subject: Advantages Of Foreign Direct Investment For Business And Society [print this page] The global economy has been changing rapidly over the last decade and as new economies and markets emerge, the need to globalize business has been well emphasized. Foreign direct investment for businesses has been very effective towards taping global markets. Many businesses have gone global through FDI schemes and many of those have ripped the benefits. So what are some of the advantages of FDI or for that matter why is it important?
Joint ventures and strategic business alliances one of the most important advantages of FDI is the opportunity it brings in forging strategic partnerships with global business entities. This is important in sharing of inventive technology towards business success, acquisition of skills and circumventing pre-existing business barriers on a long term perspective. In many cases, such ventures have involved politically binding authorities and have as such guaranteed future prosperity of business in the county concerned.
New markets and marketing channels FDI has been a significant tool for businesses to expand their markets to wider horizons and in the process develop new and effective marketing channels. Development of international trade has opened up global investment to the whole world and through FDI, looking at the world as one in terms of the markets has become possible. Whilst it will be absurd to think of meeting the global demand for whatever products or services your company is dealing with, FDI has been critical in diversifying the customer bases of many manufacturing and services firms for the better.
Low cost labor production foreign direct investment if well harnessed can reduced the gross operational and production cost of your business by using low cost labor production in foreign lands. In many cases this has applied to many developing countries and emerging economies where the cost of hiring labor, skilled or unskilled is considerably less compared to the relatively advanced and well developed countries of the western world. Furthermore, procurement of production infrastructure under direct taxation in many of the emerging countries is less compared to the west.
Opportunities for new technology, capital and organizational skills Foreign direct investment in the better part of the 21st century has helped business establishments to acquire new technologies, capital investment to finance expansion as well as management and organizational skills from the country of operation. Although at some point all this come at a cost, they have proved in many ways very significant in inspiring business success and improved revenues. In most cases, companies have distinguished themselves through helping research in new and relatively effective production technology.
Diversifying your business portfolio investing directly in another country is important in diversifying your companys portfolio. Financial dynamics do not affect countries the same way and in fact, FDI can give you a way out in the event of falling business activity in your major countries of interest and operations. Furthermore, it is logical for a futuristic business to anchor its foundation in a wider horizon just to avoid any regrettable surprises.
