DIRECT INVESTMENT

Question 1

What is direct investment

Answer 1

Direct investment occurs when a company that has headquarters in one country has operations in another country. (could be opening shops, factories, taking over another organisation in the supply chain etc)

This could be through organic growth, or by the takeover of a business overseas

Question 2

What can direct investment also be reffered to as

Answer 2

Direct investment can also be referred to as “foreign direct investment” “DI” or “FDI”

Question 3

What are the pros of direct investment

Answer 3

Company retains control over investment overseas

All profits remain in house

Investment could be vertical integration, giving greater control over the supply chain

Question 4

What are the cons of direct investment

Answer 4

Lack of local knowledge requires significant market research - Even dealing with the government of a new country can be challenging.

Lack of expertise in managing staff overseas

High cost of investment

Question 5

Is direct investment allowed in every country

Answer 5

This isn’t always possible, some countries require there to be a native member on the board.

Question 6

What places is direct invesment usually allowed

Answer 6

UK

USA

European Countries

Canada

South Korea

Australia

Usually the more advanced economies