Understanding Foreign Direct Investment and Economic Impact

This research report explores the multifaceted concept of Foreign Direct Investment (FDI), analyzing its significance in the context of globalization and its impact on economic growth. The report includes an introduction outlining the research proposal, objectives, and rationale, followed by an extensive literature review that delves into the various facets of FDI, including its definition, expansion drivers, and societal impact. The research methodology section details the approach to data collection and analysis, followed by an analysis of the collected data. The report uses Mercedes-Benz as a case study to understand the practical implications of FDI. The research aims to identify the factors influencing FDI expansion and its effects on economic development, providing insights into the relationship between FDI and economic growth. The conclusion summarizes the key findings, offering recommendations and alternative research methodologies. The report provides a comprehensive understanding of FDI and its role in business and economic expansion, supported by relevant literature and data analysis. The report also highlights the impact of FDI on the automotive sector.

Research Project

Table of Contents
Title: To understand the concept of Foreign Direct Investment......................................................1
CHAPTER 1: INTRODUCTION....................................................................................................1
1.1 Research Proposal......................................................................................................................1
(i) Research project description..................................................................................................1
(ii) Research aim and objectives.................................................................................................1
(iii) Rationale behind research....................................................................................................1
(iv) Activities and Timescale......................................................................................................2
.........................................................................................................................................................4
CHAPTER 2: LITERATURE REVIEW.........................................................................................5
2.1 To understand the concept of Foreign Direct Investment.....................................................5
2.2 To analyse reasons of expansion in Foreign Direct Investment of society...........................6
2.3 To identify impact of Foreign Direct Investment of Mercedes Benz on economic growth
of society.....................................................................................................................................7
2.4 To determine inter relationship between Foreign Direct Investment and economic growth
of society.....................................................................................................................................7
CHAPTER 3: RESEARCH METHODOLOGY.............................................................................9
3.1 Introduction...........................................................................................................................9
3.2 Research philosophy.............................................................................................................9
3.3 Research approach................................................................................................................9
3.4 Data collection......................................................................................................................9
3.5 Research Strategy................................................................................................................10
CHAPTER 4: DATA ANALYSIS AND INTERPRETATION....................................................12
4.1 Data analysis.......................................................................................................................12
4.2 Data interpretation...............................................................................................................13
CHAPTER 5: RESEARCH OUTCOMES....................................................................................21
5.1 Concept of Foreign Direct Investment................................................................................21
CHAPTER 6: REFLECTION, RECOMMENDATION AND ALTERNATIVE SOURCE FOR
RESEARCH METHODIES...........................................................................................................22
6.1 Reflection............................................................................................................................22

6.2 Recommendation.................................................................................................................22
6.3 Alternative Source for research methodology.....................................................................23
CHAPTER 7: CONCLUSION......................................................................................................24
7.1 Conclusion...........................................................................................................................24
.......................................................................................................................................................24
REFERENCES..............................................................................................................................25
APPENDIX....................................................................................................................................27

Title: To understand the concept of Foreign Direct Investment
CHAPTER 1: INTRODUCTION
1.1 Research Proposal
(i) Research project description
Due to increase in globalisation, the concept of Foreign Direct Investment is widely
spread among countries. Hereby, a company of one country make investment in organisations of
another country, in order to earn high return on investment. For this purpose, a firm can either
expand its business in foreign nation or reinvestment profits to overseas subsidiaries from
foreign operations (Blonigen and Piger, 2014) . This would provide opportunity to earn high
profitability and run business more smoothly. There are multiple methods a company can use for
FDI such as Merger and Acquisitions, Joint Ventures with overseas corporations, acquire voting
stock in foreign companies etc. To get more information and understand the concept of FDI, this
report is going to conduct a research, by taking various scholarly articles and books. For this
purpose, a case of Mercedes-Benz is taken, which is a German automobile company. It is mainly
known for its luxury vehicles, coaches, buses and trucks. This firm is headquartered in Stuggart,
Germany but has expanded its business in all over the world and serve products worldwide.
(ii) Research aim and objectives
Research aim: “To identify the reasons of expansion of Foreign Direct Investment.” A case
on Mercedes Benz.
Research objectives
 To understand the concept of Foreign Direct Investment.
 To analyse reasons of expansion in Foreign Direct Investment of society.
 To identify impact of Foreign Direct Investment of Mercedes Benz on economic growth
of society.
 To determine inter relationship between Foreign Direct Investment and economic growth
of society.
(iii) Rationale behind research
The main reason behind chosen this topic is to analyse why globalisation is taking place
with rapid speed in organisation and how it impacts on economic growth of country. For this
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purpose, concept about difference in economic terms like FDI, tax rates, GDP, etc. are evaluated
in this research (Buchanan, Le and Rishi, 2012). With the help of this knowledge, it becomes
easy for researchers to understand role of globalisation in business expansion. Researchers also
have personal interest to conduct study on globalisation and its impact business activities,
especially in auto mobile sector, that helps in completing personal motto of them as well. This
research also enables researchers to explore economic terms of country in which they have core
interest.
(iv) Activities and Timescale
Research is considered as a process of collecting information from various internal and
external sources for the purpose of in-depth analysis. For this purpose, researchers perform
different activities in a proper time-frame while conducting research in order to address main
issue of study (Chandran and Tang, 2013). In this regard, the main activities carry out by
researchers to understand concept of Foreign Direct Investment are –
Introduction – This is the first step which has to be considered for conducting business
operations. It provides entire knowledge related to importance of research, background of topic,
chosen company, rationale behind selection of topic and more (Harding and Javorcik, 2012). For
this purpose, researchers will take near about 12 days to introduce the main part of research in
short and specific way.
Aims and objectives – After introduction, next step carry out by researchers is to set appropriate
aims and objectives which covers entire portion of main study. This is the base for whole
research which helps to provide direction to conduct research and way to carry out investigation
specifically. In this regard, they will take near about 15 days for setting aims and objectives.
Literature review – It is collection of information by using secondary research techniques that
provides highly authentic source for gathering the required data. In order to address the main
objectives of research, near about 18 days are required.
Research methodology – It refers to a systematic discussion about techniques which are
required to conduct information in effective and significant manner (Jadhav, 2012). For this
purpose, both primary and secondary research techniques are used to describe how researchers
are going to make an investigation report and which methods they are used for the same. With
this assistance, approximate 20 days are required for making a discussion about which tools are
more effective to gather information about FDI and globalisation.
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Collection of data – It refers to collecting views of respondents on specific research topic. This
is the method to collect authentic views on research topic by using primary and secondary
research techniques. Here, research team will take 25 days to collect authenticate and reliable
information for making study on present topic.
Analysis of data – It refers to interpreting information which is collected from respondents. This
provides information about change in trends. For this assistance, more than 16 days are required
to arrange analyse and interpret the data in appropriate way.
Conclusion and recommendations- Conclusion is mainly provided on the basis of information
collected by using various primary and secondary techniques as well as how the same is analysed
(Lau, Choong and Eng, 2014). In this regard, three days are enough to make conclusion on
results obtained by analysis of data and further, make recommendation accordingly to the
company on which entire research is done.
For framing the given activities of research into fixed duration of time, Gantt Chart
technique is used, that helps to analyse required time to collect information about time required
to complete specific information. This helps to divide whole research in different activities wit
their allotted time.
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CHAPTER 2: LITERATURE REVIEW
It refers to systematic, reproducible and explicit method for determining, analysing and
synthesizing existing body of the recorded and completed work that produced through scholars,
investigator sand practitioners (Lee, 2013). It is comprehensive study as well as interpretation of
literature that help in address particular topic. It is an in-depth and necessary evaluation of
previous investigation. It is based on secondary investigation and the different sources to
collecting information are books, articles, internet sources etc.
2.1 To understand the concept of Foreign Direct Investment
On the basis of opinion of JAMES CHEN (2019) it has been stated that it is an
investment in form of controlling ownership in business in one country through an entity based
in other. It is distinguish from foreign portfolio investment through notion of the direct control. It
taken place when investors develop business operations at foreign or acquire the foreign business
assets consisting controlling interest in foreign firm (Mathur and Singh, 2013). Foreign Direct
Investment is different from portfolio investment under which an investor but equities of the
foreign based organisations. It is commonly made in an open economies that provide skills
labour and growth prospects for investors. In addition to this, FDI can be made in many different
ways consisting opening of subsidiary in foreign country, acquiring controlling interest in
existing foreign firm or by means of joint venture or merger.
Investment in to foreign company is regarded as Foreign Direct Investment if it establish
lasting interest. In context to this, lasting interest is developed when an investor obtain at least
10% of voting power in company (Moran, 2012). It is when a person or business owns at 10% or
more of foreign country. On the other hand, key to the Foreign Direct Investment is component
of control. It represents intent to the manage as well as influence the operations of foreign
company. FDI also provides the some benefits for the foreign countries. For new start ups,
Foreign Direct Investment provides source of the external capital and enhanced revenue
(Morrissey and Udomkerdmongkol, 2012). It can be a tremendous source of the external capital
for developing country which can be lead to the economic development. It is critical for the
emerging as well as developing market countries. Firms require expertise and funding of
multinational in order to expand its international sales.
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2.2 To analyse reasons of expansion in Foreign Direct Investment of society
On the basis of opinion of Tejvan Pettinger (2019) it has been stated that Foreign Direct
Investment is flow of the capital among countries. Investors of Foreign Direct Investment look in
to different factors before making any kind of investment decision in country. In FDI, firm buy
capital and then invest in to foreign country (Quer, Claver and Rienda, 2012). It will helpful in
develop the positive impact on business. There are some reasons for expansion in Foreign Direct
Investment of society mention below:
Stability of government- For any investment, stable government is necessary
prerequisite. Investors will look for government which helps in supporting investment and will
not take any steps which are anti- investment. In addition to this, investors should not have the
fear to take over through government. It enable an organisation to go for the expansion purpose.
Exchange rate stability- The commercial viability of any FDI depend on stability of
exchange rate (Ramasamy, Yeung and Laforet, 2012). It means that value of the domestic
currency should not be drop abnormally through which repatriating funds, foreign investor will
lose more.
Tax policies and concessions- Under this, government should adopt the uniform tax
policies on the basis of international norms. Heavy sales tax and excise duty will help in prevent
the Foreign Direct Investment. The moderate tax policy should be continue so that Foreign
Direct Investment will feel comfortable.
Return on Investment- The main attraction for FDI is profit or return that they got for
investment made. The return is substantially more than what they could have obtained in the
other countries. In addition to this, Rectum should be consistent and should be enhanced over a
time period (Razin and Sadka, 2012). These factors are more looked in to understanding the
investment. On the other hand, financier of FDI will assure that they can get money back as it is
safe investment.
Return on investment is main deciding factor for Foreign Direct Investment while
understanding an investment in to foreign countries. Firms would like to assure that payback
period is less so that return is to be assures within short period of time.
Flexibility in Government policy- Some investments were not allowed in hands of
Foreign Direct Investment but such inflexible policies will not aid in development of industries
(Sbia, Shahbaz and Hamdi, 2014). With WTO regulation, there is a need to government to adopt
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the flexible policies and permitting FDIs in all the areas consisting those under which they were
prevented previously.
2.3 To identify impact of Foreign Direct Investment of Mercedes Benz on economic growth of
society
As per opinion of Khun Sokang (2019) Enhance in Foreign Direct Investment leads to the
high development rate in developed countries compared to the rated which observed in the poor
countries. Automotive sector has experienced main reorganization on global scale in early 1990s
and in this present time period it represents most globalised sector. FDI is helpful in enhance
national productivity and wages (Selaya and Sunesen, 2012). The multinational organisations
brings in managerial and technological which enhance output in their business operations
directly. FDI brought the advantages related to increasing productivity. Mercedes- Benz is
global auto mobile marque and division of Daimler AG. This brand is known for the buses,
trucks, luxury vehicles etc. It was biggest selling premium vehicle brand in world that having
sold 2.31 million of the passengers cars.
In Automotive industry, FDI has experience more development. Foreign Direct
Investment is beneficial for the economic development in host economy. In this, cash inflows aid
finance current account deficit. It is necessary vehicle technology transfer from the developed
countries to developing. It stimulate investment and the facilities improvement in human capital.
Under this, Mercedes Benz use FDI for the economic development by expansing the business
into other country (Chen, 2019). Most necessary factors in economic development processing of
any country are commercial transactions as well as foreign Direct Investment. In economic
growth, marketing opening is mostly accumulated of the technology transfer and natural capital.
On the other hand, Foreign Direct Investment enhance exporting capabilities in United Kingdom
and also lead to the profit enhance at foreign exchange. FDI is an engine of the economic
development in enhancing globalised world economy.
2.4 To determine inter relationship between Foreign Direct Investment and economic growth of
society
There is direct relationship among economic growth and FDI of society. It can be
attained with proper change in planning related to expansion of business operations (Pettinger,
2017). When foreign currency is invested in an economy, then it is easier to make improvement
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in overall condition of society. With FDI, country is able to compete with economic condition of
the other countries. The foreign Direct Investment contribute towards the economic
development of business. The developing country produce the different policies to attract inward
FDI with pour-pose to enhance economic development and growth. It is one of the main factor to
promote development, growth and the job creation in to emerging economies which has been
subject of debate over past decades. The foreign Direct Investment plays necessary role in
development of an economy of United Kingdom (Sokang, 2019). It is an integral part of global
economic system. United Kingdom presents vast potential for the foreign investment and also
actively encouraging entrance of the foreign players into market. There are several ways under
which export- oriented FDI can aids in increase economy of host country. For attract this
investment and also assure that it translates in to the development gains, there is a need to United
Kingdom country to search most better ways of making location choice and target segments.
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CHAPTER 3: RESEARCH METHODOLOGY
3.1 Introduction
Research defines as a process of carrying out in- depth knowledge on a chosen topic that
helps in understanding the concept with the help of different sources. It includes qualitative and
quantitative techniques which helps in gathering information and further analysing the same to
conclude a result. As it is important to collect data from authentic sources in order to make
appropriate interpretation and conclude result. Therefore, under this research, qualitative
research source is used because it covers all aspects of research topic. With the help of
qualitative method, it is easy to make understood reader about research topic, as it includes usage
of graphics and provides reason behind using specific views of consumers.
3.2 Research philosophy
It refers to a technique which is generally used for collecting information to obtain
appropriate as well as relevant information. There are basically three types of research approach
are used as interpretivist, positivism, pragmatism. In this regard, in present study, researchers
have used interpretivist as this approach suits with all other concepts of activities for carrying out
a research.
3.3 Research approach
In order to conduct a research, researchers can adopt a number of approaches as per
requirement to address specific issues. It includes two types of research approaches that are
deductive and inductive. Under this research, is used because it provides method through which
specific and relevant information can be gathered.
3.4 Data collection
In this researcher collects information from primary as well as secondary data, because it
covers all the sources and it helps to creates awareness about research topic. 50 respondents are
selected as key employees such as managers, directors, etc. of Mercedes-Benz because they are
much aware about expansion of business. With using primary and secondary sources, it is easy to
understand concept of globalisation. This helps to analyse changes which are specific and
relevant to get relevant conclusion and recommendations.
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