Foreign direct investment (FDI) is a form of international investment in which an investor in one economy establishes an interest in another economy. One industry that takes part in FDI is the automobile industry as it is not realistic for producers to make all the parts and products, so they ultimately open plants in other countries. Outsourcing to other countries is a common practice for manufacturers due to the lower labor costs, lower energy costs, and trade agreements, and Mexico seems to be the country to go to.
One US based company that has an extensive history in Mexico is Ford and they are currently in the process of deepening their roots. Discovered by union workers in early 2021, Ford stated they will be moving operations from their Ohio plant to Mexico. Being the first automobile manufacturer to begin operations in Mexico back in 1925 it is not a surprise that they would look to further their work in Mexico, but they are receiving backlash from the natives of Ohio. Prior to the announcement of the move, Ford had told the people of Ohio that they would be the ones to produce their new electric vehicles which would help with the local economy, produce additional jobs, and hopefully speed up the distribution of vehicles, but that is no longer the case. The global chip shortage has put a lot of strain on all auto manufacturers, so by moving where they can be made quicker will solve the problem sooner.
The benefits of Ford moving to Mexico include lower costs for parts, less of a shortage in parts, and ultimately a lowering in price of the vehicles on the market. As mentioned, the biggest problem this is looking to solve is the part shortage, and by having the plants just south of the US will allow for resources to be used more sparingly. On the other hand, it is removing jobs from the local Ohio economy and motivating other manufacturers to move. Cheap labor is good for the businesses goal of making money, but it hurts the national economy if they are all to follow Ford.
DeWine at City Club: No jobs will be lost at Avon Lake ford plant. Ideastream Public Media. (2021, March 19). Retrieved September 17, 2022, from https://www.ideastream.org/news/dewine-at-city-club-no-jobs-will-be-lost-at-avon-lake-ford-plant
Hall, D. H. and K. (2021, March 16). UAW blasts Ford for backing out of Ohio Assembly Investment. The Detroit News. Retrieved September 17, 2022, from https://www.detroitnews.com/story/business/autos/ford/2021/03/16/uaw-blasts-ford-backing-out-ohio-assembly-investment/4718047001/
Radebaugh, J. D. (2021). MyLab Management for Daniels International Business + Third Party eBook (Inclusive Access) (17th ed.). Pearson - Channel Partner Integration. https://reader2.yuzu.com/books/9780137439065
Vinh Truong:
The FDI event chosen involves two countries, Italy and India. This article describes that Italian financial services giant, Generali, announced on Saturday that it has finalized the purchase of a 25% stake in Future Generali India Insurance from Future Enterprises, increasing its ownership in the JV to 74 percent. The competent regulatory and competitive agencies gave Generali it's blessing. The agreement completely complies with the "Lifetime Partner 24: Driving Growth" strategy, bolstering Generali's position in quickly expanding markets and reaffirming the group's dedication to providing profitable growth while adding value for stakeholders. Since the new foreign ownership cap went into effect, Generali is the first player among international insurers to increase to a majority position in both its Indian Life and P&C (Property and Casualty) insurance joint venture (JV) companies. This acquisition is in line with Generali's strategy to reinforce its “position in a high potential market and we look forward to deepening our presence in India, becoming Lifetime Partners to an increasing share of Indian customers in both Life and P&C businesses” (Economictimes). The benefactor of this deal is Future Enterprises, a supply chain company based in India. As part of its asset monetization strategies to reduce debt, the deal assisted the indebted Future Group in selling its ownership in the insurance company Future Generali India Insurance for a cash payment of Rs 1,252.96 crore. Due to a number of variables that have increased FDI, India has recently been a popular location. The economy of India, which came in at number 68 on the Global Competitive Index, fared quite well during the pandemic. Additionally, among the top 50 nations, India was ranked as the 48th most innovative nation (IBEF). Additionally, India has recently lowered company taxes dramatically and streamlined its labor rules. The nation has also loosened its FDI limitations, which have gone from 0.42 to 0.21 over the past 16 years. In terms of both short- and long-term possibilities, India has continued to be a desirable market for foreign investment. One of the FDI sectors with the most promise is low-skill manufacturing in India. India has also improved its government's effectiveness. Its improvements in public sector efficiency are mostly attributable to reasonably stable state finances (despite supply chain issues, war and COVID) and a positive attitude among Indian business stakeholders toward the funding and subsidies provided by the government to private companies. By 2025, India might be able to draw in FDI worth US$120–160 billion annually thanks to all of these factors.
References:
Generali completes acquisition of 25% stake in future Generali India Insurance from Future Group
. The Economic Times. (n.d.). Retrieved September 16, 2022, fromhttps://economictimes.indiatimes.com/industry/banking/finance/insure/generali-completes-acquisition-of-25-stake-in-future-generali-india-insurance-from-future-group/articleshow/91401274.cms?from=mdr
Daniels, J. D., Radebaugh, L. H., Sullivan, D. P., & Click, R. W. (2022).
International Business: Environments and Operations
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FDI in India: Foreign Direct Investment Opportunities, policy: IBEF
. India Brand Equity Foundation. (n.d.). Retrieved September 16, 2022, fromhttps://www.ibef.org/economy/foreign-direct-investment