Foreign Investment essay

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Abstract

This paper looks at foreign investment regulations and policies. It outlines the screening process before a good foreign investment is made. It lists and discusses the foreign investment regulations. The important issues that concern management when screening potential markets and locations, as well as what is needed for an overall success in investing in a foreign country.

Introduction

Foreign investment regulations are rules set by government to restrict the entry of investment by foreigners. In most cases, the entry limitations are directly imposed conditions, which range from a simple slapped ban on investments on particular economic segments to the entry lack of restrictions on particular conditions for example ceilings on ownership by foreigners, and necessities on the technological terms of transfer. Nevertheless, in some instances the foreign investment scope can also be limited through casual mechanisms that prevent hostile acquisitions as well as takeovers undertaken by foreign investment firms or individuals. Such regulations are often realized through minority shares held by government, which target investments made on significant sectors of the economy.

Foreign Investment Regulation

Prior to the setting up of a business organization, matters that concern management while screening prospective markets as well as sites are very significant for the survival and flourishing of the enterprise (Campbell & Stonehouse, 2002). Key among the screening issues include social stability in the target market, how viable the trade environment is, and legal issues that regulate the business settings. Screening involves several steps that must be followed to ensure business viability is upheld.

According to Kourdi (2009), the initial step involves country identification; this involves undertaking a universal overview of likely upcoming markets. There ought to be an easy match - for instance two countries may share a comparable  heritage such as Australia and the United Kingdom, a similar tongue language for example Australia and the United States, or a similar civilization, political beliefs or religious faith for example China and Cuba. Countries that share similar ideologies can be integrated in terms of business strategies to enhance business growth and expansion.   

Second, preliminary screening is the second step that demands more screening of the nations that have shortlisted. This stage opens doors for scoring, weighing and ranking nations based on macro-economic aspects for instance currency steadiness, exchange rates, and degree of domestic consumption. Moreover, the investor has the foundation to begin calculating the environment of market joining costs. Some nations for instance China have made it mandatory that some percentage of the firm entering the economy is owned locally. Countries that experience instability in terms of political systems provide investors with risk rewards to cater for any damages that may occur to business organizations (Campbell & Stonehouse, 2002).

Third; in-depth screening entails more evaluations on the potential markets, even though shortlisted countries for stage three are eligible for market entry. Therefore it is imperative that comprehensive information detailing the target market be extracted to be used for decision-making purposes, which need accuracy. In-depth screening requires that one deals with all business aspects such as micro-economic and local conditions for instance marketing studies relating to the  prices that can be fairly charged, how to distribute products or service of the firm, communication link between the firm and the market (Campbell & Stonehouse, 2002).

Fourth; the final stage is to make a binding short list of probable nations decided upon. Top administrators would mirror upon strategic objectives and look try to locate them among the chosen few states. The company may look at potential cutthroat competitors or alike domestic local that already exist in the market. This strategy is informed by the notion that firmer values in connection to market setting are imperative. Managers can also review other nations where it has made significant entry to compare similarities if any exists. A final attainment, ranking as well as weighting would then be implemented based on more precise criteria, before a final visit to handful countries remaining on the final list (Kourdi, 2009). The fifth and last stage involves the travel by the manager to the potential markets to get the firsthand information, which in most cases in indispensable owing to the fact that such data collected are accurate ad represent the reality at the lowest level of the market.

Conclusion

A properly executed business screening process ensures better results in terms of returns to business organizations investing in a foreign state. It is therefore important for any foreign investment to pay attention the local countries regulation policies, understand the cultures and customers of the people, have a direct link to the locals by incorporating locals among other things.

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