International Finance in Practice: Stories Past and Present
Summary
MINI CASE: Enron versus Bombay Politicians

1 Under a 1981 Voluntary Trade Agreement Japanese automobile manufacturers were not allowed to increase their exports to the U.S. market. As a result: a) They exited the market
b) Honda was motivated to circumvent the trade barriers.
c) Honda’s FDI may have been part of an overall corporate strategy designed to bolster their competitive position vis-à-vis their domestic rivals such as Toyota d) Both b) and c)
Answer: d)

2 Following Honda’s FDI in the U.S.,
a) The U.S. government imposed a Voluntary Trade Agreement under which Japanese automobile manufacturers were not allowed to increase their exports to the U.S. market. b) Toyota and Nissan made direct investments in America

c) Sales of Hondas declined
d) none of the above
Answer: b)

3 Honda’s decision to build a plan in Ohio
a) Was welcomed by the United Auto Workers
b) Was encouraged by assistance from the state of Ohio, including improved infrastructure around the plant and abatement of property taxes. c) Involved setting up a special foreign trade zone that allowed Honda to import auto parts from Japan at a reduced tariff rate. d) All of the above

Answer: d)
4 When firms undertake FDI,
a) They become MNCs
b) They reduce their tax rate since they can tell each country that they do business in that they paid their taxes in other countries. c) The can exploit workers by...
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