Business Quiz Chapter 8
Review Questions for Final Exam November 2013
1. Discuss why much of the recent increase in FDI is being driven by the dramatic political and economic changes that have been occurring in many of the world's developing nations.
a. These countries are now open to FDI and companies in places that are developed want to go to places people don’t have all the products or as many of the product they sell.
2. Exporting is an attractive option for products that have a low value-to-weight ratio. Explain why it is or it is not the case.
a. They will cost more to ship then you will get in profit. In favor of less weight and more value. That is why the export pieces of items instead of the whole thing.
3. Despite its advantages, FDI has been described as an "expensive" and "risky" international growth strategy. Other things being equal, why is FDI expensive and risky? Compare the risks involved with FDI to the risks involved with exporting and licensing.
a. The company is investing in a country that does not have stable political, legal, and economic systems. If your investment is confiscated and you would not get paid. Ex. Uganda. It can be expensive because of the cost of expatriates. And what happens if you can’t work the local people or find a local workforce. Pricy to expand company to another country
4. Name three reasons that licensing may not be an attractive option.
a. Export – people who manuf. a lot in their own country, economies of scale – more you produce the less it cost per item, reach a critical mass because you have enough storage for the resources you don’t have
b. Licensing- you have the know-how, you can get something that is already established (you don’t have control over manuf, and you can be impersonated.
5. Justify the following statement: "Governments are the main source of impediments to the free flow of products between nations."
a. They can establish tariff, subsidies, quotas, laws that restrict products coming in.
1. Discuss why much of the recent increase in FDI is being driven by the dramatic political and economic changes that have been occurring in many of the world's developing nations.
a. These countries are now open to FDI and companies in places that are developed want to go to places people don’t have all the products or as many of the product they sell.
2. Exporting is an attractive option for products that have a low value-to-weight ratio. Explain why it is or it is not the case.
a. They will cost more to ship then you will get in profit. In favor of less weight and more value. That is why the export pieces of items instead of the whole thing.
3. Despite its advantages, FDI has been described as an "expensive" and "risky" international growth strategy. Other things being equal, why is FDI expensive and risky? Compare the risks involved with FDI to the risks involved with exporting and licensing.
a. The company is investing in a country that does not have stable political, legal, and economic systems. If your investment is confiscated and you would not get paid. Ex. Uganda. It can be expensive because of the cost of expatriates. And what happens if you can’t work the local people or find a local workforce. Pricy to expand company to another country
4. Name three reasons that licensing may not be an attractive option.
a. Export – people who manuf. a lot in their own country, economies of scale – more you produce the less it cost per item, reach a critical mass because you have enough storage for the resources you don’t have
b. Licensing- you have the know-how, you can get something that is already established (you don’t have control over manuf, and you can be impersonated.
5. Justify the following statement: "Governments are the main source of impediments to the free flow of products between nations."
a. They can establish tariff, subsidies, quotas, laws that restrict products coming in.