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International Trade Operations

← Investment & BudgetingDistribution of Income →

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Foreign direct investments can be defined as the ownership of different assets in the different companies and land in another country other than that of the parent organization. The definition has also been revised further to incorporate mergers and acquisitions in the different host countries. Recently, foreign direct investments have gained popularity with many companies investing in other countries. Companies in the developed countries have started investing in developing countries after realizing the great potential these countries have. A good example of this is where a company in America or France has invested in other developing countries like Kenya or Nigeria.

            A company might accrue various benefits from using the foreign direct investment method. One of the benefits is that a company will get market for its products. When a company invests in another country, mostly it gets direct entry of marketing goods to that new economy. Another benefit of using this method is that a company is able to acquire capital or finances from these investment in the new market or economy. It also benefits the company by increase the rate of units produced leading to high profits. Lastly, a company might benefit from this method through brand recognition. By investing in other countries, the company is able to expand its brand by making it known.

            On the other hand, there are risks involved in using this method as way of investment. One of the risks is the economy of the host country. Instead of the economy growing, it might be falling leading to losses for the company that has invested in the economy. Political instability in the host country might be another risk. This can lead to huge losses to the country that has invested in the country. Lastly, legal and infrastructure are other risks that the different countries might encounter. The country might change their legal policies that do not favor foreign investors leading to losses for the investing company. Additionally, it might lead to a lot expenses for the investing company if there are poor infrastructure in the host country.

            In my opinion, I would recommend Mr. Swanson regarding foreign direct investments, is that he should first learn the different risks that might accrue in the host country in relation to the content cow dairy. However, I would recommend Mr. Swanson to invest in either Egypt or another country because the remarkable benefits it has as compared to the risks.

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