Reasons for Undertaking Foreign Direct Investment by the Multinational Essay

Reasons for Undertaking Foreign account Investment by the Multinational Enterprise - Essay ExampleUnlike the small and medium sized enterprises that only stress to access exotic markets, the major concern of the multinational enterprises is to develop a global manufacturing capacity and correct their proximity to the major world markets (Graham & Spaulding, 2005). The foreign take on investitures provide a measure of ownership of house servant productive assets in a given prudence by foreign organizations (Economy Watch, 2010a). Classically, foreign direct enthronisation is a situation where a company from one country call fors a foreign physical investment by building a factory in another country (Graham and Spaulding, 2005). It is an investment in the attain of buildings, machinery, and equipment and it is opposed to portfolio investments that are considered indirect investments. Several factors drive firms to expand their operations to cut across different national and regional boundaries. MNEs establish foreign direct investments in response to the changing global and regional competition (Bartels & Crombrugghe, 2009, p.1). Foreign direct investments rear be a means of accessing new markets and marketing channels, diminution in costs of production, providing the organization with access to new skills, technologies and other resources, and sources of financing (Graham & Spaulding, 2005). To go global, the firms fag go under to make foreign direct investment, and this decision is in turn guided by a issue of factors that are considered the potential benefits of the approach. This paper provides a critical evaluation and discussion of some of the major factors that can drive a multinational enterprise to decide to undertake foreign direct investment in efforts to expand its operations and go global. The paper highlights on the benefits of foreign direct investments to the multinational enterprises. Reasons for establishing FDIs to MNEs Foreign Direct Investment has been associated greatly with the current trend that is observed towards globalization and internationalization of business operations. High growths of the economy and better economic performances in different parts of the world in the recent past can be attributed to the foreign direct investments by the multinational enterprises (Vardar, 2012). Significant growth has been seen in the flows of foreign direct investment especially into the developing countries in the last few decades (Graham & Spaulding, 2005). It becomes one of the drivers of globalization. With the developments that have been seen in the global business operations and global investment patterns, the concept of foreign direct investment has been expanded to admit alliances with local companies, foreign mergers and acquisition, or establishment of joint ventures in the foreign markets (a Watch, 2010). The foreign direct investor forget seek to have a controlling stake in these investments (IL IKEINVESTING, 2011). Cross-border investments have been in existence as early as the 1950s and different theories have been advanced to explain why the firms decided, and continue to make decisions, to internationalize their operations. In the recent pasts, countries have entered a habit of competition to attract more foreign direct i