Question

1. Assume that you produce plastic computer pieces for computer companies. The pieces require very little technology. Where would you like to establish DFI? (The point of this question is to force consideration of various characteristics that are incorporated in a DFI decision.)

Answer 1

We need to understand the different factors before establish the DFI, few of them are as below:

1. Labor cost: Since it requires the little technology we need to invest in the country where labor cost is very less and there will be huge labor force need to be availabel.

2. Local governemnt policy : Since the investment is in plastic there is extra care need to be taken with respect to DFI because due to environmental impact there can be extra cost for the compnay to estalish DFI if the government is strict with the plastic usage.

3. Exchange rate: For establish the DFI one need to be careful with the currency exchange rate other wise return can be compromised.

4. Local economy : it is very important how the local economy is performing if it is not performing well then there might be huge loss due to inflation or other economic factors.