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MNG4804 ASSIGNMENT 2 2023
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Contents
1. Elucidate on how Kenya’s political and economic ideology could act as a deterrent to inflow
of foreign direct investment (FDI). (20 marks) .......................................................................... 3
2. Discuss in detail, the vital role played by culture during the acquisition process and
thereafter in managing an offshore subsidiary. (30 marks) ...................................................... 7
3. Discuss the concept of “ethics” and “ethical dilemma” in international business context. (30
marks) .................................................................................................................................... 10
References ............................................................................................................................ 17
, 0717513144 MNG4804 ASSIGNMENT 2 2023 muzavazi47@gmail.com
1. Elucidate on how Kenya’s political and economic ideology could act as a deterrent
to inflow of foreign direct investment (FDI). (20 marks)
According to Hill (2023) before Stephen Hymer's theory of direct investment in the 1960s, the
reasons for foreign direct investment and multinational corporations were explained by
neoclassical economics based on macroeconomic principles. These theories are based on
trade theory, in which trade promotion is the result of differences in production costs between
the two countries, with a focus on lower production costs, which in turn stimulates the
company's foreign activities. For example, Anderson (2018) explained the challenges only of
internationalization through three main principles: absolute cost advantage, different product
advantages, and scale economy. In addition, neoclassical theories have been developed on
the assumption of perfect competition. Intrigued by the impetus behind the massive foreign
investment created by corporations in the United States, Hymer has developed a framework
that goes beyond existing theories, explaining why this phenomenon occurs because it
believes that the theory cannot explain foreign investment and its incentives.
Faced with the challenges of his predecessors, Hymer focused his theory on filling in the
gaps in international investment. Theories proposed by the authors approach international
investment from different and specific perspectives. Unlike traditional macroeconomic
investment theory, Hymer states that there is a difference between ordinary capital
investment, called portfolio investment, and direct investment. The difference between the
two, which will form the basis of the whole theory, is a matter of management, which means
that the direct investment company can get a higher level of control than the portfolio
investment. In addition, Hymer went on to criticize neoclassical theories, saying that the
theory of capitalism could not explain international production (Peng & Meyer, 2019). He also
stressed that foreign direct investment is not necessarily a movement of funds from the
country of origin to the host country, and it focuses on specific sectors in many countries.
Conversely, if interest rates were a major driver for international investment, foreign direct
investment would involve fewer industries in less developed countries.
Political ideology of Kenya
The role of political ideologies is to establish a set of ideas that can be used to provide the
foundation of political organisation. As a result, all political ideologies have three specific
features:
i. A realistic interpretation of society as it currently is.
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