Foreign Direct Investment
Foreign direct Investment involves business companies that choose to extend their operations in more than one country as a company on its own and not through the government. Major activities that such a company pursues include asset acquiring and being stakeholders in the other business company or extending its business operations for a wider market. Foreign Direct Investment (FDI) specifically involves the element of control, where the business does not only purchase and establish income-generating projects in another country like in portfolio investment but also invests passively in securities that include public stocks and bonds thus controlling the whole operations of a chosen business organization. This paper describes the operations, policies and restrictions of Foreign Direct Investments such liberalization and how they affect the Multi National Enterprises (MNE) and evaluate whether changes are needed for a fresh look in developing countries concerning the policies and role of the Multi National Enterprises.
Multi National Enterprises often concentrate on establishing their business operations in developing country capable of providing enough resources where the FDI spillages are directed. The quality of these spillages largely depends on the subsidiaries, which are the developing countries in which the host country of which the business organization originates from chooses to extend their operations. The fact that Foreign direct investment has the control element; most factors are actually determined by the host country before engaging in business with another country or business company. The MNE’s have to therefore interact with the administration and evaluate the capabilities of the host country as well as the subsidiaries matching with their internal policies before the business go to full operation. The Multi National Enterprises has its own internal policies and business structures, by which the business companies and organizations must go by. These include the strategies on international business where for instance roles of the particular businesses participating in the deal have to be clearly stipulated, however the MNE’s still have a cut for the relatively under developed countries that are affiliates and interested in engaging in international business. The Multi National Enterprise sets up relatively lower standards and limits for such a country, and especially where a country does not have the capability to provide quality and high level of resources locally, the MNE’s sets up relatively low or matching affiliates in terms of quality and resources capabilities.
Upgrade of the affiliates resources and level of development in terms of infrastructure and general local resources in a country is common which has a part laid by the Multi National Enterprises. This happens with time where the longer an affiliate has been in this global business operation, the more sophisticated are its skills and ways of managing the operations including the skills developed over time. As much as in the current world economy, there is a great noticeable change and variation in the different kinds used in Foreign Direct Investment, the important role played by the FDI in improving the worldwide economy is still recognized. Liberalization being an important factor and policy employed in Foreign Direct investment still does not have much effect on international business as before. Globalization has always faced major challenges in the business world from factors of different currencies to liberalization including the different levels and pace of development in different countries in the world. Liberalization has however been able to improve a number of factors where countries have open communication where different skills in the business skills are shared among the countries; technologies used in the countries have to be uniform thus enhancing international cohesion and hence easy access to the different desired international markets, which the Multi National Enterprises have to engage in.
- The Multi National Enterprises have a number of roles in global economic development; industrial development as well has a major part that it relies on these MNE’s in the world at large. Despite the major changes occurring in the global business field, on policy substitution concerning the regulations on imports and exports. The operations by all the Multi National Enterprises depend largely on policies and changes concerning the Foreign and Direct Investment policies set by the respective authorities.
Analysis of the tools used in Foreign Direct Investment is also important. They tools used here are uniform in both the economic and the industrial field. The current international market which has been enhanced by efforts on liberalization is said to be at a past the decades where the World Trade Organization was in control of the trade and business operations by international organizations including international business conducted by the respective governments had to follow policies stipulated by the World Trade Organization.
The changing policies on trade concerning the exports and imports regulations of different countries pose a challenge to the many parties in international business. With the improved skills and new technologies that have developed, relevance to business processes represents a research question on whether there is need to improve the agenda on the role of Multi National Enterprises in relation to the Foreign Direct Investments.
- Research on the business field concerning Multi National Enterprises has several assumptions on the operations of the business. Basing on the fact that the level of a country’s development directly determines the skills and therefore ability to build enough and adequate resources the Foreign Direct Investments rely on this to measure the capabilities of a country when connecting one country say a host to the affiliates and subsidiaries that can conduct business operations smoothly. Potential and existing, market size are major considerations for a host country with the major business organization or firm of which highly determine the extent of linkages the country will engage business in. As the level of skills among the entrepreneurs increase locally in a country, there is definitely increase of content within the country which means more business that attracts more suppliers of various commodities therefore increase in linkages.
- The case study paper researches on several factors concerning the Multi National Enterprises and how their operations are affected by other factors including the major policies by the Foreign Direct Investments. The research bases its conclusions and assumptions on findings through both the qualitative and quantitative analysis where for instance they focus on use of the tools available used to improve the economy in a liberalized market.
- Business affiliates established through the merging and acquisitions on various terms have a higher probability of developing much stronger linkages in terms of establishing business relationships and involving in the real business towards economical and industrial development much more than affiliates established under the Greenfield investment. This has a sole reason of which the affiliates established on merges have a higher probability of regaining existence of previously established linkages.
New Zealand being highly dependent on their natural resources has currently more available linkage information that they may not be putting to use, this is from the previous business that they engaged in before the country stopped import operations, however the type of linkages provided here differ depending on the type of Foreign Direct Investments.
- Policy making on changes in business, especially global investments that involve the Multi National Enterprises: The Middle East is a rich country and one of the popular leaders in the global economy that has high influence in the business world. Existence of the Gulf region as a business association is a plus for them that give them a way ahead of other countries in terms of trade. Findings on this paper, for instance on how affiliates can be established and the best in terms of number and consistency of linkages, are a major factor when forming new business associations in the Middle East countries. This based on the fact that the business in this region is being restructured in terms of energy production to the only reliable renewable source, the solar. New relations and affiliates will have to established, noting such measures from this findings will be helpful.
- Similarities with the textbook are particularly on the issue of the measure of a country’s local capabilities that determine the value systems and the ability to capture the skills and spillovers on technology from the country, they all point on how these capabilities of respective countries depend on selective policies and definitely strategies in the Foreign Direct Investments.