Question

Situation: Australia and New Zealand Banking Group (ANZ) found China and India have a potential investment for ANZ.

Identify what type of FDI is suitable for these two countries to minimizing risks when ANZ invests in China and India (eg. consider a Joint venture or a Wholly-owned subsidiary and include a brief explanation why this type is better than other types, by also considering the corporate behavior, ethical and social responsibility).

Answer 1

Australia and New Zealand banking group should be trying to do the Horizontal type of foreign direct investment because HORIZONTAL type of foreign direct investment will mean that it is a foreign direct investment which is based upon expansion of the similar business of bank in the outside territory of the New Zealand and Australia and it will mean that the company will be carrying out it operation in India and China by opening up with the branches rather than engaging into other activity through VERTICAL foreign direct investment

I will be advocating for wholly owned subsidiary which is a type of horizontal foreign direct investment because wholly owned subsidiary in the banking space is a better business as it will be offsetting the risk relating to the currency movement because there will be translation of the books of accounts of the subsidiary in the parents accounts of book and it would be leading to all such minimization of risk related to the foreign exchange exposure and it will also mean that there will be a significant market gain as well as there will be extension of the brand and the company and it will also provide an extension opportunity to the other countries as well.

Risk related to wholly owned subsidiary is that there will be complete responsibility of the parent organisation and they should be trying to control with the operation of the wholly owned subsidiary into complete different country whose is highly diversified and they should be trying to consider cultural risk as well as social risk because these countries are highly democratic countries so they will be trying to enforce the will of the people and they are often socializing.