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Issues concerning international business in developing countries - Essay Example

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Issues concerning international business in developing countries

Prior to investing in developing nation B, it is essential for one to look into the popularity of doing business in such countries. However, the general trend currently is that many developed nations are looking towards the developing ones to further their returns. Additionally, it is essential for one to consider the cost of doing business in country B. The combination of the latter two factors is actually what brings out the beauty of doing business in country B. Rarely is it possible to find that an investment idea that is both cheap and popular. However, choosing to take one's business to developing nations is likely to change all of this in one instant. (Vernon, 2001)
Research conducted earlier this year in Europe indicated that close to forty six percent of investors are choosing to take their businesses to emerging markets. What this means for the company is that there will be substantial levels of capital getting into such an economy thus reflecting on the overall returns obtained there. In 2008, it was asserted that percentage returns from emerging economies approximated to about fifteen percent. One the other hand, the level of returns from developed nations was eleven point one percent. Consequently, this company will be at a better footing if they chose to invest in country B which is an emerging economy.

Some experts may argue that launching one's services or products into a lucrative area is always a risky thing to do because one can never be sure when investment costs will go up or down. Consequently, it is always advisable to be cautious. However, projections made about developing countries have indicated that prices are likely to remain positive and that returns will still be higher in developing nations rather than in developed ones. (Oxley, 2000)

The company should proceed with investing in country B owing to three major factors
Historically, investments have been cheap there
Investments are cheap compared to developed markets
Investments are cheap on absolute basis.

Numerous experts have asserted that in a developing nation like country B, one is likely to find a multinational investing in single digit ratios. However, such companies may yield double digit growth rates thus indicating that it is indeed a wise idea to invest in these emerging economies. It should also be noted that most of the latter mentioned companies actually trade in the London Stock exchange and so far, they have recorded positive indications for the commodities. In other scenarios, some of these companies are actually purchased through brokerage houses located in those respective countries. The same thing can happen in country B. Additionally, these kinds of returns may depend upon the geographic are chosen for the business venture. (Twomey, 2000) In certain instances, country B may be located near other emerging economies and it would then make more business sense to invest in an entire region. However, for purposes of starting out, it would be wiser to tackle country B first and then proceed to other parts of the world. (Norback & Persson, 2007)

The F and C management company based in London claimed that when investing in developing countries, one was likely to find price earning ratios of close to ten. This is an overwhelming discount compared to what one has to spend when ...Show more


Whenever businesses are looking beyond their borders to establish themselves, there are a number of factors that make certain countries more lucrative than others. At no single time in history have businesses been more interested in investing outside their borders; consequently, it is essential to look for alternatives that would work for the company rather than against it…
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Issues concerning international business in developing countries
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