AU International Business Foreign Direct Investment Discussion

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This is BUSI457 International Business course. TEXTBOOK International Business Competing in the Global Marketplace, 12th Edition Authors: Charles W.L. Hill, G. Tomas M. Hult Copyright Date: 2019 This one is long discussion section D6: Direct Investment, Tariffs and Strategy for Harley Davidson View the Harley Davidson CEO Interview and read the article at: https://www.cnbc.com/2019/05/20/harley-ceo-on-trade-war-we-cant-sit-by-and-wait-forsomething-to-happen.html Read “chapter 8 – Foreign Direct Investment” and watch video/read article. After watching the video, answer the following questions. Prove your answer that you read the textbook. Discuss the following questions: Remember: “Prove” you read the chapter. 1.How are Tariffs affecting Harley Davidson? How are Presidential comments directly affecting them? 2.How are they deciding to roll out their electric vehicles? Where are they directly investing in markets? How do they manage their supply chain? 3.How should they prioritize their markets? What options do they have? What would you do as CEO? 4.Anything else interesting in the video or with Harley and Motorcycle markets? International Business Ms. Jean Ellefson Course: BUSI457 Credit Hours: 3 Semester Hours Class Time / Location: Canvas Get tested…  Testing is one of most important and effective tools we have to mitigate the spread of COVID-19 on our campus. For testing to be most effective, it requires all of our students to take part in the process.  Thus far, the testing process has gone well. More than 1,200 of our students have provided saliva specimens used in in pooled sample testing, and none of the samples have come back positive. With that being said, there is still a significant portion of our student body—as many as 350 students—who have yet to be tested.  For students who have not yet signed up or appeared for testing, please know that it is required. Students who fail to meet their responsibilities for being tested will be subject to sanctions under the Student Code of Conduct, up to and including suspension and possible expulsion.  Your shared responsibilities for promoting a safe campus include wearing a mask or face covering when required, engaging in appropriate personal hygiene, practicing social distancing, and submitting to daily health screening. Equally critical is your duty to participate in required testing. Students can reserve a convenient time to be tested can by using this link: https://sugeni.us/W2XI. 2 3 Foreign Direct Investment Inflows―flows of FDI into a country Foreign direct investment (FDI) • Occurs when a firm invests directly in new facilities to produce and/or market in a foreign country (10 percent or more) • The firm becomes a multinational enterprise Stock of FDI - the total accumulated value of foreign-owned assets at a given time Outflows―flows of FDI out of a country Foreign Direct Investment Trends • Increase in both flow and stock of FDI over past 25 years • Growing more rapidly than world trade and world output • Way to circumvent trade barriers • Political and economic changes • Shift toward democratic political institutions and free market economies • Globalization • Historically, mostly directed at developed nations • U.S. is a target for FDI inflows • Large and wealthy domestic market • Dynamic and stable economy • Favorable political environment and openness to FDI • European inflows mainly from the U.S. and other European nations • China has also been a recipient of FDI recently Discussion: Auto Markets in China The gigafactory 1. Tesla’s Gigafactory on the outskirts of Shanghai is the first of its kind. What advantages does this give Tesla in China? Do you see any disadvantages? Explain. How did China’s new regulations on foreign investment encourage the move by Tesla? 2. Discuss the nature of the auto industry in China. What makes China an attractive market? Can foreign companies like Tesla compete with local companies? Why is success in China so important to the future of Tesla? How could success in China change Tesla? 3. How does Porter’s Diamond relate to the factors with Tesla and China? 4. How does COVID impact this? Multi-national Growth Strategic Options • Exporting - transportation costs and trade barriers may make this difficult • Licensing: • Licensing may result in a firm’s giving away valuable technological know-how to a potential foreign competitor. • Licensing does not give a firm the tight control over production, marketing, and strategy in a foreign country that may be required to maximize its profitability. • The firm’s competitive advantage is based on the management, marketing, and manufacturing capabilities, which is not amenable to licensing. • FDI – When a firm wishes to maintain control over its technological know-how, or over its operations and business strategy, or when the firm’s capabilities are simply not amenable to licensing. Governments may increase the attractiveness of FDI and licensing through increases in quotas and tariffs FDI Decision Method Jump to long description in appendix FDI Options • Greenfield investments • Parent company builds a new entity from the ground up • Acquisitions and mergers • Quicker to execute • Can acquire valuable strategic assets • Can increase the efficiency of the acquired unit by transferring capital, technology, or management skills • Get to economies of scale quicker Political Ideology and FDI Radical View Free Market View Pragmatic Nationalist View • FDI has benefits and costs • Pursue policies designed to maximize the national benefits and minimize the national costs • Aggressively court FDI believed to be in the national interest 10 Influencers of FDI International Institutions and the Liberalization of FDI • World Trade Organization • Push for liberalization of regulations governing FDI • Two extensive multinational agreements were reached in 1997 to liberalize trade in telecommunications and financial services • FDI and Government Policy • Theory of FDI • Dunning’s locations specific advantages argument explains the direction of FDI, but not why firms prefer FDI to exporting or licensing • Internalization theories identify the relative profitability of FDI, exporting, and licensing • Government Attitudes and Negotiation Strength Busi457 Project Guidelines  Find a topic important to YOU with regard to International Business, for you to research, analyze and create recommendations.  Potential topics include:    Study of a multi-national company and their actions across multiple countries, or within a single non-home country of the entity. A multi-national market and the flows through countries and companies A country, their policies and impacts  Present an individual project proposal:  Including what what you want to work on, how you plan to tackle the problem, what you hope to learn  Work alone or in groups up to 4 (Possible to change projects from originally submitted)  Submit Final paper (at least five pages) and slides submitted  Presentations  Bonus points awarded for:   Teammates Primary sources 12 Discussion (Canvas): Direct Investment, Tariffs and Strategy for Harley Davidson View the Harley Davidson CEO Interview and read the article at: https://www.cnbc.com/2019/05/20/harley-ceo-on-trade-war-we-cant-sit-by-and-wait-for-something-to-happen.html Discuss the following questions: 1. How are Tariffs affecting Harley Davidson? How are Presidential comments directly affecting them? 2. How are they deciding to roll out their electric vehicles?Where are they directly investing in markets? How do they manage their supply chain? 3. How should they prioritize their markets? What options do they have? What would you do as CEO? 4. Anything else interesting in the video or with Harley and Motorcycle markets? Remember to discuss! For next time… • Discussion (Canvas) Harley Davidson Learning Objectives LO 8-1 Recognize current trends regarding foreign direct investment (FDI) in the world economy. LO 8-2 Explain the different theories of FDI. LO 8-3 Understand how political ideology shapes a government’s attitudes toward FDI. LO 8-4 Describe the benefits and costs of FDI to home and host countries. LO 8-5 Explain the range of policy instruments that governments use to influence FDI. LO 8-6 Identify the implications for managers of the theory and government policies associated with FDI.
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FOREIGN DIRECT INVESTMENT

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Foreign Direct Investment
Student’s Name
Institutional Affiliation
Course Name
Professor’s Name
Date

FOREIGN DIRECT INVESTMENT

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Foreign Direct Investment
Q1
a
Harley Davidson has severely been affected by the tariffs on aluminum and steel,
which are the primary metals used to make the bikes. The company is also hit by the taxes
supposed to assemble the motorcycle imported into the European Union fully. The tariffs
have already increased from 6% to 31%, which are expected to increase to 56% around 2021.
b
Levatich said that the president’s comments did not affect Harley Davidson because it
clarified the Europea...


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