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International Financial Management

Moreover, Wall-Mart also has projected plan to invest further 37% of its US $ 13.05 million and 38 percent of US $ 12.5 million of capital investment in the international market for the year 2013 and 2014 respectively. Significant portion of the above mentioned investment is aimed at adjustments and capturing e-commerce retail sales in US, Brazil and China (Wal-Mart, 2013). In light of the Wall-Marts decision to invest and since the conditions of the world are constantly changing; therefore, underlying report is aimed at exploring factors that affect the foreign direct investment in specific context to China. The report will provide comprehensive review of foreign direct investment arena of China that determines its attractiveness. Furthermore, assessment of the FDI scenario of China with reference to global financial crises and the current position will be highlighted. Finally the improvement recommendations will be made. IMPORTANCE OF INVESTMENT AVENUES ASSESSMENT Foreign Direct Investment, in accordance with the definition of World Bank, is investment leading to ten percent stake ownership by an organization that is not domestic by origin. MNC’s have been making investments in foreign investments since past 200 years but these investments centrally constituted portfolio investments than green field business purpose, wholly owned subsidiaries or joint ventures (Vardar, 2011). Liberalization of economies led to the relaxation of paths for the foreign investors by removing barrier (Vardar, 2011). Factors that drive multinational corporations towards investment in international arena are concretely dependent on either the objective of growth of diversification. Though increasingly important driver of the country’s economies; FDI also benefits extensively to the investing companies in response to taking risks and costs in international markets. Companies usually undertake foreign investment decisions when export and licensing such as tariffs and quotas etc are prone to increased costs and risks than benefits. Alike, Wall-Mart many other corporations such as Coca-Cola, Exxon Mobile, Tesco, Starbucks, Nokia etc all have invested their stakes in the foreign markets. Complimenting to growth and diversification, factors that influence international investment are highlighted as follows: Significant reduction in transportation cost is gained. Attractive markets may turn unprofitable on shipping or transporting of products in bulk from local market to long distance markets. Internationalization and FDI stake in market, according to internationalization strategy, gets attractive once the cost, difficulties and limited level of control in licensing mode restrains corporations from gaining actual benefits from international markets. Investment in international markets also forms an important dimension of strategic behavior of gaining dominant position in the international market. This factor adds significant value to the firm in comparison with competitors by gaining first mover’s advantage. Stages of the product’s life cycle where demand of the product increases to considerable extent in the international markets leads to firm’s investment in the international market. In most instances, the maturity stage of product’s life cycle leads to FDI in international market. Each country in the world offers some advantages that are not offered by many other markets or locations in the world. Other than market ...Show more

Summary

INTRODUCTION Business of Multi-National Corporations receives impact from wide range of factors. Success of multi-national corporations’ business model is not only leveraged from successfully investing in local markets but at the same time must have portion of asset deployed in other countries to generate revenues…
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