Exam 7: Foreign Direct Investment

According to the international product life cycle, in which of the following stages is a good produced in the home country because of uncertain domestic demand and to keep production close to the research department?

________ theory states that when an imperfection in the market makes a transaction less efficient than it could be, a company will undertake foreign direct investment to internalize the transaction and thereby remove the imperfection.

Scenario: Global Manufacturing, Inc. (GMI) GMI is a fast-growing U.S. company that wants a production system that makes each of its product's two components in the location where the cost of production is lowest. The components will then be taken to maquiladoras for final assembly. GMI purchased an existing company in Brazil to produce component A and built a subsidiary in Thailand to produce component B. -GMI's purchase of the Brazilian company can be best classified as a(n) ________.

Exports and imports of computer software, electronic components, and apparel would be reflected in the ________ account within the current account.

Explain the theory of market imperfections and describe the two market imperfections.

The two main reasons countries intervene in foreign direct investment flows are to control the balance of payments and to obtain resources and benefits.

Scenario: Happyland Happyland, a country of about 48 million people with beautiful beaches, vast natural resources, and a highly skilled labor force, is encouraging foreign direct investment flows. The country has been exporting textiles, computer hardware, and software. The net result of trade is that Happyland exports far more goods and services and receives more income from abroad than it imports and pays abroad. -The exporting of Happyland's textile and computer products are included in its ________.

What two factors propel growth in foreign direct investment?

Scenario: Happyland Happyland, a country of about 48 million people with beautiful beaches, vast natural resources, and a highly skilled labor force, is encouraging foreign direct investment flows. The country has been exporting textiles, computer hardware, and software. The net result of trade is that Happyland exports far more goods and services and receives more income from abroad than it imports and pays abroad. -If Happyland markets its beaches and attracts tourists, the tourism-related income would be included in its ________.

The extension of company activities into stages of production that provide a firm's inputs or absorb its output is called ________.

The ________ account records transactions involving the import and export of goods and services, income receipts on assets abroad, and income payments on foreign assets inside the country.

Discuss some surprises that may face managers as they invest in new markets. How can managers minimize the disadvantages of doing business abroad?

Complete ownership of a business in another country ________.

A(n) ________ is the advantage of locating a particular economic activity in a specific location because of the characteristics of that location.

According to the eclectic theory, an internalization advantage is the advantage that arises from internalizing a business activity rather than leaving it to a relatively inefficient market.

According to the eclectic theory, an ownership advantage is the advantage of locating a particular economic activity in a specific location because of the characteristics of that location.

A market that is said to operate at peak efficiency and where goods are readily and easily available is said to be a(n) ________.

Factors that reduce the appeal of purchasing existing facilities include obsolete equipment, poor relations with workers, and an unsuitable location.

The ________ represents a country's national accounting system that records all payments to entities in other countries and all receipts coming into the nation.

Factors that affect the cost of production in any national market include all of the following EXCEPT ________.