Chapter 6: Investing Abroad Directly
Chapter 6: Investing Abroad Directly
Choose any Multinational Enterprise (other than Coca-Cola) that engages in FDI and
complete the questions below for your company of choice.
Provide a copy of the articles used to complete the questions.
Below is an example of Coca-Cola:
Coca-Cola Co. owns a secret formula for its sodas and supports Coca-Cola brands.
Coca-Cola Co. produces drink syrups, which it sells to licensed bottlers around the world.
The licensed bottlers mix the syrups with local water and sell the resulting soft drinks in their
countries.
Coca-Cola engages in Horizontal FDI in South Africa (in contrast with Apple, which has a process factory in California, a body factory in Taiwan, and an assembly factory in China to produce its MacBooks).
Ownership: The secret recipe and brand recognition.
Location: Shipping Coca-Cola is expensive — it’s mostly water. Instead, use domestic water.
Internalization: Coca-Cola recipe is easily stolen, so ship the syrup to bottlers and keep recipe
within the company.
O, L, and I advantages are all strong in this case.
Some of the positive benefits of Coca-Cola on the host country: (1) Brought jobs to the communities in South Africa
Some negative benefits of Coca-Cola on the host country: (1) Childhood obesity
1. Did the MNE engage in Horizontal FDI or Vertical FDI (upstream/downstream)?
Draw their value chain to illustrate the type of FDI which they engaged in (see page 154
in your book). (1 paragraphs)
2. According to John Dunning’s framework, what are the ownership advantages that the MNE reaped? Give at least 3 examples directly from your Multinational Enterprise. (1 paragraph)
3. According to John Dunning’s framework, what are the locational advantages that the MNE reaped? Give at least 3 examples directly from your Multinational Enterprise. (1 paragraph)
4. According to John Dunning’s framework, what are the internationalization advantages that the MNE reaped? Give at least 3 examples directly from your Multinational Enterprise. (1 paragraph)
5. Provide at least two of the potential benefits and two negative affects that this MNE
has had on the host country. (1 paragraph)
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