Direct Investment
The ultimate form of foreign involvement is direct investment: The foreign company can buy part or full interest in a local company or build its own manufacturing or service facilities.
If the market is large enough, direct investment offers distinct advantages. First, the firm secures cost economies through cheaper labor or raw materials, government incentives, and freight savings. Second, the firm strengthens its image in the host country because it creates jobs. Third, the firm deepens its relationship with the government, customers, local suppliers, and distributors, enabling it to better adapt its products to the local environment. Fourth, the firm retains full control over its investment and can develop manufacturing ...
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