by LAURA DANIELA FIALLO HERRERA 5 years ago
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TYPES AND EXAMPLES
Platform
A business expands into a foreign country but the output from the foreign operations is exported to a third country. This is also referred to as export-platform FDI. Platform FDI commonly happens in low-cost locations inside free-trade areas.
if Ford purchased manufacturing plants in Ireland with the primary purpose of exporting cars to other countries in the EU.
Conglomerate
A business acquires an unrelated business in a foreign country. This is uncommon as it requires overcoming two barriers to entry: entering a foreign country and entering a new industry or market.
if Virgin Group, which is based in the United Kingdom, acquired a clothing line in France.
Vertical
A business expands into a foreign country by moving to a different level of the supply chain. In other words, a firm conducts different activities abroad but these activities are still related to the main business.
McDonald’s could purchase a large-scale farm in Canada to produce meat for their restaurants.
Horizontal
A business expands its domestic operations to a foreign country. In this case, the business conducts the same activities but in a foreign country.
EXAMPLE
McDonald’s opening restaurants in Japan would be considered horizontal FDI.
Commonly mistaken
Commonly mistaken with a merger which occurs when the purchaser and the target both cease to exist and instead form a new, combined company.
Examples
1. Microsoft and Skype 2. TransCanada and Columbia Pipeline Group 3. DELL and EMC 4. Google acquired android for $50 million in August 2005
Volvo Uber Joint Venture
Recently, Volvo and Uber have also announced that they would form a joint venture to produce self-driving cars. The ratio would be 50%-50%. As per the agreement, they are doing a $300 million investment for this JV. Uber will purchase Volvos and then install its own driverless control system for the specific needs of its ride-hailing service.
Key Takeaways:
*A JV is a Business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. *They are a partnership in the colloquial sense of the word but can take on any legal structure. *A common use of JVs is to partner up with a local business to enter a foreign market.
*Interviews with the franchisor *Interviews with existing franchisees *Examination of the franchise's Uniform Franchise Offering Circular (UFOC) *Examination of the franchise agreement *Examination of the franchise's audited financial statements *An earnings-claim statement or sample unit income (profit-and-loss) statement *Trade-area surveys *List of current franchisees *Newspaper or magazine articles about the franchise *A list of the franchisor's current assets and liabilities
In order to analyze a franchise will be acquired through the following:
Best Franchises to Buy
1. McDonald's
2.7-ElevenDunkin'
3.The UPS Store
4.RE/MAX
5.Sonic Drive-In
6.Great Clips
7.Taco Bell
8.Hardee's Restaurant
9.Sport Clips
How it works?
For example, about 90 percent of the $160 million a year in sales at Calvin Klein Inc. comes from licensing the designer's name to makers of underwear, jeans and perfume.
Example
Subway
Subway is a restaurant or franchiser that sells the rights to use and distribute its products to franchisees the individual restaurant owners. All franchise agreements are slightly different, but most of them have a two-part payment plan.
