Business Finance Homework Help

Chapter 8

Question 7: For each of the following, specify whether the foreign direct investment is hor- izontal or vertical; in addition, describe whether that investment represents an FDI inflow or outflow from the countries that are mentioned.

1. McDonald’s (a U.S. multinational) opens up and operates new restaurants in Europe.
2. Total (a French oil multinational) buys ownership and exploration rights to oil fields in Cameroon.
3. Volkswagen (a German multinational auto producer) opens some new dealerships in the United States. (Note that, at this time, Volkswagen does not produce any cars in the United States.)
4. Nestlé (a Swiss multinational producer of foods and drinks) builds a new production factory in Bulgaria to produce Kit Kat chocolate bars. (Kit Kat bars are produced by Nestlé in 17 countries around the world.)

Question 8: If there are internal economies of scale, why would it ever make sense for a firm to produce the same good in more than one production facility?

Question 9: Most firms in the apparel and footwear industries choose to outsource production to countries where labor is abundant (primarily, Southeast Asia and the Caribbean)—but those firms do not integrate with their suppliers there. On the other hand, firms in many capital- intensive industries choose to integrate with their suppliers. What could be some differences be- tween the labor-intensive apparel and footwear industries on the one hand and capital-intensive industries on the other hand that would explain these choices?

Global Value Chains

What are the different forces of dispersion and agglomeration that determine how dispersed production would be in a value chain? (500 words)