Question Tag: Foreign Direct Investment (FDI)

Describe five strategic reasons that might motivate a company to undertake foreign direct investment. —------------------------------------------------------------------ Question: b) At the last meeting of the Board of Directors of Greenwich Ghana Limited, the Board resolved to establish a manufacturing facility in Asia and Europe. Briefly describe FIVE strategic reasons that might have informed management's decision to undertake the Foreign Direct Investment (FDI). (5 marks) Answer: Strategic Reasons for Foreign Direct Investment (FDI) Access to New Markets By establishing a manufacturing facility in foreign countries, the company gains access to new markets, enabling it to expand its customer base and increase market share. This helps diversify the company’s revenue sources and reduces dependency on the domestic market. (1 mark) Cost Reduction Manufacturing in regions with lower production and labor costs can significantly reduce operational expenses. Asia and Europe might offer cost advantages such as cheaper raw materials, lower wages, or favorable tax policies, making FDI a cost-effective decision. (1 mark) Proximity to Resources Setting up operations closer to key resources (such as raw materials or skilled labor) reduces transportation costs and ensures a more efficient supply chain. This proximity can also lead to better quality control and faster production cycles. (1 mark) Government Incentives Many countries offer incentives such as tax holidays, grants, or subsidies to attract foreign investments. These incentives can lower the company’s overall costs and improve profitability, making FDI an attractive option. (1 mark) Strategic Positioning Against Competitors Establishing a presence in key international markets can be a defensive move to counter competitors who are already operating in those regions. By entering these markets, the company can strengthen its competitive position and ensure it does not lose out on potential opportunities. (1 mark) ========== Let me know if you'd like to proceed with the next part or have any further modifications! Describe five strategic reasons that might motivate a company to undertake foreign direct investment. —------------------------------------------------------------------ Question: b) At the last meeting of the Board of Directors of Greenwich Ghana Limited, the Board resolved to establish a manufacturing facility in Asia and Europe. Briefly describe FIVE strategic reasons that might have informed management's decision to undertake the Foreign Direct Investment (FDI). (5 marks) Answer: Strategic Reasons for Foreign Direct Investment (FDI) Access to New Markets By establishing a manufacturing facility in foreign countries, the company gains access to new markets, enabling it to expand its customer base and increase market share. This helps diversify the company’s revenue sources and reduces dependency on the domestic market. (1 mark) Cost Reduction Manufacturing in regions with lower production and labor costs can significantly reduce operational expenses. Asia and Europe might offer cost advantages such as cheaper raw materials, lower wages, or favorable tax policies, making FDI a cost-effective decision. (1 mark) Proximity to Resources Setting up operations closer to key resources (such as raw materials or skilled labor) reduces transportation costs and ensures a more efficient supply chain. This proximity can also lead to better quality control and faster production cycles. (1 mark) Government Incentives Many countries offer incentives such as tax holidays, grants, or subsidies to attract foreign investments. These incentives can lower the company’s overall costs and improve profitability, making FDI an attractive option. (1 mark) Strategic Positioning Against Competitors Establishing a presence in key international markets can be a defensive move to counter competitors who are already operating in those regions. By entering these markets, the company can strengthen its competitive position and ensure it does not lose out on potential opportunities. (1 mark) ========== Let me know if you'd like to proceed with the next part or have any further modifications! Describe five strategic reasons that might motivate a company to undertake foreign direct investment.