logo

International Business Environment - Sample Assignment

   

Added on  2021-06-15

32 Pages7795 Words110 Views
International business environment1INTERNATIONAL BUSINESS ENVIRONMENTName:Department:School:Date:

International business environment2Executive summaryThe paper has broadly discussed how Brazilian and Russian companies are operating expanding their business abroad. It has identified the challenges faced by the countries and firms as they were operating overseas. The companies were mostly challenged by economic crisis and politicalinstability. The study has also discussed the role of outward foreign direct investment in the development of a country. The study has analyzed various results of contributions of outward foreign direct investment to these countries. Different theories have been used in this report to discuss current trends in outward foreign direct investment.FDI makes up a very little part of the total capital formation of a country. But it greatly promoteseconomic growth, welfare and industrial growth in developing economies. Due to increased capabilities of technology specific advantages sufficient to expanding their operations to other countries, the emerging and developing countries started investing abroad.Russian outflows involved activities of the large energy firms that were trying to invest abroad. Due to the political risk in the country in early 2000s Russian companies were moving capital out of the country (Anwar and Mughal 2015, pp. 2385). Due to this there was no increase in amount of outward foreign direct investment. The Brazilian outward foreign direct investment mostly was concentrated on financial services such as banking services. Other sectors of investment were oil exploration and production, construction, engineering and construction. Oil and construction sectors were aiming Latin American while engineering services were directed to Middle East countries.

International business environment3IntroductionForeign direct investment (FDI) is an important part in the strategy of national development. Strategies have been developed but they only focused on inward flows (Anyanwu 2012, pp. 14). But recently, outward foreign direct investment has been put into consideration and was more integrated and considered in development policies of emerging and developing economies. Theories have been developed trying to discuss the role of outward foreign direct investment in upgrading the growth of industries. Outward foreign direct investment has been considered important both for emerging economies and technologically advanced countries (Da Silva 2015, pp. 114). In the current years, outward financial direct investments have grown contributing to liberalization of investment movements across the countries. Multination plays an important part in global business with most of the global trade done by Multination. The study emphasizes on the impact of the outward foreign direct investment on an economy of a country.This report analyses the current trends on outward foreign direct investment in both Brazil and Russia. The paper compares the trends of outward foreign direct investment in the twocountries. The paper has also identified the determinants of the outward foreign direct investment. The study examines the potential determinant variables of outward foreign direct investment. The paper has discussed the five determinants including; economic performance, political stability, geographical distance, state of institution and cultural effects (Bevan and Estrin 2004, pp. 507). Over the past years the foreign direct investment has grown strongly in both investments to and from emerging and developed economies.

International business environment4Outward FDIDue to increased capabilities of technology specific advantages sufficient to expanding their operations to other countries, the emerging and developing countries started investing abroad. From 1990s, various shifts have been experienced in the investment objects, means of possession and sectorial evaluation (Akyuz 2015, pp. 67).FDI and emerging economiesFDI makes up a very little part of the total capital formation of a country (Brito and Sampayo 2005, pp. 419). But it greatly promotes economic growth, welfare and industrial growth in developing economies. There was an increased in the value of total outward foreign direct investment stock from developing countries from US$ 129 billion in 1990 to US $859 billion in 2003. There has been 11 increases since 1985. estinations of OFDI (Akyuz 2015, pp. 71). There have been two different waves of outward foreign direct investment; market and efficiency seeking factors and combination pull and push factors. The first wave started in Latin America where new TNCs started from Chile, Argentina and Mexico followed by Colombian, Venezuelan and Brazilian competitors. The other wave was dominated by Asian TNCs Taiwan Korea China, Hong Kong, Singapore, Thailand, Philippine and India (Al-sadiq 2013, pp. 21).Russian outward foreign direct investmentSince when the country started trading abroad the foreign direct investment outflows of the Russian federation have consistently exceeded the inflows. The country started using improved recording in 2003. Since 1990s the Russian outflows were in the nature of informal, and unregistered in the balance of expenses (Al-sadiq 2013, pp. 25). To make a middle income country to become a net capital exporter you need to combine economic and political factors. To

International business environment5combine these factors such as business environment and economic has still been hard. This was due to their oligarchy which was created under the governance of Boris Yeltisin, Where most of the natural resources have been privatized in the country (Le and Zak 2006, pp. 309). The political changes happening in the government can only have a limited increase in the influence of the state (Jones and Wren 2016, pp.35). The Russian strategic interest to take control of their vertical value chains through outward foreign direct investment was long term (Andreff 2017, pp. 24).Russian outflows involved activities of the large energy firms that were trying to invest abroad. Due to the political risk in the country in early 2000s Russian companies were moving capital out of the country (Al-sadiq 2013, pp. 27). Due to this there was no increase in amount of outward foreign direct investment. Russian companies’ outward foreign direct investment was mostly aimed at resource related sectors such as metals and energy.According to the research, Russians 2014 outward foreign direct investment were half that of 2013 (Andreff 2017, pp. 26). This was as results of Russian companies’ reduced their activities in abroad due to scarce financial resources and fear of restrictions by countries that fated Russia’s actions in Ukraine. Another growth in outward foreign direct investment is expected until they form a stable relationship with west (Kumar 2016, pp. 519).The largest recipient and contributor of Russian foreign direct investment is Europe. Many of the Russian companies have invested in Europe (Acaravci and Ozturk 2012, pp. 52).Russian companies are focused in extra outward investment in production chain, technology series and guaranteed product markets and supplies in Europe. There is an expectation of the

International business environment6Russian investment in Europe to decrease due to Russian companies interests in eastern markets have increased (Euromoney 2001, pp. 483). Outward FDI to Europe by country, 2007 and 2013 (Akyuz 2015, pp. 67)20072013$ million% total FDI$ million% of total FDI1Cyprus1470032.81Cyprus76898.872Netherlands1199126.82Austria52656.073UK24545.483Switzerland 13581.574Switzerland 14043.134Spain13561.565Germany6731.505Germany13341.546Luxembourg4971.116Luxembourg13141.527Spain2580.587UK12941.498France2570.578Denmark7520.879Czech2480.559Latvia5680.6610Austria 2300.5110Bulgaria 5540.64 Source: central bank of Russia, foreign direct investment databaseEurasiaRussia is focused in making a greater integration with the Eurasian where there was an understanding of post-soviet space. In 2000 Belarus, Kyrgyzstan, Kazakhstan, Russia, Uzbekistan and Tajikistan came together and formed the Eurasian (Andreff 2017, pp. 27). Eurasia was formed to encourage a customs union and single economic space, manage member states’ policies and assimilate them into the world economy.In 2010, the Eurasian customs union was formed, and the EEU was established in 2015, which was focused in in greater economic integration (Anwar and Mughal 2015, pp. 2388). The EEU was made up of Belarus, Armenia, Russia, Kyrgyzstan and Kazakhstan. EEU had a

International business environment7different objective from EAEC and Eurasian Custom Union which aimed at common trade, establishing of super natural agencies, monetary and fiscal policies, economic commission, international investment bank, and commodities commission (CIA 2006).Currently Russian inflows from EEU members is 0.7% of the total FDI inflows and Russian foreign direct investment outflows of 1.9% of its total outflows to members of EEU (Akyuz 2015, pp. 76). Internalization of Brazilian companies was contributed by economic motives, political support from their governments to invest abroad. Russia and Brazil have particular strengths that led them to join both developing and developed countries and follow their internationalization strategy (Andreff 2017, pp. 29).Many companies from different countries have entered the international markets. Fundamental changes and economic liberation in foreign regimes of BRIC have attracted high FDI inflows to these countries and motivated companies from these countries to invest overseas (Bartlett and Beamish 2018, pp. 121). The world investment report shows that the rate of outward foreign direct investment growth by firms from emerging markets has outperformed the foreign direct investment growing by firms from developing marketsOutward foreign direct investment in BrazilThe Brazilian outward foreign direct investment mostly was concentrated on financial services such as banking services (Jensen, Biglaiser and Li 2012, pp. 24). Other sectors of investment were oil exploration and production, construction, engineering and construction. Oil

International business environment8and construction sectors were aiming Latin American while engineering services were directed to Middle East countries.In 2008 there was a high Brazilian OFDI stock growth rate of 25% (Akyuz 2015, pp. 80).This was as a result of intercompany loans from parent companies to failing subsidiaries abroad as well as new acquirements of mining an natural-resource-based industries (Al-sadiq 2013, pp. 28).Due to worldwide economic and financial crisis which was experienced in 2009, there was negative FDI outflow from Brazil. Through intercompany transfers the Brazilian parent companies lost $10 billion from their foreign subsidiaries (Akyuz 2015, pp. 82). The Brazilian companies did not venture much abroad due to depreciation and loss of market value of oversea equity. This was due to uncertainty caused by economic crisis and international credit conditions.Trans-border mergers and acquisition (M&As) by Brazilian MNCs failed in 2009 although its effect were not felt much in Brazil. The growth rate of Brazil’s GDP was 7.5% and equity investment in foreign subsidiaries by Brazilian MNCs was $11.5 billion in 2010 (Cruz 2015, pp. 92). From 2010, Brazilian OFDI stock that was directed to Europe has been significantly raising due takeovers of Austrian banks. Brazil was ranked19th largest outward investor in 2007 where Russia was ranked 12th. In 2012, outward foreign direct investment stock from Brazil was ranked 18th world’s most important source of OFDI with Russia being the 15th (Al-sadiq 2013, pp. 31).About 1000 Brazilian companies had invested abroad in 1990s. A study showed that in 2006 885 Brazilian MNCs had invested in 52 countries and had employed 77000 people. Some of these companies were privately-owned while others were owned by the state. By use of UNCTAD trans-nationality index, in 2007, it showed that the most trans-nationalized Brazilian

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Foreign Direct Investment in African Countries
|14
|3980
|425

MKT11104 - FDI In Russian Textile Industry Report
|13
|3279
|38

Assignment on International Business and FDI
|4
|750
|92

Economics of Globalization: Outward Chinese FDI in Thailand
|5
|987
|175

Foreign Direct Investment
|16
|2961
|116

Business Environment - Definition
|10
|2792
|19