Dynamics of multinational companies Essay Example | Topics and Well Written Essays - 1250 words

Dynamics of multinational companies - Essay Example However, it should be noted that the benefits that come about as a result of FDI can only be possible if all the three parties follow the right regulations, and the ethical ways of doing business is strictly adhered to. This paper sheds some light on the costs, and benefits of FDIs to the investors, the home country, and the host country. In addition, it will also review how the country, and the firms’ level of development, and growth play a role in determining the costs, and benefits accrued from the FDIs (Weigel, Wagal & Gregory 1997, 56). Benefits and costs for The host country One of the core benefits of global foreign direct investment is that it creates an opportunity for money to freely flow to any business around the world that shows any signs of potential growth in the future. This is in light of the fact that when investors choose to invest their money, the main logic behind this is that they expect some forms of return from the investment. Additionally, the home cou ntry’s capital account will benefit from the inward flow from the returns on the investment. There are no standard criteria on who deserves the investment, and who doesn’t. This ensures that all the businesses get equal competitive advantage, and no particular business is favored over the others. Subsequently, economists observed that the best money will be invested in the best business anywhere in the world despite the race or color or culture. This in turn means that the goods, and services will reach the market just in time as compared to an instance when unrestricted FDI wouldn’t have been available. Benefits and costs for home country The foreign direct investment has an advantage to the investors too. The investors get to receive global benefits. The fact that the investors can freely invest in different countries reduces the risks likely to be suffered from the investment. Diversification brings about reduction in the risks likely to be incurred, and an i ncrease in the returns that will be enjoyed from the investment (Stephan 2013, 43). Secondly, the other benefit to the home country that comes with FDIs is that the investors can learn new valued skills that may come in handy from the foreign markets. Thereupon, these skills are then transferred to the home country leader to even further growth, and development for the country’s economy. Moreover, the businesses also get to benefit in that when an investor chooses to invest in a particular business, it is often expected that the investor will ensure that the staff is competent enough to give the investment a return. Additionally, the investors will introduce new technology to the business to ensure that it has a competitive edge over its competitors.(Chung 1997, 40) The business will get to be enlightened on ways of doing business they would likely not have been aware of before the investors come into the picture (Jones & Wren 2007,54). As a result, there will be improved gen eral living standards of the employees of the business with all these new incorporation. To add to this, since there are no kinds of favoritism in choosing which business to invest in, it would be expected that the government will have less influence on the business, and that the government isn’t able to put up poor economic policies that will affect the business. The other advantage for the host country is that there is a general improvement on the standards of living for the people in the country.