Introduction to International Business - Essay Example

This can include money or people, and most often refers to a nation offering this investment to a private or publicly held corporation that is owned by people in foreign countries, who are doing the investing (“Foreign Direct Investment,” 2011). For example, the United States may have some people who are sent to Icecreamists, an ice cream parlor in the city of London that has made headlines for serving a new flavor called the “Lady Gaga,” which is made with human breast milk (Casciato, 2011) not only to help the budding entrepreneur who owns the establishment, but also to bring new ideas home.

When dealing with foreign direct investments, it is paramount that those who deal in them understand that for each nation there are precise regulations that need to be followed in order to operate there. The purpose of foreign investment regulations is to protect industries when trying to catch up to more advanced nations. In some cases, it is to prevent other nations from being able to get a hold of the technology, methods, and management practices that make one nation better than all others.

This is why some countries allow certain industries to receive a high level of foreign direct investment, and others to receive little. A nation like Ireland, for example, is very open to foreign direct investments while Finland operates in much the opposite fashion (Chang, 2003). Foreign investment regulations vary by country. In the United States, businesses are welcoming to member who participate in the World Trade Organization (WTO) to those who prefer more secrecy. Part of the reason for this is because the United States values the world of ideas and tends to shun isolationist sentiment, which is when a nation does not want to have anything to do with any other country.

The idea that one country keeps to itself while others fend for themselves does not often work because while one nation is operating to the best of its ability, the world of nations are operating to the best of all of their collective talents. For this reason nations who have tried to live in a bubble in the past have ended up paying a price for it later. Foreign investment regulations start with the premise that a firm must be abreast of global trends in their industry. For example, if a textile company wanted to know whether or not a foreign competitor was going to expand into its market, it could try to find out from third party sources, or it could go straight to the source.

After all, if a firm from Japan, China, Brazil, or any country wanted to operate in the United States, it would be very interested to get an inside look at a factory (as well as its management and other staff) to see how to be successful, possibly allowing it to capitalize on shortcomings within the operations. Doing so will also allow for a company to see how globalization affects domestic clients, meaning that when a firm travels home, the local company will want to follow their expansion, which could allow for a partnership to form in work that is either performed in the United States or other countries (Chang, 26-30).

All of this is related to concerns that management will have in screening potential markets for expansion. Two of the most important concerns are the assessment of internal resources and how competitive a firm can be in the new market. For example, it would not matter that Ford Motor Company has the cash to expand into India and sell sport utility vehicles if the locals would be