FOREIGN DIRECT

INVESTMENT
Investment
- an asset or item acquired with the goal of
generating income or appreciation. In an economic
sense, an investment is the purchase of goods that
are not consumed today but are used in the future to
create wealth. In finance, an investment is a
monetary asset purchased with the idea that the
asset will provide income in the future or will later
be sold at a higher price for a profit.
What is a Foreign Direct
Investment (FDI)?
◈ 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, including
establishing ownership or controlling interest in a
foreign company. Foreign direct investments are
distinguished from portfolio investments in which an
investor merely purchases equities of foreign-based
companies.
METHODS
◈ Greenfield Investments
◈ Brownfield Investments
Greenfield Investment
-a type of foreign direct investment (FDI) where
a parent company builds its operations in a
foreign country from the ground up. In addition
to the construction of new production facilities,
these projects can also include the building of
new distribution hubs, offices and living quarters.
Brownfield Investment
- also referred to as "brownfield" is when a
company or government entity purchases or
leases existing production facilities to launch a
new production activity
TYPES
◈ Horizontal FDI
◈ Vertical FDI
◆ Forward Vertical FDI
◆ Backward Vertical FDI
◈ Conglomerate FDI
◈ Greenfield Entry
◈ Foreign Takeover
◈ Horizontal FDI- It is the investment done by a
company or organization which practices all the
tasks and activities done at the investing company,
back at its own country of operation. Therefore,
basically such investors are from the same
industry where investments are done but
operating in two different countries.
◈ Vertical FDI: The industry of the investor and the company
where investments are done are related to each other. This type of
FDI is further classified as:
◆ Forward Vertical FDI: In such investments, foreign
investments are done in organizations which can take the
products forward towards the customers. For e.g., a car
manufacturing company in Australia invests in a wholesale
Car Dealer company in India.
◆ Backward Vertical FDI: IN such investments, foreign
investments are done in an organization which is involved in
sourcing of products for the particular industry. For e.g., the
car manufacturer of Australia invests in a tire manufacturing
plant in India.
◈ Conglomerate FDI: Such investments are done
to gain control in unrelated business segments
and industries in a foreign land. For e.g., the car
manufacturer of Australia invests in a consumer
durable good manufacturer in India. Here the
investing company ideally manages two
challenges, first being gaining operational control
in a foreign land, and the second being starting
operations in a new industry segment.
◈ Greenfield Entry: In this special type of FDI,
the investing company refers to an investing
organization starting assembling from scratch
just like Honda did in United Kingdom
◈ Foreign Takeover: This type of FDI takes
the form of a foreign merger, acquisition or
takeover of an exisiting foreign company.
Examples of FDI
◈ manufacturing
◈ real estate
◈ arts
◈ electricity
◈ gas, steam, and air-conditioning supply activities
◈ financial and insurance
◈ entertainment and recreation
Cited
◈ https://www.investopedia.com/terms/f/fdi.asp
◈ https://www.investopedia.com/terms/i/investment.asp
◈ https://www.investopedia.com/terms/g/greenfield.asp
◈ https://www.investopedia.com/terms/b/brownfield.asp
◈ https://kittelsoncarpo.com/foreign-direct-investments-in-the-
philippines-for-2018
/
Presenters
◈ Aballe, Angelica Cristine
◈ Cabugatan, May Ann
◈ Cambarihan, Shaira