Question

Identify the three methods for Foreign Direct Investment and give an example of each of these strategies. What were the advantages to the company using these strategies?

Foreign Direct Investment

●The Greenfield Strategy

●The Acquisition Strategy

●Joint Ventures

Answer 1

The three methods of foreign direct investment are 1) Equity capital In this the shares of an enterprise are bought from their own country. Because of this they are also know as first investment. Example - Common stock capital 2) Profits Converted into New investments These are the profits that the investor earns is used to buy stocks and bonds which becomes the new investment. 3) Internal debts in Cooperation These are the short or long term debt between the investor and the enterprise. \r\n Example - Bank loan, Capital leases, etc The investing company is at an advantage by using these strategies in the following ways: 1) Economics of scale arising for their large scale The cost of production of the company will reduce as the scale of production increases. 2) Managerial expertise The managers appointed in the company will be masters in management and so will help the Company expand and also provide the best marketing techniques. 3) Financial strength