Question

Please describe some of the potential benefits to a multinational corporation of foreign direct investment? Nike has expanded its footwear production to Latin America. What do you think motivated them to do so? What are the potential non-financial benefits to the company that is being invested in? Do you think that multinational corporations should invest in countries with poor child labor laws? Why or why not? How does your response to that question relate to the responses to my previous questions?

Answer 1

Some of the benefits of FDI are as follows

1. To get more demand

2. To increase profit margins by entering a market

3. Opportunites for higher revenues in other geographies.

4. Decrease their exposure to economic conditions by establishing and expanding business activities in different economies.

Nike would be motivated to expand in Latin America due to following reasons -

1. Popularity of American lifestyle in Latin America

2. Strong influence of the culture of US on the consumption in Latin American fashion industry

3. Driving sustaintable and profitable growth by achieving cost efficiency

4. Cheaper production costs

Companies can invest in countries with child labor in the following ways -

1. Instead of just eliminating child workers from the factories the companies should establish methods that can eradicate child labor practices.

2. Corporation can have corporate responsibilty in place to benefit the international workforce in their factories.

3. They can provide children education, safe working environments, light chores, accomodation. In this way, they can return the benefits that have been experiencing in international supplier factories with in depth approach to tackle real problems underlying child labor.