FIN302 Report: Direct Foreign Investment, Profitability, and Motives

This report provides an analysis of the profitability and motives behind direct foreign investment (DFI), considering factors such as site location, opportunities, and weaknesses in expansion strategies. It examines strategic, social, and economic motives, including acquiring brand assets and seeking efficiency. The report contrasts Singapore and Beijing, noting increasing demand and investment in Beijing despite challenges like the working environment and government policies. Factors affecting the probability of DFI occurrence, such as domestic market conditions and government opinions, are reviewed. The analysis also covers trade barriers, rival organizations, and regulatory frameworks. Furthermore, the report explores the benefits of economies of scale (increased reach, market capture) and diversification (risk mitigation, capital returns), emphasizing the importance of understanding their applicability to specific businesses. It concludes that organizations can achieve profitability through strategic DFI, highlighting Beijing's business importance and the role of government policies in fostering growth, supported by references to relevant academic sources.

FIN302

Introduction
•Analyses of profitability and motives of direct foreign
investment
•Consideration of Site Location
•Identification of opportunities and weakness in
expansion.
•Determination of factors and their chances of
occurrence and their review
•Economics of scale and diversification

Motives for direct foreign
investment
•Strategic Motive
•Development related to Social environment
•Economic Motive
•Acquiring brand assets
•Efficiency seeking

Stabilizing of Profit
•Advertisement
•Demand
•Enhances the skills
•Increases the chances of growth

Contrast between Singapore
and Beijing
•Increasing demand in Beijing
•Number of Universities
•Population
•Number of corporate headquarters
•Foreign direct investment

Reason for weak effects even
after expansion
•Working Environment
•Opportunity growth
•Government policies
•Taxation
•Demand

Factors affecting probability for
occurrence
•The domestic market
•Market condition of the industry
•Government opinions
•The effectiveness of the language in the country
•The available competition

Review of data
•The trade barriers
•Analysis of the trend of the rival organisation
•The rules and regulation of the country
•The growth of the country
•Foreign direct investment

Benefit from economies of
scale
•Increasing the reach
•Market capture
•Increase in sales and profit
•Goodwill

Diversification benefits
•Risk of loss
•Capital
•Returns

Understanding of economies of
scale and Diversification
•Nature of the business
•The profitability
•Applicability and usage

Ways to achieve both economies
of scale and diversification benefit
•Grouping
•Scale
•Competitiveness

Conclusion
•Organisation can achieve the profitability
•Beijing is important for business purpose
•Government can play an important role in business growth
•Economies of scale can be effective
•Diversification and economies of scale can lead to better
growth

References
• Alfaro, L., & Chauvin, J. (2016). Foreign Direct Investment, Finance, and
Economic Development. Encyclopedia of International Economics and
Global Trade
• Pananond, P., 2015. Motives for foreign direct investment: a view from
emerging market multinationals. The Multinational Business Review, 23(1),
pp.77-86.
• Pettinger, T., 2017. Factors that affect foreign direct investment (FDI).
Economics help. [Online] Also available at
https://www.economicshelp.org/blog/15736/economics/factors-that-affect-
foreign-direct-investment-fdi/. [Accessed on 16-01-2018]
• Versus, 2017. Beijing vs Singapore: 51 facts in comparison. Versus. [Online]
Also available at https://versus.com/en/beijing-vs-singapore. [Accessed on
16-01-2018]
• Vilkman, J., 2015. MOTIVES AND LOCATION FACTORS OF CHINESE FOREIGN
DIRECT INVESTMENTS IN FINLAND AND SWEDEN. Also available at
http://www.utupub.fi/bitstream/handle/10024/113981/gradu_2014_Vilkam_J

Thank you