Question

In international business, a firm in Italy controls and manages assets in South Africa. What is this firm participating in? a. the triple bottom line b. liability of foreignness c. the base of the pyramid d. foreign direct investment

Answer 1

The firm in Italy controlling and managing assets in South Africa is participating in foreign direct investment (FDI), which involves a long-term commitment and managerial responsibility. FDI refers to purchasing a firm in another country or starting up a new enterprise in a foreign country.

Step-by-step explanation:

The firm in Italy that controls and manages assets in South Africa is participating in foreign direct investment (FDI). FDI refers to purchasing a firm in another country or starting up a new enterprise in a foreign country. In this case, the firm from Italy is making a long-term investment in South Africa by acquiring and managing assets there.

Foreign direct investment is different from portfolio investment, which is more short-term and does not involve taking managerial responsibility. FDI involves a higher level of commitment and a longer-term focus.

For example, a Belgian company purchasing a U.S. beer-maker is an example of foreign direct investment. The company would need to supply its own currency (euros) to the foreign exchange market and demand U.S. dollars to make the purchase.