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FDI Strategy - Essay Example

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The growth of multinational enterprises in emerging markets is making the world a much smaller place with each passing day. Year after year, it is possible to see the coming up of a multinational enterprise in a foreign land or region, as it struggles to get a piece of the trends in globalization. …
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FDI Strategy
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Download file to see previous pages These trends come with different advantages as well as their fair share of challenges as pressure to belong grows on these corporations and firms regularly. To assist in these changing trends, foreign direct investment guarantees that the corporation is well-situated through mergers, joint ventures, or acquisition of shares. This guarantees their position in the growing market, and a place in their hosts’ market (Peng, 2012).
MNE selected (who they are and what they do)
Multinational enterprises are taking over the world by storm as they strive and struggle to capture the international market through some of the products and services they offer. One major MNE that is popular in this day and age is probably the McDonald’s fast food chain. This MNE has been around for a particularly long time and is keen on spreading its wings into different regions of the world, so as to capitalize on the changing trends. Changes in the technological and cultural field are making it easier for MNEs to break into emerging markets and take advantage of the growing number of consumers (Peng, 2012). McDonald’s Corporation probably has the largest chain of fast food restaurants around the world. It is situated in almost 119 countries, and has its headquarters in the United States. The corporation sells almost anything that is considered fast food, ranging from soft drinks to desserts for its ever-growing customer base. Sadly, one region that may not boast of having a branch of this corporation is North Korea.
Challenges and advantages of FDI for the MNE
One of the main advantages of FDI for the MNE is that the host country may be assisted in their quest for improving their infrastructure and projects that boost their economy (Dunning & Lundan, 2008). McDonald’s, in some of the areas that it is situated, can offer them the aid they need in order to be self-sufficient and increase their infrastructure developments. North Korea, as a region that does not boast of having a McDonald’s branch or franchise, may need the services and job opportunities that arise from the corporation’s presence in the region. Moreover, greater competition may arise from all the subsidiaries of the corporation, which may lead to an increase in productivity and gains from all groups participating in the business. Some of the challenges of foreign direct investment for the fast food corporation involve the exploitation of labor in the region. In order to make a mark in the region in which they are situated, corporations are pushed into focusing on their profits, rather than the positive impact of their presence. Also, the host’s country’s investment policies may be a tremendous challenge to the main corporation (Dunning & Lundan, 2008). If the host region has stringent investment policy measures, it may be next to impossible for the mother corporation to invest in the host country, or even find the right strategies to satisfy their overall organizational performance. Best way for the MNE to minimize foreign exchange risks For MNEs, it is crucial to identify the risks that are posed to its operations. The corporation needs to monitor its financial, portfolio, and structural risks and engage in risk management strategies that may protect the corporation’s investments in the host country. When it comes down to foreign exchange and MNEs, structural risks are the most crucial risks to monitor. This is because mismatches between cash inflows and outflows can cause ...Download file to see next pagesRead More
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