Question

What is the vertical foreign direct investment (FDI)?
a) Breaking up the production chain and parts being transferred to the affiliated
location.
b) Mainly driven by production cost differences between countries.
c) Both a and b
d) None of the above.
Answer​

Answer 1

Answer:

Vertical foreign direct investment occurs when a multinational acquires an operation that either acts as a supplier or distributor. Horizontal FDI occurs when a company initiates a similar operation or business model in another country.

Explanation:

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Answer 2

Answer:

Vertical foreign direct investment (FDI) is the a) Breaking up the production chain and parts being transferred to the affiliated location and b) Mainly driven by production cost differences between countries.

So the answer will be C) Both a and b

Explanation:

• Vertical Foreign Direct Investment (FDI) occurs when a firm purchases and controls the means of production for a good and/or service in one country to sell that same product or service to another country.
• Vertical foreign direct investment occurs when a multinational decides to acquire or build an operation that either fulfills the role of a supplier (backward vertical FDI) or the role of a distributor (forward vertical FDI). Companies that seek to enter into a backward vertical FDI typically seek to improve to cost of raw materials or the supply of certain key components. For example, a Japanese car manufacturer acquires a tire manufacturer.