Comparative Essay on Foreign Direct Investments

1. Foreign Direct Investments are classified by the form,
  * Where the focal firm by building a new facility ; be it manufacturing, marketing or administrative known as Greenfield investment ;
  * Where the focal firm purchases an existing company or facility
  * By means of a merger; wherein two or more firms join to create a new, larger company.
FDIs can also be classifies by means of the nature of ownership
  * Equity participation, where the focal firm acquires partial ownership in an existing company in the target market,
  * A wholly owned direct investment exists when the firm takes complete control of another firm.
  * Equity joint venture, where two or more investing firms pool assets/resources to create another firm in which both parent firms have ownership.
The level of integration also serves in categorizing an FDI.
  * Vertical integration exist when the investing firm owns or aims to own multiple stages of a value chain for producing, selling, and delivering a product or service
  * Horizontal integration is evident when the investing firm owns or aims to own activities involved in a single stage of its value chain
An acquisition is a type of direct investment whereby the focal firm purchases an existing company or facility as opposed to Greenfield investment wherein the investing firm invests by building a new manufacturing, marketing or administrative facility.
  2. Firms engage in FDIs with an ultimate goal to boost competitiveness on the global market. The motives can be categorized into 3 groups:
  * Market seeking motives: aims at gaining access to new markets, follow existing customers and/or compete with major rivals in new markets
  * Resource or asset seeking motives: cost of production. Firms aim to have easy/quick access or even cost effective to raw materials. Managers seek to gain access to knowledge or other assets which can be very beneficial for R&D, manufacturing and marketing
  * Efficiency seeking... [continues]

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