Question

provide a clear distinction between horizontal FDI and Vertical FDI. Support your answer by providing real examples for both Horizontal and Vertical FDI

Answer 1

The major methods of FDI

1.horizontal and

2.vertical FDI.

The former refers to the firm expanding abroad based on the same production line as in the home country. For instance Samsung or even Pepsi. Suzuki has expanded and manufactured cars in India and multiple nations through horizontal FDI. Whereas the latter is predominately division of the firm that is different segments of the production process is done in different places abroad where it is cheaper to do so hence bringing down the cost of production. An example of vertical is Mac book pro as its body is made in Taiwan, the processor factory in California, and finally, its assembled in China.  Firms that want to lower the cost of production or increase their control over the supply chain use the vertical FDI route. Most developing nation expand through horizontal as believe that market access is more important than reduced production cost.