What Is FDI? Why Is It Preferable To Other Routes Of International Business?

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amber Jhon answered
FDI is "Foreign Direct Investment". It is not possible to answer straightly that it is the preferable route of doing International business. There are various advantages and disadvantages of FDI, both for home country as well as for host country.

Some reasons which make it preferable includes the benefits which the host country will get. Benefits includes like economic development, infrastructure development, increased resources, and increase in employment. By using this strategy Home country explores new resources, may incur low labor costs as compare to its own market, and gets more opportunities in foreign market.

However, some reasons which can hinder host countries to stop FDI, includes local companies issues, cultural changes, religious issues in some cases, and foreign interference. Home country can also think of avoiding FDI in some other country because of lack of facilities, regulations of the host country, barriers of entry, lack of control, sometimes limited resources and heavy investment.

Therefore, either it is difficult to decide whether FDI is preferable on other modes of entry or not. But FDI can play an important role in the development of emerging states.

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