Classifications of FDI

FDI can be classified based on form, nature of ownership and level of integration.

• TRUE

• FALSE

Acquisition occurs when a firm invests to build a new manufacturing, marketing or administrative facility, while greenfield investment is when a firm acquires existing facilities.

• TRUE

• FALSE

A merger is a special type of acquisition in which two companies of similar sizes join to form a larger firm.

• TRUE

• FALSE

A wholly owned subsidiary is a type of partnership in which a separate firm is created through the investment or pooling of assets by two or more parent firms that gain joint ownership of the new legal entity.

• TRUE

• FALSE

The level of integration in FDI is divided into vertical and horizontal integration.

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• FALSE

In a horizontal integration, a company owns multiple stages of value chain activities in foreign locations.

• TRUE

• FALSE

Factories and assembly plants are examples of upstream value chain activities.

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• FALSE

Coca – Cola owns bottling plants in China and Malaysia. This is an example of horizontal integration.

• TRUE

• FALSE

Zara’s designs and production activities are performed in Spain while it owns many retail stores globally to distribute its products. This is an example of:

• Greenfield

• Joint venture

• Horizontal integration

• Vertical integration