Foreign Direct Investment

This essay hasn't yet been marked by one of our teachers

You can view all our essays on Marketing that have been Marked by Teachers

The first 200 words of this essay...

Foreign Direct Investment

The main motive of companies to expand into a foreign country is to maximise shareholders wealth. There are different ways to expand into a foreign market, ranging from those that carry little risk to those which are extremely risky. One such form of expansion is Foreign Direct Investment which is a permanent form of expansion and Foreign Direct Investment (FDI) is a term used to denote the acquisition abroad of physical assets, such as plant and equipment, with operational control ultimately residing with the parent company in the home country. It can take a number of different forms including; the establishment of a branch or subsidiary overseas, the expansion of an existing overseas branch or subsidiary or the acquisition of an overseas business enterprise or its assets.

While FDI has been on the up for decades, people still ask the question; why do companies do it? Exporting is far less risky and it does not involve the trouble or expense of setting up and managing operations in a foreign country. If transportation costs are too high then the firm could license it products1 or sell technology and/or brands to an overseas firm which knows the