INTERNATIONAL BUSINESS

International business



International business

Question 1)

3 costs associated with foreign direct investments

Direct cost

The analytical consensus from studies on the environmental effects of FDI is to decompose the direct effects into “scale effects” (resulting from the expansion of economic output), “structural effects” (from the reallocation of production and consumption), and “technology effects” (from technological development and diffusion).

Technology cost

Technology effects emerge as FDI flow drives a more rapid rate of technology development, diffusion and (sometimes, cf. Chapter V) transfer. Assuming that the technologies used by foreign investors tend to be less polluting and use fewer resources,3 technology effects are expected to be positive (or neutral), depending on whether they improve economic and resource efficiency.

Structural cost

Structural effects are associated with the adjustments within and between economies that occur when the pattern of resource use shifts. To the extent that trade and investment liberalization promote allocative efficiency among economies, structural effects are expected to be positive: goods will be produced with lower input and capital per unit of output worldwide.

Question 2)

Advantages and Disadvantages of entering into foreign market

Advantages

access to difficult markets

low capital risk and low commitment of resources

information on product performance and competitor activities in different markets at little cost

improved delivery and service levels in local markets.

Disadvantages

disclosure of accumulated competitive knowledge and experience

creates possible future competitors

lack of control over licensee operations

passive interaction with the market

exclusion of some export markets

organizing licensing operations: costs of adaptation, transfer and controlling.

Question 3)

As we know that the currency of Japan (Yen) will rise after June 2013, we are going to fix the amount of Japanese yen due to use. For instance our payment which is due on June 2013 is 40,000 yen. By fixing this amount and agreeing with the counterparty to pay 40,000 yen (at the prevailing currency rate) we are going to more profitable.

Question 4)

There are two ...