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Slide 3.
Chapter 3
The triad and international

business
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013
Slide 3.2
The triad and international business
Objectives
Introduction
Reasons for FDI
FDI and trade by triad members
The triad and regional business strategy
The worlds regional automotive industry.
Slide 3.3
Objectives
Describe the major reasons for FDI.
Explain the role of triad-based MNEs in worldwide
FDI and trade.
Relate select examples of inter-triad MNE
business activity.
Discuss the economic interrelationships among
triad members.
Slide 3.4
Introduction
Most FDI and trade are conducted by MNEs.
MNEs from the triad continue to dominate
international business.
The triad is the basic unit of analysis in
international business.
Slide 3.5
Table 3.1 Fifteen years of intra-regional FDI in the triad, 19932008

Notes: EU intra-regional FDI is FDI stocks within Europe as a whole. NAFTA intra-regional FDI is US and Canada stocks
within NAFTA. Asia intra-regional FDI is Japan, South Korea, Australia, and New Zealand stocks within Asia.
Source: Authors calculations based on OECD, International Direct Investment Statistics Yearbook, 2009.
Slide 3.6
Reasons for FDI
Slide 3.7
Foreign direct investment

FDI is the ownership and control of foreign
assets.
FDI usually involves the ownership, whole or
partially, of a company in a foreign country: a
foreign subsidiary.
FDI is different from portfolio investment, which is
the purchase of financial securities in other firms
for the purpose of realizing a financial gain when
these marketable assets are sold.
Slide 3.8
Some reasons for FDI
Increase sales and profits.

Enter rapidly growing markets.
Reduce costs.
Gain a foothold in economic blocs.
Protect domestic markets.
Protect foreign markets.
Acquire technological and managerial know-how.
Slide 3.9
FDI and trade by triad members

The triad accounts for about 80% of world FDI.
Two important FDI destinations are:
Intra-regional (within region): from one triad
member to another;
Inter-regional (between region): from one triad
member to the geographic region that surrounds
it. (e.g. from the United States to Latin and South
America).
Slide 3.10
Table 3.3a Ten years of triad FDI

*EU15 numbers are in outward stocks of FDI by every EU15 member and thus include intra-EU15 FDI.
Sources: Authors calculations; United Nations, World Investment Report 1999, pp. 495-500; United Nations, World Investment
Report 2009, pp. 251-254.
E-resources: UNCTAD Statistics Online Database, Foreign Direct Investment, Major FDI Indicators, http://stats.unctad.org/FDI/
Slide 3.11
Table 3.3b Ten years of triad trade

*EU includes intra-EU trade
Note: Exports are calculated by including freight and insurance while imports do not include freight and insurance.
Sources: Authors calculations and International Monetary Fund, Direction of Trade Statistics Yearbook, 2000 (Washington,
DC: IMF, 2000), pp. 25; International Monetary Fund, Direction of Trade Statistics Yearbook, 2009 (Washington, DC: IMF,
2009), pp. 25.
Slide 3.12
Triad FDI clusters

A group of developing countries usually located in
the same geographic region as a triad member
and having some form of economic link to this
member.
The US tends to be a dominant investor in Latin
America, and countries such as Mexico and Brazil
are part of its FDI cluster.
The EU tends to be a dominant investor in Eastern
Europe and countries like the Czech Republic and
Poland are part of its FDI cluster.
Slide 3.13
The triad and regional

business strategy
MNEs pursue market opportunities within their
own triad as well as that of the other members.
International expansion does not necessarily
mean global expansion.
The nature of international business is regional,
not global.
For example, Wal-Mart has 94.5% of its sales in
North America, and only about 20% of Wal-Marts
stores are located outside of North America.
Slide 3.14
Figure 3.1 Wal-Marts globalization: regional distribution

Notes: Data are for 2009. US stores include 56 stores in Puerto Rico.
Source: Wal Mart Stores, Annual Reports, 2009
of stores
Slide 3.15
The worlds regional automotive

industry
There are 29 automotive firms in the worlds
largest 500 firms (2009 data).
Only one of these is a global firm, Madza.
Eighteen of the 29 firms are home-region based,

with an average of over 60% of their total sales as
intra-regional.
There are 10 bi-regional automotive firms on the
list.
Slide 3.16
Table 3.4 The regional nature of the motor vehicles and parts industries, 2010 ranking
*Weighted intra-regional sales average is weighted according to revenues.
Notes: Data are for 2009. The sales percent of North America, Europe and Asia Pacific might not be tied to 100 percent as
the balance may represent percent sales in rest of the world (ROW).
Source: Authors calculations and Fortune, The Fortune Global 500, July 26, 2010 and individual companys annual reports.
E-resources: http://money.cnn.com/magazines/fortune/global500/2010
Slide 3.17
Table 3.4 The regional nature of the motor vehicles and parts industries, 2010 ranking
*Weighted intra-regional sales average is weighted according to revenues.
Notes: Data are for 2009. The sales percent of North America, Europe and Asia Pacific might not be tied to 100 percent as
the balance may represent percent sales in rest of the world (ROW).
Source: Authors calculations and Fortune, The Fortune Global 500, July 26, 2010 and individual companys annual reports.
E-resources: http://money.cnn.com/magazines/fortune/global500/2010
Slide 3.18
Key reasons for the automotive

industrys regional operations
The auto industry operates in clusters of
localized activity within each major triad region.
Auto firms are strongly embedded in downstream
activities and after-sales markets.
Cultural barriers across regions.
Fuel.
Different environmental regulations.
Tariffs.
Local competitors are more adept at meeting
the demands of their regional markets.

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Slide 3.

The triad and international

The triad and international business

Table 3.1 Fifteen years of intra-regional FDI in the triad, 19932008

Reasons for FDI

Foreign direct investment

Some reasons for FDI

Increase sales and profits.

FDI and trade by triad members

Table 3.3a Ten years of triad FDI

Table 3.3b Ten years of triad trade

Triad FDI clusters

The triad and regional

Figure 3.1 Wal-Marts globalization: regional distribution

The worlds regional automotive

Eighteen of the 29 firms are home-region based,

Key reasons for the automotive

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