Duoc Hau Giang

Only available on StudyMode
  • Download(s) : 58
  • Published : September 23, 2013
Open Document
Text Preview
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 paying them below-market wages in depreciating currencies. d) All of the above

Answer: a)

5 FDI can take the form of:
a) Greenfield investment
b) Cross-border M&A
c) Establishing new production facilities in a foreign country d) All of the above
Answer: d)

6 The Ford Motor Company recently acquired Mazda, a Japanese auto maker, and Jaguar, a British auto maker. a) This is an example of cross-border M&A
b) This was a Greenfield investment
c) Both a) and b)
d) None of the above
Answer: a)

7 According to a recent UN survey, the world FDI stock grew at what rate relative to worldwide exports of goods and services? a) The world FDI stock grew twice as fast as worldwide exports of goods and services. b) The world FDI stock grew at the same rate as worldwide exports of goods and services. c) The world FDI stock grew half as fast as worldwide exports of goods and services. d) None of the above

Answer: a)

Global Trends in FDI

8 Japan plays a major role as an exporter of FDI. As a recipient of FDI a) Japan receives as much FDI as it exports, making it a major player on both fronts. b) Japan plays a relatively minor role, reflecting a variety of legal, economic, and cultural barriers to FDI. c) Japan’s receipts of FDI are third in the world

d) None of the above
Answer: b)

9 The third most important host country for FDI is
a) The United States
b) Japan
c) China
d) Mexico
Answer: c)

10 MNCs have invested in China
a) By lower material costs.
b) By lower labor costs.
c) By a desire to preempt the entry of rivals into China’s potentially huge market. d) All of the above
Answer: d)

11 FDI stocks
a) Are the common shares of multinational companies that invest abroad b) Are mutual funds that invest in FDI
c) Represent the accumulation of previous year’s FDI flows d) At the sum total of current year FDI flows
Answer: c)

12 The dominant source of FDI outflows
a) Several developed countries
b) A few underdeveloped countries next to wealthy...
tracking img