Vernon’s product life-cycle theory of the FDI
Discuss the Vernon’s product life-cycle theory of the FDI. Specify the strength and weakness of theory?
Expert
As per, theory of the product life-cycle, firms take on FDI at the particular stage in life-cycle of the products which they primarily introduced. When new product is introduced, firm chooses to keep the production at home, close to the customers. However, when product gets mature and develop the foreign demands, firm can be induced to start the production in foreign countries, particularly in low-cost countries, to serve local markets and also to export the product back to home country. Theory of product life-cycle may explain the historical development of FDI quite well. In current years, though, international system of production has become too complex to be described neatly through the life-cycle theory. Such as, new products are generally introduced at the same time in many countries and production facilities may be situated in several countries simultaneously.
Since NAFTA was developed, several Asian firms particularly those from the Korea and Japan has made the extensive investments in the Mexico. Why do you think these Asian firms decided to build the production facilities in the Mexico?
Identify and explain important components of social interaction.
It is extremely difficult in order to forecast future exchange rates more precisely as compared to forward exchange rate or to the current spot exchange rate, as per the researchers. How these findings can be interpreted?
Describe the trend of Gross profit of Company?
Describe how country may run an overall balance of payments deficit or surplus.
Describe the allegations of interest rate parity for the determination of the exchange rate.
Explain why and how a firm’s capital cost can be reduced when stock of firm is cross-listed on foreign stock exchanges.
Explain, how international financial management is different from the domestic financial management?
What is the difference among personal or real account and nominal account?
Compare and discuss the hedging transaction exposure by using the forward contract vs. money market instruments. When the optional hedging approaches do creates the same result?
18,76,764
1922382 Asked
3,689
Active Tutors
1413719
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!