Question
In: Finance
Why do firms go global (beyond the obvious reason of reaching more customers)? How do companies...
Why do firms go global (beyond the obvious reason of reaching more customers)?
How do companies invest abroad?
In your own words or experiences provide an overview of the different modes of foreign investment.
Solutions
Expert Solution
Why do firms go global
The firms go global so as to capture new markets, apart from that the firms also go global to look for the opportunities so as to minimize the costs by opening their manufacturing units in the country where the labor and the production is low. The companies also go global to reduce the dependency on the current market. By diversifying to the new markets, the companies can mitigate the risk.
How do companies invest abroad
the companies can invest abroad by investing in the shares, having commercial loans, foreign direct investment and foreign portfolio investment.
Different modes of foreign investment
The foreign inmvestment can be done in form of:
Exporting: Where the domestically produced goods are sold to other country.
Licencing: When the company acquires a licence of the company to trade in the other country. The licence is usually in form of trademarks, patents etc
Joint venture: When the company joins their hands with some othe company of other country. Then this is a joint venture.
Foreign direct investment:This is the form where the one directly invests its capital and resources in other country.
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