The role of an FDI is important because it differs from other kinds of portfolio investments. The reason is that FDI in different nations is a great source of economic growth in that country. FDI can be done by expanding the firm into the international economy or by holding an interest.
The Benefits of FDI
The benefits are discussed in our FDI Policy assignment help online as follows:
- FDI has a lot of benefits on a global economy that benefits the investors. The capital invested in trade is used to develop a business.
- The profit incurred via this trade is unbiased because it is not affected by politics or religion. It offers the business a competitive advantage irrespective of color, race, or creed thus reducing the effects of corruption and politics.
- It plays a vital role to diversify the possession of the individual investors much beyond the boundaries of a particular economy. FDI minimizes the risk of failure by giving the investors additional benefits of diversification.
- FDI helps the host nation get the best practices related to accounting, management, and legal advice from the investors. This benefits the host with the best operational practices and technologies using financial instruments.
- One major advantage is that FDI enables investors to invest a huge amount of money and then sell the entire investment quickly.
The Kinds of FDI
The different kinds of FDI are stated in our help with assignment online on FDI Policy topics as follows:
Horizontal: This investment deals with economies horizontally. In this FDI, it is vital that investors operate in the same industry in different countries. For instance, an IT company in the UK invests in the IT company in the US.
Vertical: In this investment, the functional areas of the host and the investor are different but related. It is necessary that the primary business of an investor is to establish or acquire a share of a company in a host country. The main difference between vertical and horizontal FDI is the area of operation.
Conglomerate: It is highly popular among investors because of the challenges a firm face while investing in a foreign nation. The main objective of the investment is dominating the international market. The business is different from the host nation. For instance, if a mobile company invests in the shares of an automobile company.
Foreign Takeover: It operates in the name of a merger, takeover, or acquisition working on a foreign country.
Greenfield: In this FDI, the investors depend on some other investing nation to begin the operations in a foreign country.