Which of the following best describes horizontal foreign direct investment?

Horizontal foreign direct investment refers to the overseas manufacturing of products and services similar to those the company produces and manufactures in its home market. … It is called horizontal because the company duplicates its business activities of its home country in different countries.

Which of the following best describes the term FDI?

Which of the following best describes foreign direct investment (FDI)? … A firm’s direct investment in production and/or service activities abroad. b. The purchases of foreign securities by people within the U.S.

Why is foreign direct investment horizontal?

Answer: Horizontal FDI refers to the type of direct investment between industrialized countries as ways to avoid trade barriers, gain better access to the local economy, or draw on technical expertise in the area by locating near other established firms.

Which of the following best describes the term foreign direct investment or FDI *?

Foreign Direct Investment (FDI) is an investment in business in one country into business interests located in another country Through FDI the company or a firm establishes business operations and assets in the foreign country with the sole objective of production and distribution.

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What is the difference between vertical and horizontal FDI?

Vertical foreign direct investment occurs when a multinational acquires an operation that either acts as a supplier or distributor. Horizontal FDI occurs when a company initiates a similar operation or business model in another country.

What is FDI in simple words?

A foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets in a foreign company.

What is FDI and its importance?

Foreign direct investment is when an investor living in one country invests in a business based in another country. … Foreign direct investment is significant for developing economies and emerging markets where companies need funding and expertise to expand their international sales.

What are the 3 types of foreign direct investment?

Types of FDI

  • Horizontal FDI. The most common type of FDI is Horizontal FDI, which primarily revolves around investing funds in a foreign company belonging to the same industry as that owned or operated by the FDI investor. …
  • Vertical FDI. …
  • Vertical FDI. …
  • Conglomerate FDI. …
  • Conglomerate FDI.


What is difference between FDI and FPI?

FDI implies investment by foreign investors directly in the productive assets of another nation. FPI means investing in financial assets, such as stocks and bonds of entities located in another country.

How many types of FDI are there?

Typically, there are two main types of FDI: horizontal and vertical FDI. Horizontal: a business expands its domestic operations to a foreign country.

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What are the benefits of FDI?

1. FDI stimulates economic development

  • FDI stimulates economic development. …
  • FDI stimulates economic development. …
  • FDI results in increased employment opportunities. …
  • FDI results in increased employment opportunities. …
  • FDI results in the development of human resources. …
  • FDI results in the development of human resources.


Which of the following constitutes foreign direct investment?

Definitions. Broadly, foreign direct investment includes “mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations, and intra company loans”.

What is the relationship between foreign direct investment and multinational enterprises?

The multinational firm and its main vehicle, foreign direct investment, are key forces in economic globalization. Their importance to the world economy can be seen in the fact that since 1990 foreign direct investment has grown more rapidly than the world GDP and world trade.

What is an example of a vertical FDI?

Vertical FDI is where an investment is made within the supply chain, but not directly in the same industry. In other words, a business invests in a foreign firm that it may supply or sell too. For instance, Hersheys, a US chocolate manufacturer, may look to invest in cocoa producers in Brazil.

What is FDI advantages and disadvantages?

Employment and Economic Boost. Foreign direct investment creates new jobs, as investors build new companies in the target country, create new opportunities. This leads to an increase in income and more buying power to the people, which in turn leads to an economic boost. 4. Development of Human Capital Resources.

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What is FDI seeking?

MARKET SEEKING FDI. To identify and exploit new markets for the firms` finished products. Requires easy production expansion and thus. economies of scale.

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