BUSN20016: Examining the Effects of FDI on Domestic Firms

This report investigates the effects of Foreign Direct Investment (FDI) on domestic firms, addressing issues such as increased competition, taxes, and political instability. The research aims to determine the parameters surrounding foreign investment effects, identifying the pros and cons for domestic firms and exploring strategies for competing effectively with foreign companies. Utilizing both qualitative and quantitative research methods, including secondary data analysis from firms' reports and government publications, the study assesses the impact of FDI on firms' sales, market control, and government regulation policies. While acknowledging challenges in data collection due to confidentiality concerns, the analysis seeks to provide insights into the resources needed for firms to engage in FDI and maintain competitiveness, with a focus on outlining key issues affecting FDI and offering strategic measures for firm survival in the market.

Running head: THE EFFECTS OF FDI ON DOMESTIC FIRMS 1
The effects of Foreign Direct Investment on Domestic Firms
Name
Institution

THE EFFECTS OF FDI ON DOMESTIC FIRMS 2
Table of Contents
The effects of Foreign Direct Investment on Domestic Firms........................................................3
1. Statement of Problem...........................................................................................................3
2. Research Aim and Objectives...............................................................................................3
3. A Brief Methodology............................................................................................................4
4. Secondary Data Analysis Methods.......................................................................................4
References........................................................................................................................................6

THE EFFECTS OF FDI ON DOMESTIC FIRMS 3
The effects of Foreign Direct Investment on Domestic Firms
1. Statement of Problem
Foreign Direct Investment aims at improving the annual sales of a firm. Some of the
problems of FDI includes adverse competition for both domestic and foreign companies. Foreign
companies bring adverse competition to the domestic firms and this may result to their failure.
However, the foreign firms may face stiff competition from the domestic firms resulting to their
failure. Also, firms may be affected by the high taxes, and political instability, which may reduce
their profit margin (Frieden, & Lake, 2015).
According to Kim, & Mauborgne (2017), business competition has increased over the
years and firms are looking for ‘Blue Oceans’, which are markets with no competition in order to
attract a large market base. Additionally, some of protection of home firms include some country
governments putting strict measures to restrict influx of foreign companies such as quotas in
order to protect their domestic companies form the stiff competition (Boly et al., 2015).
Basically, the main effect of FDI is stiff competition and this business research will enable firms
have an incite of what they expect from FDI hence they will put strategic measures to ensure
their survival in the market.
2. Research Aim and Objectives
The objectives of this study will be to determine the parameters surrounding foreign
investment effects on domestic firms. It will aim in identifying the pros and cons of domestic
firms with regard to FDI. In order to remain competitive in the market, firms invest in foreign
countries not only to increase sales but also grow their businesses thus increasing competition to
the domestic companies, which might not be up to their standards. Therefore, this research

THE EFFECTS OF FDI ON DOMESTIC FIRMS 4
project will aim in finding out ways, which a domestic firm can compete effectively with foreign
companies without being disadvantaged (Harris et al., 2015). Also, this research will outline the
problems domestic firm face from the increased operation of the foreign companies in the home
market.
3. A Brief Methodology
In order to get concise information regarding FDI, this research will use both qualitative
and quantitative research methods. It will analyze data, use opinions to be able to get the main
problems a firm might expect when planning to engage in international business. Through the
use of primary data collection methods such as surveys, questionnaires, interviews, focus groups,
documents, and records, this research will be able to outline all the necessary information a
business requires to succeed in foreign investment. The study will focus collecting secondary
data from reports of successful international firms, trade journals, public records, government
publications, and statistical record documents. All the information forms the various sources
with be analyzed to come up with a summary of the key issues affecting FDI (Sullivan-Bolyai et
al., 2014).
4. Secondary Data Analysis Methods
This report will mainly be concerned with secondary data from firms’ reports regarding
the sales they make in the foreign markets. Additionally, it will evaluate domestic firms to check
their growth and development as a result of FDI. The data obtained will be recorded and
analyzed to check the its correlation to aid in identifying the main effects of Foreign Direct
Investment.
Areas to be analyzed will include both firms’ sales, market control, government
regulation policies among others. The analysis will be able to ascertain the number of sales

THE EFFECTS OF FDI ON DOMESTIC FIRMS 5
before and after FDI hence indicating whether it has any effects to domestic firms or not. Also, it
will categorically, identify the benefits associated with FDI. Therefore, the data analyzed with
depict the resources needed for a firm to engage in FDI and competitive in the market (Milner,
2014). However, getting relevant information for this study may be a challenge as firms
disclosing their information may be hard because of the fear of competition. Additionally, other
sources of information might be time consuming but it is important for correct information to be
obtained (Cavusgil et al., 2014).

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References
Boly, A., Coniglio, N. D., Prota, F., & Seric, A. (2015). Which domestic firms benefit from FDI?
Evidence from selected African countries. Development Policy Review, 33(5), 615-636.
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L.
(2014). International business. Pearson Australia.
Frieden, J. A., & Lake, D. A. (2015). World Politics: Interests, Interactions, And Institutions:
Third International Student Edition. WW Norton & Company.
Harris, R., Perkins, E., Holt, R., Brown, S., Garner, J., Mosedale, S., & Farrier, A. (2015). Aims,
objectives and research questions.
Kim, W. C., & Mauborgne, R. A. (2017). Blue Ocean Leadership (Harvard Business Review
Classics). Harvard Business Review Press.
Milner, H. V. (2014). Introduction: The global economy, FDI, and the regime for
investment. World Politics, 66(1), 1-11.
Sullivan-Bolyai, S., Bova, C., & Singh, M. D. (2014). Data-collection methods. Nursing
Research in Canada-E-Book: Methods, Critical Appraisal, and Utilization, 287.