Introduction to Global Business
In this world, each and every nation makes an attempt to attract foreign investment on its own land. But some of these nations get success in bringing huge foreign investment in the nation. There are some of factors due to which few nations successfully attract attention of investors for bringing FDI in their nation. Some of factors that play a key role in attracting foreign investment in these nations are a follows.
1.Economic growth rate- Foreign investors before making any investment in nation look at its growth rate. Growth rate as a figure indicate lots of things. If in any economy growth rate is increasing consistently then it reflects that business operating in that economy is growing steadily. This happens because government of that respective nation is giving full support to corporate sector which are operating in the relevant nation (Porter, 2008). This means that if any foreign investor opens his business in that foreign nation then he will get full support from the government and will be able to tap abundant demand that is available in the foreign market. High growth rate also indicate that there is good demand for products in the respective nation. Hence, economic growth is a factor which most of the foreign investor look before making investment in any foreign land.
2.Positive image- Positive image of a nation also plays significant role in attracting foreign investment in the nation. When any investor makes any sort of investment in any nation he on the basis of many factors evaluates the image of that nation (Johnson, Scholes and Whittington, 2008). On the basis of evaluation he decides whether to invest in the country or not. Countries like India and China build their strong image among the foreign investors and due to this reason many MNC are operating in these nations and creating ample job opportunities in the mentioned countries. Hence, positive image of nation plays a great role in attracting foreign investment in the nation.
3.Ample opportunities- Foreign investors before making investment in any nation look at opportunities that are available to them in the specific nation. Countries like India are attracting those companies that require high level of intellectual people for their business (Grant, 2010). Whereas, China is attracting numerous companies on its land due to business friendly policy and low labor cost. So organization on the basis of demand, cost and availability of resources identify opportunities in other nation. Due to this reason, Asian nations are successfully attracting investment from numerous firms on their land.
4.Natural resources- In today era, the big problem that manufacturing organizations are facing is scarcity of resources. As a result, now manufacturing companies are investing investment in those nations in which lots of natural resources are available (Hill, and Hill, 2009). Those nations that are rich in natural resources are attracting heavy investment from companies which are operating in manufacturing sector of varied nations. Thus, availability of natural resources is also playing an important role in attracting investment from foreign investors.
5.Human resources- In today era, cut throat competition is going on between companies and due to this reason these companies are paying due attention on reducing their cost. Due to recession, it becomes now inevitable for the firm because cost of raw materials is sky rocketing and due to low demand companies are earning low profit. Elevation in raw material cost cannot be passed to customers by enhancement of sales price of the product (Hillier, Grinblatt and Titman, 2011). Hence, companies are compelled to satisfy by earning low margin on per unit of sale. Due to all these reasons these firm are paying due attention on reducing their labor cost in order to generate economies of scale. In respect to this, companies are opening their business on foreign nations or outsourcing their activities. By doing this it reduce their employee cost substantially (Richards and Bergin, 2005). Many nations of Asia are receiving heavy foreign investment from foreign investors due to their low labor cost. Hence, in today era low labor cost of efficiency level of the people is also playing a key role in attracting investment from foreign investors.
6.Infrastructure- Many times there are lots of opportunities in a nation but due to lack of infrastructure they failed to attract investment from foreign investors on their land. Countries like India are facing such kind of problems from so many years. Infrastructure plays vital role in growth of any nation. If infrastructure in a nation is developed then communication will be better. Means that coordination will be better. In same way if road, rail and air connectivity will be better then goods can be transported to any place in a short duration (Asiedu, 2002). Thus, foreign investors also look after these factors before making investment in any nation. Countries like USA and nations situated in Europe are best example of this. Thus, many nations across the world are paying due attention on developing infrastructure on their land so as attract foreign investment from the investors.
7.Support from government- This is the most important factor that every foreign investor keeps in mind before making investment in any nation. It has been seen that those nations where government is giving full support to corporate and preparing a business friendly policy investment is attracting investors at a fast pace (Meyer and Sinani, 2009). This is because investors think that government of such nation is committed towards growth of business firms on their land and in upcoming time period many new reforms will be brought by the relevant government. Thus, government plays an important role in attracting investment from foreign investors.
Nations can take many steps in order to attract investment from foreign investors in their nation. Some of these steps are as follows.
1.Tax structure- In order to attract investment from foreign investor’s governments can improve their tax structures. Under this they can reduce tax rates and can give lots of relaxations to the companies in their tax liabilities. This is what big corporate expect from the governments. Hence, government must reduce tax rates. Such kinds of steps send a specific message to the corporate world. Message that corporations received from such kind of initiatives is that government wants to create a business friendly environment on its land (Pajunen, 2008). This creates hope among foreign investors that in upcoming year’s government may bring some revolutionary changes in its business policies. Hence, tax structure may play a prominent role in attracting investment from foreign investors on domestic land.
2.Reducing investment approval process- In many nations it is common grievance of the investors that project approval process is too long in the relevant nations. Due to this reason many foreign investors hesitate in making investment in the foreign nation. Government can reduce project approval duration and some of steps can be curtailed in order to boost investment form foreign investors on domestic land. Government is required to bring changes as per demand of foreign investors (What is foreign investment- definition and examples, 2015). Only by doing this investment can be attracted from the foreign investors on the homeland.
3.Supporting through finance- Financial support is another main factor that foreign investors look before making investment in any nation of the world. Government can improve its financial structure and can make terms and conditions regarding granting of loan more relent than ever before. By doing this investment from foreign investors can be increased on the domestic land.
4.Increase FDI limit – Government can increase limit of FDI for foreign investors on their land. This will create positive image on the government in the eyes of foreign investors and lots of foreign investment can be brought from foreign investors on domestic land.
Thus from above discussion it can be said that government is required to look after so many factors in order to promote investment from foreign countries on their land. Economic growth is necessary factor and without it, it becomes very difficult to build confidence among international investors community. Government needs to prepare business friendly policies in order to send a message to foreign investors that it is fully committed towards creating a healthy business environment on its land. There are many factors that create a lot of problem in growth of any nation in this regard. Countries need to look after all these factors that are impeding growth of the nation. Along with this, nations are required to take steps as soon as possible and at a fast pace in order to win confidence of foreign investors. Quick decisions and implementation of same in right direction is a key to build good and strong positive image among foreign investors. Moreover, this is the only way through which investment from foreign nations can be brought quickly. When any economy grows prosperity of the people also increases and due to this reason their demand for product and consumption level also gets increased (Richards and Bergin, 2005). Hence, such kinds of economies come in eye of investors and they start searching for business opportunities in these nations. Thus, countries need to improve their economic condition and draft sound business friendly policies. Only by doing this confidence of foreign investors can be won by nations.
- Asiedu, E., 2002. On the determinants of foreign direct investment to developing countries: is Africa different?. World Development. 30(1). pp. 107-119.
- Grant, R. M., 2010. Contemporary strategy analysis and cases: text and cases. John Wiley & Sons.
- Hill, T. and Hill, A., 2009. Manufacturing strategy: text and cases. Palgrave Macmillan.
- Hillier, D., Grinblatt, M. and Titman, S., 2011. Financial markets and corporate strategy. McGraw-Hill.
- Johnson, G., Scholes, K. and Whittington, R., 2008. Exploring corporate strategy: Text and cases. Pearson Education.
- Meyer, K. E. and Sinani, E., 2009. When and where does foreign direct investment generate positive spillovers? A meta-analysis. Journal of International Business Studies. 40(7). pp. 1075-1094.
- Pajunen, K., 2008. Institutions and inflows of foreign direct investment: A fuzzy-set analysis. Journal of International Business Studies. 39(4). pp. 652-669.
- Porter, M. E., 2008. Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster.