Foreign direct investment refers to a situation where a company decides to invest in another country rather than its own country. Foreign direct investment is also characterized by the establishment of branches in various parts of the world. In this research, a fictional company, Vision International Limited will be used to determine the success of foreign direct investments. Vision International Limited is a company specializing in manufacture of oil and oil products. It has come up with the most advanced technology of prospecting and manufacturing of oil and oil products. This sets the tempo for foreign direct investment high, as it is an indicator of a successful mission. Being a multinational company, it will conduct foreign direct investment in Nigeria because of the rich oil resources found in the country. The company will be aspiring to compete favorably with other multinational companies that already operate in the country.
Vision International Limited is a company with a substantial financial plan. Currently, the government is the key investor in Vision International Company, with other renowned business people facilitating the rest of the investments. Kleiner (2003) points out that the strategic, financial plan will ensure continuous availability of funds. The company plans to raise more funds in the future in order to increase the level of investment and technology acquisition.
The available research data intimates that the marketing plan of the company is also stable because it has loyal customers who will always buy the products offered. In time, the company plans to increase its market share and extend its global reach. This will be facilitated by the growing demand for oil products all over the globe. According to the research, the technology to be used and the average number of employees needed for production processes have been established. The company has included the operational plan in the business plan in order to ensure appropriate allocation of costs and avoid any inconveniences that could arise. The main risks the company will be facing include competition from leading companies in the same industry. Other established companies with larger market shares pose a greater risk to the company but continued advertising could solve this as it will attract more customers. The company’s organizational background is quite strong as its employees posses both integrity and sound academic background. Stronger management and board of directors will further boost the the company’s operational capacity.
According to the research, Foreign Direct Investment involves benefits and costs to both home and host country. The Organisation for Economic Co-operation and Development (2002) indicates that the host countries benefit because foreign direct investment increases the rate of their economic growth. The establishment of industries in any country leads to economic growth and development because countries become open to many other opportunities. The existing resources are put to maximum use, and the rate of economic growth increases. The establishment of industries that involve the use of current technology will, therefore, facilitate economic growth.
The host country will derive benefits because its citizens will be employed. The problem of unemployment will be alleviated due to the establishment of industries because of foreign direct investment. Research asserts that most people will be employed, and the dependency ratios that exist would be eliminated. The Organisation for Economic Co-Operation and Investment and Global Forum on International Development (2002) assert that people in the host country are able to cater for their needs and lead stable lives, hence improved standards of living.
The investment, though, will cost the host country’s economy dearly. According to Razin & Sadka (2008), local companies operating in the same industry will be put out of business and end up being insolvent. Thus, the host country is likely to suffer, and its balance of payment will also be affected.
The home country benefits from direct foreign investment because of the enormous profits generated. The Organisation for Economic Co-operation and Development (2002) reports that these profits are always repatriated to the home country, thus affecting the host country. These profits could be used to expand the business empire and promote foreign direct investment in other countries. In addition, the profits could be used in setting up other local industries in order to boost the economy of these countries. The home country gets enormous shares of profits generated from another country.
The home country incurs many costs. The initial cost of setting up industries in other countries is extremely high, and this is likely to overstretch their financial resources. According to the research, the heavy costs incurred are dependent on the returns of the company. In cases where the company makes losses, the home country would lose enormously, and all the initial investments will be wasted. According to Razin & Sadka (2008), a multinational company has to generate profits in order to ensure that the country benefits. This is the main cost incurred by the home country.
To conclude, Vision International Limited’s chances of success are quite high. The company enters a new market having a more advanced technology. The technology will make every process more efficient and cheaper. According to the research, the adoption of a more advanced technology will help the company produce better products at a cheaper cost. The company has larger financial resources that will help it in its day-to-day operations. This means that larger parts of the market will be accessed, thus boosting the stability of the company. Therefore, Vision International Limited is poised to get off to a good start due to having a strategic business plan which will help generate more profits.