Why companies engage in IB

Question 1

IB vs Domestic Market

Answer 1

• Longer distances
  => Higher cost
  => More difficult control
• Wider diversity of political and legal environments
  => Complexity
  => Transaction costs
• Wider diversity of social, cultural, and economic environments
  => Market Heterogeneity
  => Different Consumer Groups
  => Different Languages and Currencies
  => Variety of Business Cycles

Question 2

a firm takes a controlling interest; ownership of a foreign property in exchange for a financial return, such as interest and dividends

Answer 2

FDI

Question 3

two or more companies share ownership of the investment

Answer 3

Joint venture

Question 4

non-controlling interest

Answer 4

Portfolio investment

Question 5

a country receives a company’s direct investment from abroad

Answer 5

inward investment

Question 6

a country sends a company’s direct investment abroad

Answer 6

outward investment

Question 7

Companies also engage in IB by

Answer 7

export import

Question 8

Physical factors

Answer 8

Geographic, demographic

Question 9

Institutional factors

Answer 9

Political policy, Legal policies, Cultural forces, economic forces

Question 10

Competitive environment

Answer 10

product strategy, resources and experience, competitors faced in each market

Question 11

• Remuneration of capital are

Answer 11

dividends or interest

Question 12

what companies make when investing

Answer 12

CAPEX