Benefits of Outward FDI in Developing Nations

Dynamics of Multinational
Company

Table of Contents
CASE STUDY.................................................................................................................................1
INTRODUCTION...........................................................................................................................1
Main Body.......................................................................................................................................1
CONCLUSION................................................................................................................................4
INDIVIDUAL ESSAY....................................................................................................................5
REFERENCES .............................................................................................................................10

CASE STUDY
INTRODUCTION
Foreign direct investment is considered as investment in the form of controlling
ownership in business of some one nation by an entity belongs from the another country. This is
totally different from portfolio investment that includes purchase of equities by person.
Basically, FDI are of two types horizontal and vertical. The benefits associated with this exercise
not only attained by the organisation or person but overall nation also benefited from its
successful implementation. In terms of nature, FDI better understood through its analysis as
outward and inward (Al-Shawaf and Almsafir, 2016). The working of both is different and help
differently to the nation in relation to attainment of benefits. The effective regulation of this
concept is based upon government intervention with the help of policies. This will provides an
opportunity to gather large number of benefits that contributes in optimum growth of nation. The
main of this case study is about the ascertainment of the benefit of outward FDI towards
developing nations.
This case study covers application of appropriate FDI strategies to support the benefit of
outward FDI towards developing countries along with determination of cost. Also, covers
identification of the difference in between the cost and benefit of the outward investment at the
time of its use as south-north and south-south.
Main Body
Foreign direct investment is a process which has facilitated the business opportunities for
different business men as using same their overall capacity to operate in the commercial activity
has increased to a great extent. Although, it has many advantages for the economy of the home
country FDI also gives negative results if not used properly. FDI is the acronym of foreign direct
investment. This includes the acceptance and formulation of the policies by the nation that
contributes in attraction of investment from the outsiders. The different number of factors upon
which the aspect of FDI depends includes political condition, policies, government nature,
infrastructure, economy, education, wage rate, tax rate, human resources etc. All these are
different in nature and have their own separate impact over the aspect of FDI. For ex., if political
condition in nation is good then this will attracts the large number investors as they have belief
that large number of opportunities are present in respect to get higher amount of return. If the
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situation is not good then will have direct negative impact over their perceptions and build the
image that they are unable to get the sufficient amount of returns. While going to analyse the tax
rate, the impact of this has main as if high tax rate is going to be levied then this will have direct
impact over the margin of profit. If margin is diminished then opportunities for investors are
going to be changed. This restricts them to made investment in the particular nation as they don't
have earn chances.
This concept is further bifurcated into the two different aspects i.e. Outward and Inward
FDI. Outward FDI is about the investment by the residents and organisations of home nation
towards host country (Boateng and et. al., 2015). On the other hand, Inward FDI is opposite in
nature. This is about acceptance of investment by the home country from the residents and
organisations of host nation. Outward FDI is considered as one of the new channel that
introduced for bring improvement in the economies of developing nations. The direct of
influence of the same is ascertained over country's investment competitiveness. This plays the
important role in the long term and sustainable growth of developing nations. The aspects which
are added due to successful implementation includes high amount of knowledge, new
technology, upgraded production process, high competitiveness, better managerial skills and
wide distribution network. To gain all these in maximum of number is depends over the
capability of government. Adoption of most beneficial option of Outward FDI help in addition of
above mentioned aspects optimum in nature. In addition to this, FDI introduces as an investment
within an organisation by an investor from another nation for which the international investor has
full control over the enterprise purchased. This is commonly made in open economics of country
that offer a knowledgeable employees and above average growth prospects or chances for the
capitalist, as opposed to fully regulated economies. FDI frequently involves provisions of
management as well as technology also (Damijan, Kostevc and Rojec, 2017). Along with this,
foreign direct investment takes place when a capitalist establishes international business
operations and acquires international business assets such as controlling interest or establishing
ownership in a foreign company. FDI mainly categorised into three forms which are vertical,
horizontal or conglomerate. In case of horizontal direct investment, investor establishing the
similar kind of business operation within a foreign country. Under vertical direct investment,
investor forms related business activities. Under conglomerate type of foreign direct investment,
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