Many governments can be considered pragmatic nationalists when it comes to FDI. Accordingly, their policy is shaped by a consideration of the costs and benefits of FDI. Here we explore the benefits and costs of FDI, first from the perspective of a host country and then from a perspective of the home country. Host Country Effects: Benefits There are three main benefits of inward FDI for a host country: the resource-transfer effect, the employment effect, and the balance of payments effect. Resource transfer effects: Foreign direct investment can make a positive contribution to the host country’s economy by supplying capital, technology, and management resources that would otherwise not be available. If such factors are scarce in a country, the FDI may boost that country’s economic growth rate. Many of the MNEs by virtue of their size and financial strength, have access to financial resources not available in the host country Continue reading
International Business
International Business Management deals with the maintenance and development of a multinational operation across national borders, whose manager has the knowledge and the skills to manage and handle cross-cultural processes, stakeholders and business environments in a right way.
Family Businesses: Growth Stages and Challenges Faced
Family business can be describe when business own by one or more families members directly or indirectly and have significant ownership and commitment toward the business well being. Family business can be consist of numerous combination of family members such as husband and wife, parents and child, extended family and also multiple generations such as grandfather, father and son. These family members also play roles as stakeholder, board members, working partners, adviser and employees for the company. Generally there are three different stages of family business had gone through in order for the business to growth from inception to maturity. Different skills are required in each stage and family issues might happen when the business moving from one stage to another stage. The first stage is called as start up stage where the business is still new and varies from 1st to 5th year after the company started to venture Continue reading
Methods of Internationalization
In the process of globalization, a firm operates their activities globally and the internationalization process is one of the primary sites of attention. The changes in the technology in the fields of telecommunications and computer lessen the costs of cross border operations and encourage firms to engage in transnational production activities. Internationalization is a sequential process where firms internalize their economic activities characterized in terms of aggressiveness and motivated by either internal or external triggers or a combination of both. It is one of the key strategic decisions for firms to maximize or at least sustain profits to survive in the world of uncertainty and complexity. The global economic expansion has been largely facilitated by the growth of TNCs. They dominate world trade and capital movement with turnover exceeding the GNP of some countries. These corporations continue to grow and influence the landscape of the world economy. Once a firm Continue reading
Theoretical Perspectives on Firm Internationalization
After the World War II, there has been rapid growth in international trade in both goods and services, resulting in various transactions across national borders for the purpose of satisfying the needs of individuals and organisations. The result of this global competition has forced organisations to expand their business by finding out new markets at home and foreign countries making them ‘Transnational firms’. Transnational Corporations (TNC) is defined as a firm that has power to co-ordinate and control operations in more than one country, even if it does not own them. The significance of TNC lies mainly in its ability to co-ordinate and control different transactions within transnational production networks, ability to take advantage of distribution factors of production and ability to be flexible in locations. The growing TNCs led to various patterns and trends in international business like rapid growth in world trade and investment, cross border mergers and Continue reading
Benefits and Costs of Foreign Direct Investment (FDI) to Host Country
Foreign Direct Investment plays an important part in global entrepreneurs and businesses. The FDI can easily provide a firm with new business environments and markets, cheaper production facilities, usage chances of newest technologies, cheaper financing and skills. There is an significant difference between FDI and foreign portfolio investment (FPI). Foreign portfolio investment means investing of individuals, companies, or policy makers of a nation in foreign fiscal tools (for example government bonds, foreign stocks) making an important wealth piece in a foreign entrepreneurship is not involved. There are two strategic kinds of FDI: Horizontal foreign direct investment : If FDI is made in way which in same sector as a company have activity in at home. Vertical foreign direct investment: If a company or multi national establishment (MNE) supplies production resources for a company’s local transactions, or this kind of foreign direct investment can take place with selling the final product Continue reading
Modes of Entry into International Markets
A foreign market mode of entry is a channel which enables the enterprise’s product, human skills, management, technology or other resources, to enter into a foreign country. The choice of market entry mode is a vital strategic decision for firms intending to carry out business overseas. A number of definitions of different modes of entry exist. The major modes of international entry is classified as indirect export, direct export and alternatives to export. Most models of foreign market mode of entry is due to limited resources, therefore enterprises initially penetrate a foreign market through indirect export methods. Indirect paths to internationalization are those whereby small firms are involved in exporting, sourcing or distribution agreements with intermediary companies who manage, on their behalf, the transaction, sale or service with overseas companies. Export intermediaries play an important middleman role in international trade, linking individuals and organizations that would otherwise not have been Continue reading