Why do multinational companies engage in Foreign Direct Investment? What are the advantages?
Why do multinational companies engage in Foreign Direct Investment? What are the advantages?
Homework Answers
Multinational companies engage in Foreign direct investment to
take huge growth opportunities in foreign developing countries.They
also do it to reduce their operational costs like reduced wages,
raw material costs etc.
Advantages :
1 . It helps in diversification of the firm . It helps in reducing
risk in the firm .
2. Production costs get reduced , hence increasing the profit
margin and makes the firm more competitive.
3. Developing countries develop at a very fast and constant rate.
Hence FDI can produce high growth for companies.
4. In case of recession in domestic country the company can gain
profits in foreign country.
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