Companies Investing Internationally: Benefits and Challenges

Investing internationally is a viable option for companies that face stiff competition in their home countries and also those that have grown and need to increase the scope of their operations to beyond the countries that they had initially been operating from. Contemporary times have seen the countries investing in Sub-Saharan Africa since they want to be the first to set up operations in the states and enjoy the benefits associated with being pioneers in a country that had not been experiencing any form of investment. It is also through investing in foreign countries that organizations can enjoy the benefits associated with investing in countries which have significantly lower economic values and experience compared to them (Bicaba et al., 2017). There are, however, barriers that come with investing in the Sub-Saharan part of Africa, most of which come from the existence of poverty in the countries where the investment is supposed to take place in.

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First, poverty leads to increased transaction and operation costs associated with investing in the said countries. When one intends to invest in the poverty-stricken Sub-Saharan countries, they may be forced to engage in activities that they would not have been required to undertake in other countries that do not experience poverty. There are additional costs associated with poverty which bring about the need for the foreign investor to incur more expenses to enjoy the said benefits. For example, poverty in the countries may lead to the existence of lousy transport and communication networks, leading to the need for the foreign investors to have to undertake the process of development of the missing infrastructure so that the operations of the said organizations can continue smoothly (Bicaba et al., 2017). For business operations to be effective, a business needs to operate in environments which support the movement of the organization's transportation department so that they may be able to move the inputs and outputs as required. However, when the transport network is undeveloped, the companies may experience slower rates of development and movement of their final products or the raw materials, resulting in reduced profits since their supply chain will be paralyzed. However, some foreign investors have opted for the option of developing their transport network to support their business activities. This process is expensive to the companies since they will create networks without any government assistance.

As a result of poverty, the educational levels in Sub-Saharan Africa are less than the minimum requirements, which results in the need for the foreign investor to undertake to hire of people from other countries, which may be expensive since the foreigners will require more compensation compared to locals. The educational levels also play a part in the establishment of barriers in the openness in the locals to accept the setting up of operations in their countries (Bicaba et al., 2017). When people are uneducated, they are likelier to be closed towards the setting up of business operations in their borders by foreigners. They will feel threatened by the presence of foreigners in their country and may, therefore, cause problems to resist the process of foreigners setting up operations in their countries. It is also through the lack of education that the inhabitants of a state may develop negative attitudes towards the products that come from the activities of the business activities in their country. They may, therefore, boycott the products as a result of being uninformed about the products in question and the inability to think through the issues that the products from the investment solve when they are produced.

Poverty is also responsible for the lack of industries that support the operations that are to be set up as a result of foreign investment. When a county is poor, the possibilities of having local industries are minimum. When this happens, the countries will be unable to provide subsidiary services to the investments that are to be provided in their counties by foreign investment. Local industries can be used as providers of raw materials to the products that the foreign investors want to produce. However, due to the lack of local industries, foreign investors have to look for other sources of raw materials to support their business activities (QC, 2020). The lack of ready raw materials to support the production process undermines the possibility of foreign investors to undertake business activities in the countries concerned. It is also through the lack of local industries that the foreign investors lack the avenue through which they can dump the excessive supply of raw materials and end products through providing the excesses to the local industries. Therefore, this shows that had Sub-Saharan African countries developed a reliable local sector. Then they would have experienced more international investment than the ones that they experience now.

The evidence of poverty and the effects it has on the international investment is the lack of the capacity to buy the products from activities of foreign investment. Foreign investors are likelier to invest in countries that will provide them with a market, and the poverty-stricken countries in Sub-Saharan Africa are unable to provide a constant demand for the products that the foreign investor has introduced to them. Usually, an investor would prefer an assurance that their business activities will yield returns and the best assurance comes from the existence of a strong local market that will consume a majority of the products that they produce (Alghammas, 2018). Therefore, the foreign investors may be unwilling to set up operations in a country where they are unable to get positive feedback from the markets due to the lack of the capacity to buy from the foreign investors if the business activities are set up in their countries. The foreign investors will be left with the option of investing in exporting all of their products. This activity may be resisted with the governments in the local areas where investment is made, as well as being an expensive venture due to the costs associated with exportation such as payment of levies in the countries where the investment is supposed to take place.

There are also risks associated with poverty, such as the inability for local investors to pay back the loans extended to them as a result of foreign investment. Domestic investors may find themselves unable to pay back the loans extended to them by international investors as a result of the inability to effectively use the funds given to them in the investment process, leading to the loss of money which had initially been extended as loans (Alghammas, 2018). When a foreign investor opts to empower local industries through loans instead of them directly investing in the countries, they are dealing with the possibility of their investments being unable to be paid back on time or entirely due to the difficulties that the local investors may face in their attempts to enjoy the benefits associated with establishing ways of operating comfortably within the environments mentioned. When one investor suffers from loss of the money that they had invested, they are likelier to make the information public, hence making the areas referred to be blacklisted by future investors since they will fear for their investment to become losses due to the inability of the said countries to pay back whatever they owe.

Poverty also creates liquidity risks, meaning that the countries may be unable to provide conditions under which an investor can sell their investments, both physical and virtual and stop their operations as need arises (Alghammas, 2018). Different reasons may bring in the need for an investor to liquidate their assets, and the lack of the possibility to settle one's assets may result in the existence of situations whereby the investors may suffer from losses due to the lack of swiftness in liquidating one's assets. For example, one may need to liquidate their assets to undertake other business ventures, and the slowness of the process may lead to the inability to advance into the new markets or investments, since the countries where one has invested in may not address the need as swiftly as needed. There is also the possibility of the investors being unable to salvage their investments when there are expected losses coming by, and this will result in the investments being lost to the dangers such as natural calamities and political battles.

Politics as a Barrier to International Investment

The politics of the country in which an investment is to take place determines the effectiveness of the process is undertaken. In this case, the governments are responsible for setting the conditions that will either encourage or discourage the existence of business operations in the concerned countries. It is also through the governments that policies are supporting or undermining the presence of a foreign investment in the countries concerned (Sauvant, 2020). There are also issues associated with the politics of a country, since the politics of a country are responsible for setting the mood and attitudes of the people in the country, especially on matters of the attitudes that they hold on the issues such as foreign investments, with the positive attitudes making it possible for the businesses to operate successfully in the environments that they are in. Negative attitudes are leading to the impossibility of the businesses to work in the countries.

First, the politics of a country is directly responsible for allowing foreign investments in the states. The policies governing a country and the attitudes that they hold on issues such as foreign investment will determine the possibility of the country having foreign investments or not. For example, if the state has policies that do not support foreign investment, preferring local investment instead, then the country will not have foreigners setting up operations in the countries. The politics of a country are also responsible for setting the laws on the requirements that qualify a country to set up services in their borders. Therefore they may use this as a way to limit foreign investment or as a way of encouraging foreign investment (Sauvant, 2020). Lax laws may provide the opportunity for foreign investors to set up operations in a country since the foreign investors will need to fulfil fewer and achievable requirements for them to set up operations in a country. In contrast, stringent laws may limit the possibility of countries enjoying foreign investment. Some of the statutes include taxation, which is considered whenever a foreign investor wants to set up operations in a new location, since they will have to view all the taxes that they have to pay to operate in the said countries, and in the process determine whether it is possible to pay those expenses and still manage to make profits from their operations.

The diplomatic relations between the countries interacting in the business processes will also determine the possibility of the countries enjoying foreign investments or not. Countries that are in good terms diplomatically will invest in each other compared to the countries that are not in diplomatic relationships. When countries are in good terms, they seek to empower each other through setting up operations in their allies' countries and giving each other the priority whenever opportunities for investments arise. When countries are not in good terms, they are less likely to...