【正文】 trength。 and greenfield direct investments and/or acquisition of an existing foreign firm require the highest degree of control (along with a higher level of financial investment). The spectrum of investment approaches (licensing, management contracts, joint ventures, and direct investment) require in that order everincreasing investment of more monetary capital. The firm must decide if the benefits of greater investment (presumably greater profits, plus possibly acquiring market share or forestalling petitors from gaining a greater market share) are worth the differing amounts of monetary capital needed.182. Theory of Comparative Advantage. What is the essence of the theory of parative advantage? The essence of the theory of parative advantage is that a country should specialize in producing those goods and services for which it has a relative cost advantage pared to other countries, export a portion of those goods and services, and use the proceeds from those exports to import goods and services for which it has a relative cost disadvantage. The theory focuses on the concept of “relative advantage” for each country. Relative advantage means a parison of the ratio of costs between items within one country to the ratio of costs within another country. A country might have an absolute advantage in everything, but it will still gain by specializing where its relative advantage is greatest.183. Market Imperfections. MNEs strive to take advantage of market imperfections in national markets for products, factors of production, and financial assets. Large international firms are better able to exploit such imperfections. What are their main petitive advantages? MNEs strive to take advantage of imperfections in national markets for products, factors of production, and financial assets. Imperfections in the market for products translate into market opportunities for MNEs. Large international firms are better able to exploit such petitive factors as economies of scale, managerial and technological expertise, product differentiation, and financial strength than are their local petitors. In fact, MNEs thrive best in markets characterized by international oligopolistic petition, where these factors are particularly critical. In addition, once MNEs have established a physical presence abroad, they are in a better position than purely domestic firms to identify and implement market opportunities through their own internal information network.184. Strategic Motives for Foreign Direct Investment (FDI). a. Summarize the five main motives that drive the decision to initiate FDI. Strategic motives drive the decision to invest abroad and bee a MNE. These motives can be summarized under the following five categories. i. Market seekers produce in foreign markets either to satisfy local demand or to export to markets other than their home market. . automobile firms manufacturing in Europe for local consumption are an example of marketseeking motivation. ii. Raw material seekers extract raw materials wherever they can be found, either for export or for further processing and sale in the country in which they are found—the host country. Firms in the oil, mining, plantation, and forest industries fall into this category.iii. Production efficiency seekers produce in countries where one or more of the factors of production are underpriced relative to their productivity. Laborintensive production of electronic ponents in Taiwan, Malaysia, and Mexico is an example of this motivation.iv. Knowledge seekers operate in foreign countries to gain access to technology or managerial expertise. For example, German, Dutch, and Japanese firms have purchased electronics firms for their technology. v. Political safety seekers acquire or establish new operations in countries that are considered unlikely to expropriate or interfere with private enterprise. For example, Hong Kong firms invested heavily in the United States, United Kingdom, Canada, and Australia in anticipation of the consequences of China’s 1997 takeover of the British colony.b. Match these motives with the following MNEs: General Motors (USA): market seekers Royal Dutch Shell (Netherlands/UK): raw material seekers Kentucky Fried Chicken (USA): market seekers Jardine Matheson (Hong Kong): political safety seekers Apple Computer (USA): production efficiency seekers NEC (Japan): knowledge seekers185. Competitive Advantage. In deciding whether to invest abroad, management must first determine whether the firm has a sustainable petitive advantage that enables it to pete effectively in the home market. What are the necessary characteristics of this petitive advantage? In deciding whether to invest abroad, management must first determine whether the firm has a sustainable petitive advantage that enables it to pete effectively in the home market. The petitive advantage must be firmspecific, transferable, and powerful enough to pensate the firm for the potential disadvantages of operating abroad (foreign exchange risks, political risks, and increased agency costs). Based on observations of firms that have successfully invested abroad, we can conclude that some of the petitive advantages enjoyed by MNEs are (1) economies of scale and scope arising from their large size。 Possible improvement of the technology by the local licensee, which then enters the original firm’s home market Methods of taxation, including the rate, the type of taxation, and means by which the rate base is determined. Inconvertibili。 Permission for 100% foreign ownership versus required local ownership (joint venture) participation. Risk that technology will be stolen (3) superior technology owing to their heavy emphasis on research。 (2) managerial and marketing expertise。 Possible loss of opportunity to enter the licensee’s market with FDI later Access to hostcountry capital markets, particularly for longterm borrowing.183