GEN 005: The Contemporary World

Module #8 Student Activity Sheet

Name:Mike Jerome S. Andaya Class number:

Section:UP-FB2-BSEE1-1Schedule: Date: Feb 12, 2022

Materials:
Lesson Title: Benefits of Globalization: Foreign
Direct Investment Activity Sheets

Learning Targets: A the end of the module, students should be References:

able to: https://www.investopedia.com/te
1. explain the concept of foreign direct investment; rms/f/fdi.asp
2. differentiate types of foreign direct investments.

A. LESSON PREVIEW/REVIEW

1). Introduction (2 min)

Hello! It’s nice to see you again. Welcome to Contemporary World! Are you excited to know what our
topic is today? What we have now is Benefits of Globalization: Foreign Direct Investment. Are you familiar with
this? If you are not aware yet, you will gain more understanding of the topic after this class. In this topic,
we will learn how to invest our money in expanding our business abroad or other countries. We will learn
some of the benefits and the advantages and disadvantages of this foreign direct investment. Are you
ready now? Before we proceed to our topic today, let's check your understanding of the previous lesson by
answering the questions in the lesson review.

Please read the learning targets before you proceed to the succeeding activities. The learning targets are
your goals. Remember, you need to achieve your learning targets at the end of the lesson.

Lesson Review
Directions: Fill in the blanks. Read the statement carefully and write your answer on the spaces provided.

Global interstate system 1. The modern world-system is a system of competing and allying states.
World Governance 2 It is a movement towards political cooperation among nations.

International Criminal Court of Justice 3. The International Criminal Court (ICC) is an

intergovernmental organization and international tribunal that sits in The Hague, Netherlands.

Check your answers against the Key to Corrections found at the end of this SAS. Write your score on paper.

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 GEN 005: The Contemporary World
Module #8 Student Activity Sheet

B. MAIN LESSON

Activity 1: Content Notes (13 mins)

Is there anybody here who knows somebody who got more prosperous because of his investment
abroad? Is McDonald's a type of foreign direct investment? How about Starbucks and Jollibee, are these part
of foreign direct investment in other countries? Did you know that even businesses can have daughter companies
entirely owned by a parent company? Today we will be discussing foreign direct investment, its method,
types, and examples. Let’s start now.

What Is a Foreign Direct Investment (FDI)?

A foreign direct investment (FDI) is a purchase of an interest in a company by a company or an

investor located outside its borders. Generally, the term is used to describe a business decision to
acquire a substantial stake in a foreign business or buy it outright to expand its operations to a new
region. It is not usually used to describe a stock investment in a foreign company.

 Foreign direct investments (FDI) are substantial investments made by a company into a foreign
concern.
 The investment may involve acquiring a source of materials, expanding a company's footprint, or
developing a global presence.
 As of 2020, the U.S. is second to China in attracting FDI.

How Foreign Direct Investments (FDI) Work

Companies considering a foreign direct investment generally look only at open economies that
offer a skilled workforce and above-average growth prospects for the investor. Light government
regulation also tends to be prized. Foreign direct investment frequently goes beyond capital investment.
It may include the provision of management, technology, and equipment as well.

A key feature of foreign direct investment is that it establishes effective control of the foreign
business or substantial influence over its decision-making. In 2020, foreign direct investment tanked
globally due to the COVID-19 pandemic, according to the United Nations Conference on Trade and
Development. The total $859 billion global investment compares with $1.5 trillion the previous year.1

And, China dislodged the U.S. in 2020 as the top draw for total investment, attracting $163 billion
compared to investment in the U.S. of $134 billion.

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 GEN 005: The Contemporary World
Module #8 Student Activity Sheet

Special Considerations

Foreign direct investments can be made in various ways, including opening a subsidiary or
associate company in a foreign country, acquiring a controlling interest in an existing foreign company,
or utilizing a merger or joint venture with a foreign company. The threshold for a foreign direct
investment that establishes a controlling interest, per the Organisation of Economic Co-operation and
Development (OECD) guidelines, is a minimum 10% ownership stake in a foreign-based company. That
definition is flexible. There are instances in which effective controlling interest in a firm can be
established by acquiring less than 10% of the company's voting shares.3

Types of Foreign Direct Investment

Foreign direct investments are commonly categorized as horizontal, vertical, or conglomerate.

 With a horizontal direct investment, a company establishes the same type of business operation in
a foreign country as it operates in its home country. A U.S.-based cell phone provider buying a
chain of phone stores in China is an example.
 In a vertical investment, a business acquires a complementary business in another country. For
example, a U.S. manufacturer might develop an interest in a foreign company that supplies it with
the raw materials it needs.
 In a conglomerate type of foreign direct investment, a company invests in a foreign business
unrelated to its core business. Since the investing company has no prior experience in the foreign
company's area of expertise, this often takes a joint venture.

Examples of Foreign Direct Investments

Foreign direct investments may involve mergers, acquisitions, or retail, services, logistics, or
manufacturing partnerships. They indicate a global strategy for company growth. They also can run into
regulatory concerns. U.S. company Nvidia has announced its acquisition of ARM, a U.K.-based chip
designer. In August 2020, the U.K.'s competition watchdog had announced an investigation into whether
the $40 billion deal would reduce competition in industries reliant on semiconductor chips.4

FDI in China and India

China's economy has been fueled by an influx of FDI targeting the nation's high-tech
manufacturing and services. Meanwhile, relaxed FDI regulations in India now allow 100% foreign direct
investment in single-brand retail without government approval6. The regulatory decision reportedly

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 GEN 005: The Contemporary World
Module #8 Student Activity Sheet

facilitates Apple's desire to open a physical store in the Indian market. Thus far, the firm's iPhones had
only been available through third-party physical and online retailers.

What Is the Difference Between FDI and FPI?

Foreign portfolio investment (FPI) is the addition of international assets to a company's portfolio,
an institutional investor such as a pension fund, or an individual investor. It is a form of portfolio
diversification achieved by purchasing the stocks or bonds of a foreign company. Foreign direct
investment (FDI) requires a substantial investment in a company based in another country. The outright
acquisition of FDI is generally a more significant commitment made to enhance a company's growth.

Both FPI and FDI are generally welcome, particularly in emerging nations. Notably, FDI involves a
greater responsibility to meet the country's regulations that host the company receiving the investment.

What Are the Advantages and Disadvantages of Foreign Direct Investment (FDI)?

FDI can foster and maintain economic growth, both in the recipient country and in land investing.
Developing countries have encouraged FDI to finance the construction of new infrastructure and the
creation of jobs for their local workers. On the other hand, multinational companies benefit from FDI to
expand their footprints into international markets.

However, a disadvantage of FDI is that it involves the regulation and oversight of multiple
governments, leading to a higher level of political risk.

What Are Some Examples of Foreign Direct Investment (FDI)?

One of the most prominent examples of Foreign Direct Investment (FDI) in the world today is the
Chinese initiative known as One Belt One Road (OBOR). This program sometimes referred to as the Belt
and Road initiative, involves a commitment by China to substantial FDI in a range of infrastructure
programs throughout Africa, Asia, and even parts of Europe. The program is typically funded by Chinese
state-owned enterprises and organizations with deep ties to the Chinese government. Similar programs
are undertaken by other nations and international bodies, including Japan, the United States, and the
European Union.

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 GEN 005: The Contemporary World
Module #8 Student Activity Sheet

Activity 2: Check for Understanding (5 mins) (18 mins + 2 mins checking)

I hope that activities on this part will help you achieve your learning targets. The next set of exercises will help
you deepen your understanding of the lesson.

Exercise 1: Fill out the blank boxes with your definition of globalization based on your notes. In the
second box, give the facts/ characteristics of Foreign Direct Investment (FDI). In the 3 rd box, you can list
down some examples, in the 4th box, you can list down the non-examples.

A purchase of an interest
It can maintain
in a company by a economic growth.
company or an investor
located outside its border.

Apple incorporated that

manufacturing their Businesses that are only in
products on USA but built their own, they have no
the final product in China. supplier or business
partners.

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 GEN 005: The Contemporary World
Module #8 Student Activity Sheet

Exercise 2: If you will be given a chance to do business, would you merge with another company to have
a more significant market share? Yes/No/Why?

Yes, because it will also benefit me by making my company bigger.

A rubric found on the last page of this activity sheet will be used in checking the
answers.

Exercise 3: Please read the statement, and answer it with True or False.

False 1. Starbucks or Jollibee opening a new outlet in a foreign country is Vertical FDI.
True 2. Amazon is opening a new headquarters in Vancouver, Canada; Manila, Philippines is Horizontal
FDI.
True 3. A real estate company opening a restaurant chain in another country is a conglomerate FDI
True4. BMW investing in a parts manufacturer in Poland is vertical FDI.
True 5. McDonald's could purchase a large-scale farm in Canada to produce meat for their restaurants is
vertical FDI.

Check your answers against the Key to Corrections found at the end of this SAS. Write your score on your
paper.

C. LESSON WRAP-UP

Frequently Asked Questions (FAQs)

Question 1. What is the benefit of having foreign or international investment in any country?

Answer: The benefit would be an increase in goods and services, new jobs, increase in the collection of taxes.
There will be lower labor costs, preferential tariffs, foreign business subsidies, and market diversification.
Investors are enticed to invest in the Philippines because they can avail themselves of lower labor costs and
other business/production expenditures.

Question 2. If Filipino investors will invest their money abroad, what will happen to our economy?

Answer: If Filipino investors invest their money in other countries, there will be a decrease in employment
or job, distribution of goods and services, job opportunities, and taxation. Foreign direct investment offers
advantages to both the investor and the foreign host country. Incentives that foreign investors will receive from
the land wherein they will have their business would encourage both parties to engage in and allow foreign

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 GEN 005: The Contemporary World
Module #8 Student Activity Sheet

direct investment. Big Filipino firms and companies can enter foreign or international markets considering the
number of Filipino citizens residing in those countries.

Thinking about Learning (5

mins) My Learner Tracker
What contributed to
the quality of your
What lesson# did you
performance today?
do? What were the What were your scores
What’s the date today? What will you do next
learning targets? in the activities?
session to maintain
What activities did
your performance or
you do?
improve it?

FEB 12, 2022

Lesson #8 Read and understand the
context carefully.

Directions: Since you are done with today’s lesson, please carefully read the questions below and give
your honest answer to them.

What was the most important thing you learned during this class?

The foreign direct investment and its effects.

What important question remains unanswered?

None so far.

KEY TO CORRECTIONS

Review: 1. Global Interstate System 2. Global governance or world governance Relations

3.. International Criminal Court of Justice

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 GEN 005: The Contemporary World
Module #8 Student Activity Sheet

Exercise 1: check TG's copy.

Exercise 2: See rubric for checking the answers for the essay/open-ended questions.
Exercise 3: 1. False 2. True 3. True 4. True 5. True

Scoring Rubric for Essay

4 3 2 1 0 SCORE

Content Write-up is Write-up is Write-up is not Write-up is Questio

comprehensive, accurate but not completely stated. incomplete. Key ns are
(50%) accurate, and complete. Key Key points are not points are lacking. not
complete. Key points are stated addressed and not It does not answer
ideas are clearly but not supported. supported. It does incorporate ed.
stated and Include some not include information from
supported. Include pertinent and pertinent class discussions
pertinent and detailed information from
detailed information from class discussions.
information from class discussions.
class discussions.

Organiz Well organized, Mostly clear and Inadequate Organization and Questio
ation developed, and easy to follow. organization. The structure draw ns are
easy to follow. Usually maintains structure of the away from the not
(30%) Maintains focus on focus but answer is not easy answer. Provides answer
the topic. occasionally to follow. Presents no information ed.
presents information that is that can be
information that is sometimes unclear. understood.
different from the
topic.

Spelling Grammar, spelling, Contain few Contain substantial Contain enough Questio
and punctuation, and distracting distracting distracting ns are
Gram- sentence structure problems. There problems. There grammar, spelling, not
mar have no errors. are one or two may be three to punctuation, and answer
errors in grammar, four errors in sentence structure ed.
(20%) spelling, grammar, spelling, problems to make
punctuation, and punctuation, and it substantially
sentence structure. sentence structure. incomprehensible

TOTAL SCORE

Teacher’s Signature:

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