Scenario: Global Manufacturing, Inc. (GMI)
GMI is a fast-growing U.S. company that wants a production system that makes each of its product's two components in the location where the cost of production is lowest. The components will then be taken to maquiladoras for final assembly. GMI purchased an existing company in Brazil to produce component A and built a subsidiary in Thailand to produce component B.
-GMI's investments are considered ________.
A) foreign direct investment
B) portfolio investment
C) merger
D) horizontal integration

Question

Quizplus · Accepted Answer

GMI's investments in purchasing an existing company in Brazil and building a subsidiary in Thailand are examples of foreign direct investment, where a company invests in and manages operations in a foreign country. Portfolio investment involves passive investments in foreign securities, while a merger refers to the combination of two or more companies into a single entity, and horizontal integration involves combining companies in the same industry to improve efficiency or competitiveness.