FDI
Choose an example of foreign direct investment in a particular sub-national region (e.g. South-East of England, North of Italy, etc.). Investigate the factors that are likely to have influenced the company’s investment decision.
The IMF Balance of Payments Manual defines Foreign Direct Investment (FDI) as ‘the objective of a resident entity in one economy obtaining a lasting interest in an enterprise in another economy’ (IMF, Balance of Payments Manual, 5th edition, 1993, p.86). In reality this investment usually involves some degree of ownership but there is no universally agreed ownership requirement (A. Harrison, Business Environment in a global context 2nd edition 2014, p.228). FDI can occur through several different routes such as a joint venture with a foreign partner (such as Jaguar Land Rover and Chery Automobile1), a foreign acquisition or takeover, or even the purchase of facilities for expansion without any transfer of equity ownership2. This essay will first explain some factors that influence business decisions in terms of location and examine how different locations offer different pros and cons. Once we have established briefly how the internal and external environment can affect a business location decision we will look at a specific corporation who has recently invested in London South East of England.
Perhaps the most fundamental motive of a FDI is for an enterprise to achieve its corporate aims, contained within their mission statements. These can vary depending upon the industry sector it is in as well as the product/service offered. General primary motives for FDI often include profitability (the most crucial feature), expansion through new international markets or the possibility of benefiting from economies of scale.
To achieve these primary motives, foreign direct investment firms need to consider factors that are likely to disrupt their operations or even factors that are more favorable in some locations than they are in others. For
The IMF Balance of Payments Manual defines Foreign Direct Investment (FDI) as ‘the objective of a resident entity in one economy obtaining a lasting interest in an enterprise in another economy’ (IMF, Balance of Payments Manual, 5th edition, 1993, p.86). In reality this investment usually involves some degree of ownership but there is no universally agreed ownership requirement (A. Harrison, Business Environment in a global context 2nd edition 2014, p.228). FDI can occur through several different routes such as a joint venture with a foreign partner (such as Jaguar Land Rover and Chery Automobile1), a foreign acquisition or takeover, or even the purchase of facilities for expansion without any transfer of equity ownership2. This essay will first explain some factors that influence business decisions in terms of location and examine how different locations offer different pros and cons. Once we have established briefly how the internal and external environment can affect a business location decision we will look at a specific corporation who has recently invested in London South East of England.
Perhaps the most fundamental motive of a FDI is for an enterprise to achieve its corporate aims, contained within their mission statements. These can vary depending upon the industry sector it is in as well as the product/service offered. General primary motives for FDI often include profitability (the most crucial feature), expansion through new international markets or the possibility of benefiting from economies of scale.
To achieve these primary motives, foreign direct investment firms need to consider factors that are likely to disrupt their operations or even factors that are more favorable in some locations than they are in others. For