Tag: Foreign Direct Investment

Pioneer of FDI

The Pioneer of Foreign Direct Environment

On By In Blog

In a moving world, we need to find a way to keep our financial security in check. Thats where investment comes in, even if we dont use that money we save up, we end up giving our money to one or more firm so they can work on their goals and bring profits not only to their own firm, but also to their investor. One form of investment is Foreign Direct Investment (FDI). Taking definition from Financial Times lexicon, Foreign Direct Investment is an investment from one country that love poker to another that involves establishing operations or acquiring tangible assets, including stakes in other business.

Known as the Father of International Business due to his contribution related to Foreign Direct Investment, Stephen Hymer is a Canadian economist whose research focuses on the activities of multinational firms. The study of Foreign Direct Investment is the subject of his dissertation. Hymer developed a framework which sparked from the large number of investment made by corporations from the United States of America, the framework will be the basis of his theories in order to explain why does the corporations have to invest that much money outside the country.

Hymers theory is focusing on the corporations point of view, he states that there is a difference between capital and direct investments, those difference is the element of control. With direct investment, an investor have a greater level of control over the company. Hymer also said that Foreign Direct Investment is not just a movement of funds to a particular country, but rather it is invested and concentrated to a particular industry in that country. In plain English, Foreign Direct Investment is an investment made to a particular country outside the investors home country. The investment, however, have a greater level of control rather than that of foreign portfolio investment or just stocks. Before Hymers theory, all of the foreign investment were in form of capital movements. The movements of capital are considered to be an effect from the differences between interest rates between the countries. The distinction of capital and mentioned before ends up being Hymers groundwork for his theory. Stephen Hymers theory is considered to be the design of a perfect market structure.

There are some determinants of Foreign Direct Investment, they are firm-specific advantages, which are the capability for a firm to exploit the market flaws which could give the firm an advantage in the competition; removal of conflicts by collusion, that is, sharing the market with rivals or attempting to gain total control of production in the particular industry; and the propensity to formulate strategy to mitigate any risk that maybe imposed upon the firm, which are determined by focusing on the three levels on decision making which are day to day supervision, coordination of management decision, and long term strategy planning and decision making. His conclusion on his theory is that Foreign Direct Investment can only succeed as long there are flaws in the market that can create advantages and disadvantages towards the investing firm.

Tips Before Making Foreign Direct Investment

On By In Blog

There are lots of ways we can make our money grow, and that is, of course, by investment. There are a lot of investment types, there are venture capitalists, portfolio investments, and there is another one called Foreign Direct Investment. Foreign Direct Investment is a type of investment that gives the investor a higher level of control, that control even trascends how the company operates.

In Indonesia, there are a lot of successful Foreign Direct Investment examples, most of them come from Japan, they are Toyota Astra Motor Indonesia, which is a joint venture between PT. Astra International Tbk and Toyota Motor Corporation, some of the products made by the company is exported to other countries in South East Asia, some of those products are Fortuner and Agya. Another prime example is Astra Honda Motor which is a joint venture between PT Federal Motor, a subsidiary pf PT. Astra Internasional Tbk, with Honda Motor Co., which end up being named PT Astra Honda Motor, the company is one of the biggest motorcycle producer in Indonesia.

The name Astra doesnt end in these example, another prime example is PT Toyota Astra Motor, PT Astra Daihatsu Motor, and PT Isuzu Astra Motor Indonesia, those are companies which are produced by joint ventures between PT Astra International Tbk with Toyota Motor Corporation, Daihatsu Motor Co., Ltd., and Isuzu Motors Ltd., respectively. One of the companies is chosen by many gamblers of the agen sbobet

It was seen that most of the automotive company are making joint ventures with PT Astra International Tbk, and all of them are successful in their work. Indonesia is a large area for automotive consumers, not only that, the factories and workers are also abundant, making Indonesia a perfect country to invest in automotive production. This also plays an important role in macroeconomic level. This shows that the domestic companies in Japan can expand their operation to foreign market. Some of the Japanese automotive companies are also investing in India, making a diversification on their Foreign Direct Investment. Here are some of the tips for companies that are interested in investing to foreign countries:

Be wary of regulations, some countries limits how much control can a investing company have to their domestic companies. Some of the limits they di was structural complexity that makes the investing company face a huge hurdle in order to establish investment to another firm in another country.

Be wary of the risks, what this means is that the country tries to change private assets (which is, your asset in this case) to their national assets. This will ultimately drove you out of any investment you made in that particular country. Nationalization happens because there are crisis in the country, be very careful of any political conflicts and problems that may happen.
Diversification, when a company invests in a lot of sectors, they will minimize the risk of loss when one sector is on the low, and maximizing profits when some sectors are on the high.
Those are some tips to start on Foreign Direct Investments, all in all, avoid complications, find a way to mitigate any losses or avoid it entirely, and be very careful of conflicts that can blow your investments out of the water. Bettors from the really like doing all for the best.