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Classification of FDI:
Basis of Form Greenfield and Acquisition
Greenfield establishing new firm, increase wealth of nation,
spreaded effect on economy, flexibility to investing firms,
delay in establishment, higher risk and higher cost.
Acquisition investment in an existing firm in host country,
transfer of ownership, preferred when production commences
immediately, has brand equity and if investing firm believes
the technology and resources used by existing increase
betterment.
Motives of FDI:
Market seeking FDI: expand the market to grow or to stay
competitive - Impetus factors-Countrys market size, income &
market growth.
Efficiency seeking FDI: cost efficiency than domestic, may be
labour, transport and communication & cost of intermediaries
Country with good infrastructural facilities, skilled labour helps
cost effective and timely delivery attract this
Resource seeking FDI: Available natural resources, when home
country lack technology or capital to extract.
Created asset seeking FDI: earlier created manmade assets, can
be tangible or intangible,
Tangible financial and physical assets (communication)
Intangible knowledge assets (skill, knowledge, managerial,
learning capacity, trade mark, goodwill & brain power)