International Business - Foreign Direct Investment(FDI)

Countries which have an established information technology infrastructure perform well than those without

Disadvantages of foreign direct investment

Research shows that when companies use foreign direct investment in a foreign country , the hosting country has less control on the internal operations of the foreign country . In this case , foreign companies are known to develop a tax evasion technique which includes manipulating the financial statements and accounting books . High expenditure reduces the net profits of a company which the government bases its tax rate percentages from . Foreign direct investments which fuel the

hiring of foreign professionals who might not have the experience in dealing with the local employees may unsettle the working environment within the company . Another disadvantage of foreign direct investment is that the foreign country may benefit more than the host country . During foreign direct investment , production material may be imported from the parent company 's country hence resulting to decreased revenues from raw materials which are locally produced

Globalization

Foreign direct investment enhances the globalization activities of the company . Globalization refers to the process where local companies decide to join and expand their operations to the international market Multinational companies like the Coca Cola Company decided to establish its operations in the international market . The company has remained as an international market leader in the soft drink industry for the last couple of decades . When a company goes global it no longer competes with local companies only , in international markets only the companies with the best strategies survives this stiff competition . Many companies are known to be market leaders on their own country but when they try to go global , they are declared bankrupt within the first few months of operation . During globalization all the involved countries benefit from this strategy as international trade is only possible when...