Ib Coca Cola
You are the international manager of a U.S business that has just developed a revolutionary new personal computer than can perform the same functions as existing PC’s but costs only half as much to manufacture. Several patents protect the unique design of this computer. Your CEO has asked you to formulate a recommendation for how to expand into Western Europe.
Your options are
a) To export from the United States;
b) To license a European firm to manufacture and market the computer in Europe; or
c) To set up a wholly owned subsidiary in Europe.
Evaluate pros and cons of each alternative and suggest a course of action to your CEO.
ANSWER
First and foremost, before answering the question, we must understand on the question mentioned on the Foreign Direct Investment (FDI) indirectly that when a firm/companies invest directly in facilities to produce or market a product in a foreign country.
For us, we should also understand on the FDI’s personally that makes us easy to explain to the top level management firmly. In the FDI’s scenario, it involved on two (2) main forms as follows:
1. Greenfield Investment: This involves establishing a new operation in a foreign country.
2. Involves acquiring or merging with an existing firm in the foreign country.
As we discussed on the FDI, the most important is that to understand on how to distinguish between the flow of FDI and the stock of FDI. Thus, the flow of FDI is that refers to the amount of FDI undertaken over a given time period (normally a year). Secondly, we should also to understand on the stock of FDI that refers to the total accumulated value of foreign-owned assets at a given time. Further to these, we should look into outflow of FDI, meaning the flow of FDI out of a country, and inflow of FDI, the flow of FDI into a country.
After having rough idea on what is Foreign Direct Investment (FDI), now we can go deeper by answering the question step by step as follows?
a. To export from
Your options are
a) To export from the United States;
b) To license a European firm to manufacture and market the computer in Europe; or
c) To set up a wholly owned subsidiary in Europe.
Evaluate pros and cons of each alternative and suggest a course of action to your CEO.
ANSWER
First and foremost, before answering the question, we must understand on the question mentioned on the Foreign Direct Investment (FDI) indirectly that when a firm/companies invest directly in facilities to produce or market a product in a foreign country.
For us, we should also understand on the FDI’s personally that makes us easy to explain to the top level management firmly. In the FDI’s scenario, it involved on two (2) main forms as follows:
1. Greenfield Investment: This involves establishing a new operation in a foreign country.
2. Involves acquiring or merging with an existing firm in the foreign country.
As we discussed on the FDI, the most important is that to understand on how to distinguish between the flow of FDI and the stock of FDI. Thus, the flow of FDI is that refers to the amount of FDI undertaken over a given time period (normally a year). Secondly, we should also to understand on the stock of FDI that refers to the total accumulated value of foreign-owned assets at a given time. Further to these, we should look into outflow of FDI, meaning the flow of FDI out of a country, and inflow of FDI, the flow of FDI into a country.
After having rough idea on what is Foreign Direct Investment (FDI), now we can go deeper by answering the question step by step as follows?
a. To export from