PIB - Tutorial 7 by Rae Hooi https://padlet.com/raehooi/hibsml48pot2 Made with an open mind en-us 2020-03-05 02:21:12 UTC 2025-12-10 11:32:16 UTC hello@padlet.com 1. What is the difference between interindustry trade and intraindustry trade? Provide an example to illustrate your answer. raehooi https://padlet.com/raehooi/hibsml48pot2/wish/454799032 Interindustry trade is the exchange of products created by one industry in country A for products created by a different industry in country B.
Example: French is relatively productive in wines while Japan has comparative advantage in clock radios. Therefore, they exchange goods produced to each other in order to save the hours of labor.

While Intraindustry is the trade between two countries of products produced by the same industry. 
Example: In car industry, Japan produces Toyota while Germany produces BMW and they import and export products from one to another as it allows workers to learn and innovate in the particular products.]]> 2020-03-05 02:32:05 UTC https://padlet.com/raehooi/hibsml48pot2/wish/454799032 2. What motivates firms to become involved in international trade and foreign direct investment? raehooi https://padlet.com/raehooi/hibsml48pot2/wish/454799318 MNEs engage in international trade for a variety of reasons but mainly because both parties to the transaction, who happen to reside in two different countries, believe they benefit from the voluntary exchange.
 
Numerous factors can influence a firm’s decision to undertake FDI. Some FDI may be undertaken to reduce the firm’s costs. Such supply factors include production costs, logistics availability of natural resources and access to key technology.
 
The decision to engage in FDI may be affected by such demand factors as developing access to new customers, obtaining marketing advantages through local production, exploiting competitive advantage and maintaining nearness to customers as they internationalize operations.
 
Political considerations may also play a role in FDI. Often firms use FDI to avoid host country trade barriers to capture economic development incentives offered by host country government.
]]> 2020-03-05 02:32:53 UTC https://padlet.com/raehooi/hibsml48pot2/wish/454799318 3. Describe and categorize the different forms of international investment raehooi https://padlet.com/raehooi/hibsml48pot2/wish/454799482 Foreign Portfolio Investment (FPI):
FPI consists of securities and other financial assets held by investors in another country. Modern finance theory suggests that foreign portfolio investments will be motivated by attempts to seek an attractive rate of return while reducing the risk that can come from geographically diversifying one’s investment portfolio.
Example:
The year 2018 was a good one for India in terms of FPI. More than 600 new investment funds registered with the Securities and Exchange Board of India (SEBI), bringing the total to 9,246. An easier regulatory climate and a strong performance by Indian equities over the last few years were among the factors sparking foreign investors' interest.

Foreign Direct Investment (FDI):
FDI is acquisition of foreign assets for the purpose of controlling them. FDI may take many forms, including purchase of existing assets in a foreign country; new investment in property, plant, and equipment; and participation in a joint venture with a local partner.
Example:
In 2017, for example, U.S.-based Apple announced a $507.1 million investment to boost its research and development work in China, Apple's third-largest market behind the Americas and Europe. The announced investment relayed CEO Tim Cook's bullishness toward the Chinese market despite a 12% year-over-year decline in Apple's Greater China revenue in the quarter preceding the announcement. ]]> 2020-03-05 02:33:24 UTC https://padlet.com/raehooi/hibsml48pot2/wish/454799482 4. Discuss how do supply, demand, and political factors influence foreign direct investment raehooi https://padlet.com/raehooi/hibsml48pot2/wish/454799663 Among supply factors there are production costs, logistics, resource availability and access to technology. The firms will prefer low production cost foreign countries to get lower labor costs. Foreign locations may be attractive because of lower land prices, tax rates, commercial real estate rents.
EX: NIKE have their production in lower labor cost country such as Vietnam.
For resource availability, the firms will negotiate with host government to gain access to raw materials in return of FDI.
EX:
Malaysia that need palm oil from Indonesia will offer Indonesia FDI in return.
Besides access to technology can encourage firm to invest in existing foreign companies than reproduce an emerging technology company.
EX:
Wipro an Indian MNC had invested in Ginvera Marketing Enterprise that have build their brand in the personal care, skin care and health care industry since 1988 in Malaysia.

As for demand factors such as customer access to physical presence in market.
EX: KFC have different branch all over the world to allow customer access to their products.
The market advantage will also influence the FDI because physical presence of factory in host country can enhance the visibility of their products and foreign firms can promote "buy local" attitude and increase sales.
EX:
Exploitation of competitive advantage will encourage foreign firm to operate in host country than export to the host country.
EX:
Customer Mobility will influence FDI to locate new facility with its clients' nearby factory to support clients' need.
EX: There is Huawei support centre in Malaysia to support customer technical assistances in host country than resend the phone back to China for repair.
 
Lastly, Political factors such as avoidance of trade barriers can support FDI , foreign firms will avoid high tariffs or logistics on imported consumer electronic goods by building  their facilities in host country.
EX:
Moreover, economic development in host country that promote economic welfare such as giving incentives to firms to induce them to locate new facilities  & provide jobs and attract foreign investors.
EX: Provide tax reduction, infrastructure provision and reduction in utility rates.]]> 2020-03-05 02:33:58 UTC https://padlet.com/raehooi/hibsml48pot2/wish/454799663