International Business Chapter 8 Homework Japan This activity focuses on foreign investment, what it means to home and host countries, and the role of government policy on a firm’s investment decisions.

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discussion questions. Please feel free to leave comments in the library that you feel might be

helpful to your colleagues.

CONNECT

Video Case

BMW’s Robertson Sees EV Demand Accelerating

Summary

This activity focuses on foreign investment, what it means to home and host countries, and the

role of government policy on a firm’s investment decisions.

Activity

Students are asked to watch a video on foreign investment and then respond to a series of

questions related to the video.

Class Discussion

International managers need to be aware of the implications of their investment decisions for

both the home country and for the host country. International managers also need to be aware of

how government policy decisions can impact strategic choices for firms.

CONNECT

Click and Drag

The Costs and Benefits of FDI

Summary

This activity explores the costs and benefits of FDI. FDI can be beneficial to a host country bring

in capital, technology, and jobs. Yet, FDI also has its drawbacks. Governments can use various

policies to either encourage or discourage FDI.

Activity

Students are asked to match various costs and benefits of FDI to the correct home country or host

country.

Class Discussion

Managers need to understand the costs and benefits of FDI for both the home country and for the

host country. Consider foreign investment near you and what benefits that investment has

brought to the local community. Are there any drawbacks to the investment?

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Adverse Effects on Competition

I) Host governments sometimes worry that the subsidiaries of foreign MNEs operating in their

country may have greater economic power than indigenous competitors because they may be

be made by a foreign parent that has no real commitment to the host country, and over which the

host country’s government has no real control.

HOME-COUNTRY BENEFITS

L) The benefits of FDI to the home country arise from three sources. First, the capital account of

the home country’s balance of payments benefits from the inward flow of foreign earnings.

concerns about the negative economic effects of offshore production (FDI undertaken to serve

the home market) may be misplaced.

CONNECT

Click and Drag

Why FDI

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Activity

Students are asked to match various costs and benefits to the correct entry mode.

Class Discussion

firms.

Encouraging Outward FDI

C) Many investor nations now have government-backed insurance programs to cover major

types of foreign investment risk.

Restricting Outward FDI

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ownership restraints seem to be based on a belief that local owners can help to maximize the

resource transfer and employment benefits of FDI for the host country.

INTERNATIONAL INSTITUTIONS AND THE LIBERALIZATION OF FDI

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1. In 2008, inward FDI accounted for some 63.7 percent of gross fixed capital formation in

Ireland, but only 4.1 percent in Japan (gross fixed capital formation refers to investments in fixed

assets such as factories, warehouses, and retail stores). What do you think explains this

difference in FDI inflows into the two countries?

2. Compare and contrast these explanations of FDI: internalization theory and Knickerbocker’s

theory of FDI. Which theory do you think offers the best explanation of the historical pattern of

FDI? Why?

3. What are the strengths of the eclectic theory of FDI? Can you see any shortcomings? How

does the eclectic theory influence management practice?

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a. Why did Burberry initially choose a licensing strategy to expand its presence in Japan?

b. What limitations of licensing became apparent over time? Should Burberry have

expected these drawbacks to arise?

c. Was terminating the Japanese licensing agreement and opening wholly owned stores the

correct strategy for Burberry? What are the risks here?

5. You are the international manager of a U.S. business that has just developed a revolutionary

new personal computer that can perform the same functions as PCs 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 the pros and

cons of each alternative, and suggest a course of action to your CEO.

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revolutionary new computer will retain its competitive advantage. If the firm can protect its

Exercise 1

Search phrase: largest transnational corporations

Resource Name: United Nations Conference on Trade and Development (UNCTAD): Largest

Exercise 2

Search phrase: Multilateral Investment Guarantee Agency

(2) Visiting the Resources section, choosing Briefs and Case Studies on the left menu, and then

clicking on the Water link.

FDI in the Indian Retail Sector

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1. What explains the fragmented nature of India’s retail sector? What are the benefits of this

system? What are the costs?

2. How might investment by foreign retailers change retailing in India? What are the potential

benefits of such FDI?

3. Who stands to lose from FDI into India’s retail sector? Who stands to gain?

4. Why has India been so slow to change its laws regarding foreign ownership of retailers? What,

if anything, can foreign retailers do to influence the laws in a way that benefits entry?

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5. Given the political and economic realities in India, what is the best entry strategy for a foreign

retailer?

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Continuous Case Concept

In 2012, Nissan announced plans to increase its investment in Thailand. The company, which

spent about $358 million to open a new plant in the country, hoped the additional capacity the

new plant provided would allow it to increase its market share in the country. Nissan was not the

only foreign automaker expanding into the country—GM, Ford, BMW, and Mercedes also made

investments in Thailand, prompting the claim that Thailand is now the Detroit of the East.

Thailand’s auto production exploded, growing 383 percent between 2000 and 2017.

• Ask students to predict what changes in the global auto industry might occur in the next

decade as a result of Thailand’s position as a regional auto hub. How might the patterns

of FDI shift?

• Then, ask students to consider which theory best explains why companies like Nissan are

attracted to Thailand.

• Finally, ask students to identify the benefits for Thailand of inward FDI in the auto

industry. How will Nissan’s investment impact the country? Does Nissan’s investment

have any drawbacks for Thailand?

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Additional Readings and Sources of Information

How Thailand became the ‘Detroit of the Asia’

https://money.cnn.com/2018/07/10/news/world/thailand-auto-industry/index.html

Auto industry outlook hinges on China sales holding up under tariff pressure

https://www.cnbc.com/2018/09/18/global-auto-outlook-stable-so-far-but-tariffs-and-trade-could-

be-threats-next-year.html

Don’t Underestimate Chinese Automakers

https://www.forbes.com/sites/willyshih/2018/07/25/dont-underestimate-chinese-auto-

makers/#6fedeeb9ec96

Burberry targets emerging markets with Farfetch tie-up

https://www.ft.com/content/f392b8f4-1270-11e8-8cb6-b9ccc4c4dbbb

India’s Biggest Competitors to Walmart and Amazon? Mom and Pop

https://www.wsj.com/articles/indias-biggest-competitors-to-walmart-and-amazon-mom-and-pop-

1527512400

How China’s $60 Billion For Africa Will Drive Global Prosperity

https://www.forbes.com/sites/amyjadesimi/2017/03/14/how-chinas-60-billion-for-africa-will-

drive-global-prosperity/#7fce6d0738a3

Foreign investment in U.S. dropping dramatically under Trump

https://www.cbsnews.com/news/foreign-investment-in-u-s-dropping-dramatically-under-trump

Brexit could cause ‘serious damage’ for foreign investment into the UK, new study says

https://www.cnbc.com/2018/11/01/brexit-could-cause-serious-damage-for-foreign-investment-

into-the-uk-new-study-says.html

Where Is All The FDI Into India Really Coming From And Going To?