ABDM3234 International Business Planning

Tutorial 5
Scenario based questions
Scenario 1
Global Manufacturing Inc., a fast-growing U.S. company, plans for a
production system in which two components of its product will be
manufactured in locations where the cost of production is lowest. The
components will then be taken to maquiladoras for final assembly. GMI plans
to purchase an existing company in Brazil to produce component A and build
a subsidiary in Thailand to produce component B.
1. GMI's investments are examples of ________.
2. What is the system of production used by GMI?
3. GMI's purchase of the Brazilian company is best classified as a(n)
________.
4. GMI's subsidiary for component B in Thailand is best described as a(n)
________.
Scenario 2
Happyland is a country characterized by beautiful beaches, vast natural
resources, and a highly skilled labor force. Happyland is now encouraging
foreign direct investment flows. The country has been exporting textiles,
computer hardware, and software programs. The net result of the trade is
that Happyland exports far more goods and services and receives more
income from abroad than it imports and pays abroad.
5. Happyland's international trade situation illustrates that the country is
experiencing a ________.
6. Transactions involving the export of Happyland's textile and computer
products are included in its ________ account.
7. If Happyland advertises its beaches and attracts tourists, the tourismrelated income would be recorded in its ________ account.
8. If Happyland is successful in attracting foreign direct investment,
transactions involving those investments would appear in the country's
________ account.

9. Tax ___________ is the method used by Happyland to encourage foreign

direct investment inflows?
Discussion Questions
10.
What is the difference between foreign direct investment and
portfolio investment?
11.
What do we mean by a countrys balance of payments and what
is its usefulness?
12.
13.

What two main drivers for growth in foreign direct investment?

Describe any three management issues involved in foreign direct

investment decisions.