Question

What was the purpose of the Foreign Direct Investment? Describe and explain the importance of the purpose to your Nestle company. Does this purpose result in sustainable future growth of the economy of the country in Switzerland has made this investment or is the purpose of a limited nature

Answer 1

Foreign Direct Investment (FDI) is the flow of investments from one company to production in a foreign nation, with the purpose of lowering labor costs and gaining tax incentives. FDI can help the economic situations of developing countries, as well as facilitate progressive internal policy reforms.

KEY TAKEAWAYS

Foreign Direct Investment (FDI) is the flow of investments from one company to production in a foreign nation, with the purpose of lowering labor costs and gaining tax incentives.

FDI can help the economic situations of developing countries, as well as facilitate progressive internal policy reforms.
A major contributing factor to increasing FDI flow was internal policy reform relating to trade openness and participation in international trade agreements and institutions.

Term
Foreign direct investment: Investment directly into production in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.

Example
Intel is headquartered in the United States, but it has made foreign direct investments in a number of Southeast Asian countries where they produce components of their products in Intel-owned factories.

Foreign direct investment (FDI) is investment into production in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.

FDI is done for many reasons including to take advantage of cheaper wages in the country, special investment privileges, such as tax exemptions, offered by the country as an incentive to gain tariff-free access to the markets of the country or the region. FDI is in contrast to portfolio investment which is a passive investment in the securities of another country, such as stocks and bonds.

One theory for how to best help developing countries, is to increase their inward flow of FDI. However, identifying the conditions that best attract such investment flow is difficult, since foreign investment varies greatly across countries and over time. Knowing what has influenced these decisions and the resulting trends in outcomes can be helpful for governments, non-governmental organizations, businesses, and private donors looking to invest in developing countries.

A study from scholars at Duke University and Princeton University published in the American Journal of Political Science, “The Politics of Foreign Direct Investment into Developing Countries: Increasing FDI through International Trade Agreements,” examines trends in FDI from 1970 to 2000 in 122 developing countries to assess what the best conditions are for attracting investment. The study found the major contributing factor to increasing FDI flow was internal policy reform relating to trade openness and participation in international trade agreements and institutions. The researchers conclude that, while “democracy can be conducive to international cooperation,” the strongest indicator for higher inward flow of FDI for developing countries was the number of trade agreements and institutions to which they were party.

GLOSSARY

Developing
Of a country: becoming economically more mature or advanced; becoming industrialized.

• Outcomes : The positive and negative consequences that an individual perceives to be a result of his/her actions. Examples include praise, bonuses, and promotions.
• Passive : Being subjected to an action without producing a reaction.
• Wage : An amount of money paid to a worker for a specified quantity of work, usually expressed on an hourly basis.

Importance Of Nestle Company

Nestlé is a market leader in most of the food and beverage categories in which it operates, but our ambition today is to enhance people's quality of life through nutrition health and wellness with science-based innovations. This goes far beyond the goals of a standard food and beverage company.

As stated by Nestle Company, quality management system act as a worldwide platform whereby they ensure the food safety, and compliance to the quality standards to create value for consumers. Their system is audited and verified by independent auditor to show conformity to internal standards, ISO norms, laws and regulatory requirements (Quality and Safety, n.d.).According to Nestle Company, quality is plays a crucial role in contributing to their success in the food manufacturing industry. Their products becoming customer preference as their concern for their high quality standards. This confidence comes from the quality image and a good reputation for high standards of quality that has been built up over many years by Nestlé (Quality and Safety, n.d.). Every product, service and customer contact helps to build up this image in Nestle. Customer confidence that the product are safe to consume is based on the look of Nestle brand name on a product, that it complies with all regulations and that it meets high standards of quality (Quality and Safety, n.d.). People, equipment and instruments are made available to ensure safety and conformity of Nestlé products at all times (Quality and Safety, n.d.). Companies with high quality standards are able to minimize the possibility of making mistakes, waste less time and money and are more productive (Quality and Safety, n.d.). Thus, quality act as a vital characteristic for Nestle to succeed among others manufacturer in their industry.