Chapter IC, Problem 8.5CDQ

Summary Introduction

Case summary:

Company V decides to invest in Country R. The tariffs in Country R are more attractive for many manufacturers to make the investments. But in 2014 Country R faced some crisis. For now, Company V made a significant investment in Country R though the company faced some decline which results in overcapacity.

To qualify for the incentive program the company avoids the high import tariffs. Company V has to produce 300,000 vehicles in Country R by 2020 which cannot be obtained in the current market situation.

Characters in the case:

• Company V
• Country R

To discuss: The reason for the decisions of Company V to stay in Country R despite of the political and economic condition.

Introduction:

Foreign direct investment refers to the investment of a firm in one country and operating a business in another country.