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short and long term returns on overseas market
Pages 8 (2008 words)
With international trade and business reaching new peaks everyday, everyone wants a piece of the cake. Individual investors, mutual fund houses, equity managers, virtually everyone is looking for opportunities for short and long term returns. Having exhausted the moneymaking opportunities in their homelands, these fund houses are now eyeing foreign markets…
Many firms, like large oil or chemical companies, operate in industries with large economies of scale and their operations spill across national boundaries simply to be competitive.
Cost considerations (e.g. transport) are important in choosing whether to increase exports or invest overseas. Equally tariff barriers to trade can encourage direct investment, but non-tariff barriers are also important. Many services are not exportable in any direct sense and have to be delivered in the overseas market through direct investment. They need to respond to the changing demand considerations of overseas markets - especially where product specifications are different from the home market. This may make it sensible to locate closer to the main centres of demand, to enable easier adaptation without disruption to production in the domestic market. Other disincentives to direct trade could be that competition takes place on grounds other than price and quality of output. For example, competition in some product markets may be mainly in terms of after sales service.
Most direct investment, as with trade, occurs between similar industrial countries. ...
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