FDI and Market Entry Strategies

A set of flashcards covering key concepts of Foreign Direct Investment and market entry strategies.

Foreign Direct Investment (FDI)

Establishment of a long-term interest by a firm in assets located in another country.

Equity Modes

Investment where the firm owns shares in a foreign operation, such as wholly owned subsidiaries or joint ventures.

Non-Equity Modes

Contractual relationships for market entry, including contract manufacturing, management contracts, and turnkey projects.

OLI Paradigm

A framework developed by John Dunning stating that successful FDI occurs when Ownership, Location, and Internalization advantages are present.

Ownership Advantages

Firm-specific assets that give a competitive edge in foreign markets, such as technology and brand reputation.

Location Advantages

Host country characteristics that attract investment, like resource access, market size, and regulatory environment.

Internalization Advantages

Benefits of controlling foreign operations internally to minimize transaction costs and protect proprietary assets.

Manufacturing-led FDI

FDI primarily driven by access to cheap labor and resources, prominent from the 1970s to the 1990s.

Market-seeking motives

Firms enter large or high-growth markets to increase sales and revenue.

Risk management

Balancing control, transaction costs, and political/legal risks critical for successful international expansion.

Sustainability

Integral to FDI and operations strategy, emphasizing reuse, recycling, and lifecycle optimization of products.