Find an FDI initiative and describe what it\'s about and why it is of strategic

Question

Find an FDI initiative and describe what it's about and why it is of strategic importance. Do some quick research or use your own experience to identify an initiative by a corporation to make a foreign direct investment (an acquisition of a significant ownership interest in another company or project in another country outside its headquarters country.). Identify the objectives for the investment based on company announcements, regulatory filings and other press. If it is an older one, talk about whether it has been a success or not. If it is a new one discuss the challenges and obstacles and how the strategy meets corporate objectives

Explanation / Answer

FDI Initiative: Apple announced $500+ million investment in China to increase its R&D activities in the country.

The strategic importance: China is a massive economy. As per Apple, it is the third largest market for the company after USA and Europe. Building an R&D base at China shows that Apple is willing to work with China to develop their products. This will create a goodwill within the Chinese market.

China is also a haven for affordable manufacturing. Leveraging this opportunity also gives Apple a financial boost. (There are sources who claim that Apple products are made in USA but the label clearly says it is “designed in USA”).

Objective: The announcement of this investment from Apple was released on March 17, 2017 on various publications online (You may search online and find many references to them). The objective stated in the press releases and Apple’s official announcement was that Apple was trying to tap into the local talent in China. Also setting up two bases in China will help the company in keep close control over various manufacturing unit that works for Apple currently.

Challenges and obstacles: The FDI is fairly new (been only one year). As a result, it is difficult to gauge the success or failure of the investment. However, one of the challenges that Apple is currently facing is managing the IP at China. The country is notorious for creating counterfeit products and often Apple’s design concepts are mimicked well before the company intended to. For example, the pictures of Apple iPhone X design was leaked by some Chinese manufacturers a month before the product announcement.

Another challenge is that, while China is a large economy, it still works with communist principles (officially). Its economic metrics (GDP, CPI, Fiscal deficit, etc.) are often not verifiable by outside entities such as World Bank or IMF. As a result, there may be regulatory issues that Apple faces.

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