What does upstream vertical FDI involve?

What does upstream vertical FDI involve?

• A. Engaging in a downstream stage of the value chain
• B. Engaging in an upstream stage of the value chain
• C. Creating new markets
• D. Investing in retail operations

Answer: (B)

Upstream vertical Foreign Direct Investment (FDI) refers to the investment made by a company in the early stages of the supply chain or value chain. This typically involves activities such as raw material extraction, production of inputs, or initial processing of these inputs before they are utilized in the manufacturing or production processes. By making upstream investments, a company secures access to essential resources and reduces dependency on suppliers, thereby strengthening its competitive position in the market. In contrast, engaging in a downstream stage of the value chain, such as retail operations or marketing, involves activities closer to the final consumer, which does not align with the concept of upstream vertical FDI. Similarly, creating new markets may involve various strategies, including marketing and sales initiatives that do not directly pertain to the investment in the early stages of production. Therefore, the essence of upstream vertical FDI lies solely in the investment in resources or processes that precede the manufacturing stages.

Upstream vertical Foreign Direct Investment (FDI) refers to the investment made by a company in the early stages of the supply chain or value chain. This typically involves activities such as raw material extraction, production of inputs, or initial processing of these inputs before they are utilized in the manufacturing or production processes. By making upstream investments, a company secures access to essential resources and reduces dependency on suppliers, thereby strengthening its competitive position in the market.

In contrast, engaging in a downstream stage of the value chain, such as retail operations or marketing, involves activities closer to the final consumer, which does not align with the concept of upstream vertical FDI. Similarly, creating new markets may involve various strategies, including marketing and sales initiatives that do not directly pertain to the investment in the early stages of production. Therefore, the essence of upstream vertical FDI lies solely in the investment in resources or processes that precede the manufacturing stages.