FDI from emerging economies has become more and more important in the recent years, it increased from $149 billion in 1990 to up to $1274 billion in 2005. As traditional FDI theories are more focussing on downhill- investments, namely investments from developed countries to developing ones, the uphill investment perspective becomes more interesting.
This term paper looks into Indian FDI invested into the EU, to exemplify this the paper uses the case study of the Indian company Mahindra and Mahindra acquiring the German company Schöneweiss in 2007.
It seeks to answer the question why an Indian company like Mahindra and Mahindra is investing into Europe, trying to find specific reasons for it by analysing empirical data. It is not only taken the perspective by Mahindra in this term paper but also the perspective by Schöneweiss, asking which were their reasons to agree to the acquisition.
Table of Contents
1. Introduction
2. Background knowledge
2.1 Schöneweiss & Co. GmbH
2.2 Mahindra and Mahindra
3. Theory
3.1 FDI
3.2 Reasons for FDI
3.3 FDI and emerging economies
3.4 FDI and India
3.5 FDI in the EU from Asia
4. Methodology
5. Analysis
6. Conclusion
Research Objectives and Themes
The primary objective of this paper is to examine the motivations behind outward Foreign Direct Investment (FDI) from emerging economies into developed markets, specifically focusing on the acquisition of the German company Schöneweiss by the Indian company Mahindra and Mahindra. The study seeks to answer why a company from an emerging market invests in the European Union by analyzing strategic motives, such as the pursuit of technical expertise, brand recognition, and risk diversification, while considering the perspective of the acquired firm.
- Strategic motivations for "up-hill" investments from emerging to developed economies.
- The role of mergers and acquisitions in gaining access to technical expertise and customer networks.
- The impact of global competitive pressure on traditional manufacturing firms.
- Strategies for integrating acquired international brands into a global corporate structure.
Excerpt from the Book
1. Introduction
In recent years it became apparent that more and more companies from emerging economies are aiming to enter markets from developed countries, acquiring companies in developed countries or merge with these. To name figures, FDI coming from developing countries is stated as $149 billion in 1990 increasing to $871 billion in 2000 up to $1274 billion in 2005 (Nayyar, 2008). When looking at the average purchase volume by developing countries through cross-border mergers and acquisitions it shows that it was at about $46 billion per year during the period 2001- 2005 (Nayyar, 2008). As traditional FDI theories are more focussing on “down-hill” investments, meaning investments from companies from developed countries into companies in developing countries, the phenomenon of “up-hill” investments becomes very interesting.
Questions are asked about the reasons of these up-hill investments and the success of it. The EU has registered an increasing amount of FDI coming from developing countries so this term paper will look at the EU as a destination of FDI and not the EU as an investor abroad.
To find specific reasons for the FDI coming from an emerging economy, this paper is looking at the case study of the Indian company Mahindra and Mahindra acquiring the German company Schöneweiss in year 2007. India seems to be a significant player when it comes to outward FDI, as it was at $124 million in 1990, increasing to $1859 million in 2000 up to $9569 in 2005 (Nayyar, 2008). This development will be discussed further down in this paper and it will give guidelines to judge the significance of these investments.
Summary of Chapters
1. Introduction: This chapter introduces the phenomenon of "up-hill" FDI from emerging economies to developed markets and outlines the research focus on the acquisition of Schöneweiss by Mahindra and Mahindra.
2. Background knowledge: This section provides an overview of the companies involved, detailing the histories and market positions of both the German firm Schöneweiss & Co. GmbH and the Indian group Mahindra and Mahindra.
3. Theory: This chapter reviews traditional FDI definitions and scholarly explanations for cross-border investments, contrasting them with strategies specific to firms originating from emerging economies.
4. Methodology: This section describes the qualitative approach of the study, which relies on press releases and journalistic articles to assess the motives and consequences of the acquisition.
5. Analysis: This chapter evaluates the empirical evidence regarding the acquisition, identifying the cost-related and revenue-related drivers for both parties and assessing the strategic outcome of the deal.
6. Conclusion: The final chapter summarizes the primary findings, confirming that the acquisition was motivated by a mutual need for competitiveness, combining German technical expertise with Indian cost advantages.
Keywords
Foreign Direct Investment, FDI, Emerging Economies, India, Mahindra and Mahindra, Schöneweiss, Cross-border Acquisition, Up-hill Investment, Automotive Industry, Strategic Motives, Value Chain, Brand Strategy, Technical Expertise, Market Access, Mergers and Acquisitions
Frequently Asked Questions
What is the fundamental subject of this academic paper?
The paper investigates the phenomenon of Foreign Direct Investment (FDI) originating from emerging economies into developed industrial nations, using a specific corporate case study to illustrate the underlying trends.
What are the central themes discussed in the research?
The central themes include the shift toward "up-hill" investments, strategies of emerging market multinationals, the role of mergers and acquisitions in global market expansion, and the integration of technical and organizational expertise.
What is the primary research question?
The primary question explores why an Indian corporation like Mahindra and Mahindra would choose to invest in a European company and what the specific strategic drivers for such an acquisition are.
Which scientific methodology does the author employ?
The author employs a case study approach, utilizing empirical data from media reports, press releases, and industry publications to analyze the motives and post-acquisition developments of the case.
What is covered in the main body of the paper?
The main body examines the theoretical background of FDI, explores current trends regarding Indian firms abroad, and conducts a detailed analysis of the specific reasons Schöneweiss was acquired and how the integration of the firms was managed.
Which keywords best characterize this work?
Key terms include Foreign Direct Investment, Emerging Economies, Mahindra and Mahindra, Schöneweiss, Cross-border Acquisition, Strategic Motives, and Value Chain.
Why was the price pressure considered a major factor for Schöneweiss?
Schöneweiss faced severe competition from companies producing in low-cost countries, which led to a significant loss of orders to competitors like Bharat Forge, forcing the company to seek a strategic partner to survive.
How does Mahindra benefit from the expertise of the acquired company?
Mahindra utilizes the acquired German expertise to modernize its existing manufacturing processes in India and to improve the organizational structures of its other newly acquired forging companies.
What role does brand identity play in this acquisition?
The acquisition allows Mahindra to combine its own corporate identity with the well-known German brand name Schöneweiss, thereby helping Mahindra improve its global brand recognition while maintaining the established quality reputation of the German firm.
- Arbeit zitieren
- Katharina Osterholt (Autor:in), 2011, FDI from Emerging Economies, München, GRIN Verlag, https://www.hausarbeiten.de/document/193725
