Essay Sample on Foreign Direct Investment

Introduction

Foreign direct investment is a term used to represent the acquisition of physical assets, such as plant and equipment in a foreign country with operational control ultimately residing with the parent company in the home country. It may take a number of different forms including the establishment of a new enterprise in an overseas country; either as a subsidiary or as a branch the expansion of an existing overseas subsidiary branch or branch the acquisition of an out of the country business assets or enterprise.

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Market Variable

Market segmentation variable will involve designating a market into tiny groups of consumers with behaviors, characteristics, and needs that may call for distinct marketing strategies. The chief market segmentation variables will be demographic, behavioral, Geographic and psychographic.

Product Life Cycle Stage

Introduction stage will involve the determination of the size of the market, and the cost of logistics, for instance, consumer testing, development, and research. Growth stage will involve investing more money in promotional activities with the aim of maximizing the potential of the growth stage. Maturity stage will involve the maintenance of the market share already created and also involve product improvement and modifications. Decline stage will involve switching to cheaper markets and less expensive production methods after shrinkage of the market of the product.

Product Standardization

According to Levitt (1983) and Ohmae (1989), product standardization will allow for a scope in production and marketing, economies of scale, uniform brand image across borders, and easier coordination and control of marketing activities, cross-subsidization and transfer of marketing know-how. This would be practical if the business identifies worldwide market segments with common preferences and tastes such as wealthy people, teenagers, and women.

Local Infrastructure

South Africa has a well developed soft infrastructure (transparent institutions) and hard infrastructure (railroads and highways), this means that more foreign direct investment is likely to occur in South Africa. This is because widespread transportation infrastructures are associated with an increased foreign direct investment (Coughlin et al, 1991). Additionally, good communication infrastructure will ensure increased productivity and therefore foreign direct investment inflows.

Regional Integration

South Africa has strong ties with countries such as Mozambique and Angola. Regional integration will have significant and positive effects on foreign direct investment which is a combination of diversion and investment creation. Additionally, the business will act as a substitute for trade in an important number of cases.

Regional Infrastructure Advantages

The key driver of economic success in South Africa has been rapid trade expansion. In addition, infrastructural development in South African Countries will make an important contribution to integration to the world economy. In as much as the level of infrastructural development in most South African countries is still low, the development of regional infrastructure will strengthen links between South African economies and their connections with other countries of the world.

Stability and Attractiveness of Members

The South African government is dedicated to creating an atmosphere that makes it possible for firms to invest in the country (DBI, 2013). This, therefore, makes the country to attract clients, trade partners, and foreign direct investment. The country also offers numerous competitive advantages, therefore, which is a significant feature to exploit as a selling point for the Country as a business destination. In addition, the introduction of new government policies makes the opening business easier in Country. The policies eliminated the prerequisites to reserve a company name

Conclusion

With its growing and dynamic economy, skilled and competitive labor force and a huge market, South Africa offer several opportunities to global investors.

References

Coughlin, C., Terza, V., & Arromdee, V. (1991). State Characteristics and the Location of Foreign Direct Investment within the United States. The Review of Economics and Statistics,73(4), 675. Doi: 10.2307/2109406

Doing Business Index. (2013). Retrieved December 21, 2018, from http://www.mediaclubsouthafrica.com/economy/3676-south-africa-S-competitive-advantage-in-the-developing-world

Levitt, T. (1983). Harvard Business Review. The Globalisation of Markets, 61(3), 92