FDI or Foreign Direct Investment is the investment a company makes in a building a plant in a foreign country or investing in the acquisition of a company overseas or joining in a partnership with a foreign firm. Global Foreign Direct Investment is increasing everyday and it is essential to know the problems and consequences of it in the current marketing conditions.
One of the major advantage of Foreign Direct Investment in a company is the adoption of new technologies and capital invested in the country. Several business opportunities will be rising with FDI from another country which will organize the technology and operations along with improving management skills. Local suppliers will find it more practical to sell the products to the company. More people will get job in the company which can decrease the unemployment rate in the country.
The rate at which a company expands to a foreign country will be in different stages and the pace at which it is expanding will be different from the home country. So more opportunities will be existing for the local companies to compete with the foreign companies which provide a healthy competition. The technologies that are adopted in a foreign country will also be implemented in the home country and this improves the productivity of operations.
One of the disadvantages of Foreign Direct Investment is the fact that foreign companies can sell products at reduced cost which can cause a threat to products in the local market. This will compel the local companies to reduce the cost of the products which will affect the profit of the companies. The percentage of customers getting attracted to the foreign companies also create a competitive edge to the local companies.