Contact Us
Sign In / Sign Up for FREE
Go to advanced search...
Nobody downloaded yet

Risks in Foreign Direct Investment Projects - Case Study Example

Comments (0) Cite this document
The paper "Risks in Foreign Direct Investment Projects" discusses that Norway has experienced foreign direct investment inward flow of around 6,657 million USD. A credit insurance company has stated that Norway has low political risk with medium business risk…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER96.5% of users find it useful
Risks in Foreign Direct Investment Projects
Read TextPreview

Extract of sample "Risks in Foreign Direct Investment Projects"

Download file to see previous pages Despite the well-developed strategies, certain inherent risks are associated with a foreign direct investment which calls for additional caution when a company decides to invest in a host country. This report will attempt to assess social, environmental and political risk associated with foreign direct investment projects.
Political and macro-economic stability is often regarded as the most significant pre-requisite for foreign investors. A stable, transparent and non-discriminatory legal and regulatory environment encourages multinational organizations since it promises an efficient and non-corrupt judicial system in case of conflict. Institutional rigidities and bureaucratic procedures are not intended as significant time is wasted in making strategies to fight with bureaucratic procedures and negotiations. Multinational organizations now require a free foreign exchange system with repatriation and a flexible labor market. An appropriate social and economic environment is also a prerequisite for the MNCs. A flourishing market, an efficient communication system, qualified labor, fiscal incentives and privatization programs are some of the ingredients that make a host country attractive to foreign investors (Michalet, 2000, pp7- 9).
As mentioned earlier, foreign investors zero down on a specific country based on certain parameters. Earlier, organizations used to think the bureaucracy as a cost of getting entry into the domestic country. Nowadays the foreign investors consider these as a risk to their business. Apart from this, there can be certain political risks. Unfavourable political events and ambience of the host country can pose a potential risk for foreign investors. Changing relationships between the host and the home country as well as between the host and the third country is supposed to influence the economic well being of the multinational companies in that host country. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(Multinational enterprises (MNEs) conduct international business and Case Study, n.d.)
Multinational enterprises (MNEs) conduct international business and Case Study.
(Multinational Enterprises (MNEs) Conduct International Business and Case Study)
Multinational Enterprises (MNEs) Conduct International Business and Case Study.
“Multinational Enterprises (MNEs) Conduct International Business and Case Study”.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Risks in Foreign Direct Investment Projects

Direct Foreign Investment

... Direct Foreign Investment I. INTRODUCTION The study of foreign direct investment between China and Brazil is of great importance because it aids in the understanding of the dynamics involved in the country’s foreign investments. Research studies indicate that there is direct relationship between FDI and financial markets. According to the research studies, structural changes in financial markets have been used in attracting FDI. The general view is that stock markets have been established with the main reason of intermediating funds towards investment projects (Hui and Margarida 210). The growth of FDI has always been associated with the growth of financial markets in terms of market capitalization. This paper will compare the FDI...
8 Pages(2000 words)Coursework

Foreign Direct Investment

...Foreign direct investment Table of Contents Introduction 3 Importance of FDI 3 Impact of FDI on the economics of a region 4 Inward and Outward FDI 6Modes of FDI 7 Lessons from inward investment 7 Introduction Foreign direct investment involves acquisition of managerial control in a company. The threshold of this form of ownership is 10% or more in UK. This varies across countries. With the liberalization of the various global economies in Africa and Asia this form of investment has grown considerably. Foreign direct investment (FDI) facilitates the interaction of two firms and economies with varying economic differences. The foreign investors invest their funds with a long term perspective to exploit the cheap labour costs, strategic...
5 Pages(1250 words)Term Paper

Foreign Direct Investment (FDI)

... they provide economic benefits to the host country. Lowe (2006, p. 34) explains that acquisitions as a form of foreign direct investment includes a company acquiring the assets of another company within the foreign country. The acquisition of a foreign company makes the investing company the owner of the assets of the company within the host country. Foreign direct investment may also take the form of mergers or strategic alliances. This is a business scenario in which the investing companies collaborate with companies in the host country with an aim of undertaking a given business project. Handy, Kaufman and Martinez (1996, p. 6) point out that in foreign direct investment, companies may decide to make strategic alliances with companies...
10 Pages(2500 words)Essay

Starbucks Foreign Direct Investment

...?Starbuck’s Foreign Direct Investment Expansion through Licensing Format Starbucks was founded in 1971 as a small coffee store in Seattle’s Pike Place market. By 1992, when it went public, it had become a national phenomenon and was expanding at a break-neck pace (Pride, Hughes & Kapoor, 2009). Patterson et al. (2010) write that the two main reason Starbucks was able to become an international phenomenon are: Firstly, unlike any other coffee brand Starbucks was able to Americanize the European coffee-drinking tradition. Secondly, Starbucks did not just sell coffee, they sold an experience (2010, p. 41) Starbucks has laid significant emphasis on consistency of product, atmosphere and services across their stores globally. In other words...
7 Pages(1750 words)Literature review

Foreign Direct Investment

... aspect of IFIs in the past decades was the growth of globalization and the increasingly integrated role of the capital markets. In the early 1980s, a bulge in the level of capital flows in the direction of emergent markets became more prominent, on the basis of managing the oil revenues. Yet this degenerated into the 1982 economic meltdown due to accumulated debts. After a lull of economic crisis and the development of stronger macroeconomic policies which yielded stability, the world economy registered a sharp rise in the capital flows in the early 1990s. This came at a time when many countries that sought to rely upon direct foreign investments and credit services from non-banking organizations, accounted for the primary source...
17 Pages(4250 words)Essay

Foreign Direct Investment Risks

...International Finance Management: Foreign direct investment risks: Foreign direct investment is the long term investment by an investor in another country other than the country he resides. Before decisions on investments are made several factor are considered and this include political stability and exposure of transactions and currency which include skilled labor and infrastructure. Risks A. Political instability: Political instability according to Kobrin (1979) can be defined as the decisions made by the host country will affect the business climate in such a way that the investment made will loose money or not make as much money as they had expected when the investment was made. Some of the factors that cause political...
2 Pages(500 words)Essay

Foreign Direct Investment

... statistical analysis of data obtained from these countries in order to arrive at their determination. The authors have stated that the choice on whether or not to go for Foreign Direct Investment is dictated by the profit motive. For purposes of their analysis, the authors have selected quantifiable variables that are the result of location and the competitive advantage that may be gained. These variables were: 2.1.1: Growth rate and corporate tax rate: to determine differences in rates of return after investment in different countries. A strong growth rate increases the risk adjusted return to capital and raises net FDI while the tax rate will be reflected in the cost of doing business in a different country. 2.1.2: Openness...
9 Pages(2250 words)Essay

Foreign direct investment

...The impact of foreign direct investment on economic growth of less developed countries By Ezekiel Eyamekuare Outline: Introduction: Aims and objectives: Motivation: Development Economics and its usefulness in this study: A Brief Review of Literature: Methodology: Discussion: An outline of the chapters to be included in this project: Reference: Introduction: Foreign direct investment (FDI) has been one of the important characteristics of the global economy for the past twenty years. It has developed at an unparalleled pace for over a decade. Liberalization of overseas investment regime is an essential part of expansion of FDI. FDI as a growth-augmenting constituent has received great interest from developed nations in general...
24 Pages(6000 words)Research Paper

Foreign direct investment

... Foreign Direct Investment Though most companies operating globally choose to export to other market entry modes, there are situations in which exporting may not be feasible. In such circumstances, companies may opt for direct investment within other countries, or enter markets via diverse collaborative strategies that enable entities to diversify its assets and risk across diverse countries by engaging in contractual agreements with multiple potential partners. Companies may find it advantageous by producing in foreign countries compared to exporting to those countries based on a variety of reasons (Froot 57). #1 Why companies often prefer to operate with foreign direct investment, especially wholly owned? Foreign direct investment...
2 Pages(500 words)Essay

Foreign Direct Investment

... Foreign Direct Investment Assignment Question Compare and contrast these explanations for horizontal Foreign Direct Investment (FDI): the market imperfections approach, Vernon’s product lifecycle theory, Knickerbockers’ theory of FDI. Which theory do you think offers the best explanation of the horizontal pattern of FDI? Why? Introduction Foreign direct investment (FDI) flows has seen a steady rise amongst world economies for the past three decades. Between 1990 and 2005, the total worldwide FDI flows increased from $203 billion to $974 billion (Sayek, 2009, pp. 419). Developing countries and transition economies are intensely competing to attract FDI inflows, and requisite regulatory frameworks have been put into place...
10 Pages(2500 words)Dissertation
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Case Study on topic Risks in Foreign Direct Investment Projects for FREE!

Contact Us