E commerce
Question 1
There arises various pros and cons when setting rules to govern MNC or MNE. MNE is the short form of multinational enterprise which is sometimes referred to as multinational corporation (MNC). A multinational enterprise runs its operations from a given country which acts as the main headquarter and as the home country. They operate in more than one country to manage production establishment or deliver services. Through their activities, they influence the economic environment of another country. The impact may be negative or positive. Given there are other business entities that may be dealing in the same field, thus need to set rules to govern the MNC to create a favorable field for all. The rules set comes with disadvantages and advantages. The setting of the rues has greatly helped in the embracement of human rights to the existing principles and standards. They include employment and industrial relations between the host country and foreign investors. This eradicates the immoral vices such as bribery, consumer rights violations in the host country. The rules help to create neutral and favorable completion grounds for all businesses in a given field.
The rules require companies to always be vigilant to any potential human rights violations. The rules enable the host country to ensure its people are not abused either violated. The rules further ensure that workers are paid decent wages that can satisfy the basic needs of the workers and their families. The various trade unions also advocate for this development and always fight for better.
The set rules never miss disadvantages. The shortcomings include the prolonged complaint considerations, the potential risk of conflicts of interest. The existence of weak oversight and shortfalls in public information efforts.
Question 2
Green-field investment is a type of foreign direct investment whereby the business entity extends its operations outside its home country .it creates a subsidiary building its operations from the ground up taking into consideration the rules of that country. The process may involve the construction of new production facilities, creations of new distribution channels. Greenfield investment can be said to the expansion of operations of business entities to another country. This enables a business to extend its operations and enjoy foreign market share. The green-field investment comes with high risks .the high costs include the construction of factories or production plants. The employees will be trained to the company standards and the processes from the main company are fabricated. This also provides total control to the company. The company enjoys more control in operations, quality control, sales, and training of their workers. Some pros come up with this type of investment. For instance, they can enjoy tax breaks during the establishment period. This is usually provided by the host country for attraction purposes with prospects. Given that it’s a contemplating idea, research is done in advance to determine feasibility and cost-effectiveness. The start and management are done according to the specifications.
On the other hand, the acquisition is described as a business transaction where a company buys portion or all of another company’s shares or assets to take control and be able to build on the company’s strengths. In this investment method, both companies involved survive as separate legal entities with one becoming the parent company of the other. There are many pros of acquisition investment, they include reduced entry barriers. A company will easily enter into new markets and products directly as it is already established. The market power share can be easily be increased, this is through the acquisition in the marketplace. With the acquisition, a small company will be in a position to enjoy larger resources and acquire access to competent experts.
From the analysis above about green-field and acquisition investment, would choose the green-field investment has it has a positive mileage over acquisition investment. With the green-field investment, there is total control from the start. The company can decide on various matters that may affect its operation directly or indirectly like location, quality, and sales management.
Question 3
FDI inflows are the value of inward direct investment made by foreign company investment in the reporting economy. They comprise all liabilities and assets conveyed between resident direct investment enterprises and their direct investors. It refers to the flow of assets and liabilities between residents and non-resident fellow enterprises. There occurs a gap in the FDI inflow between the two countries. This is clear from the statistics, and it can be a result of various reasons.
The gap in the development levels of nations can be the cause of the difference in the FDI inflows. In 2008, Ireland had a greater FDI than japan because it is less established compared to Japan. Japan being a built-up nation, does not require more industries either factories. The creation may be a waste of resources but a surplus in Ireland. The availability of raw materials is another cause of the difference in the FDI inflow .a less developed country has more raw materials as compared to a developed country that has maximized its use of raw materials. Therefore, financiers from developed countries see the prospect of raw materials hence start-up industries there to utilize the raw materials. Ireland being a developing nation has got a lot of unutilized opportunities. It leads to the establishment of more industries in 2008. the opportunities attracted more investors, who yearn to increase their income in various industries, to come to Ireland.
The difference in FDI inflow can be attributed to the perception of Ireland as a better destination for investments against japan. The establishment of operations in Ireland can be easier as compared to Japan in terms of regulations. Japan has more regulations to be adhered to making Ireland more favorable to investors as it has fewer regulations. Ireland has also more favorable growth opportunities.
Variation of opinions on FDI. Looking at Japan and Ireland, their opinions on FDL differ so much. Ireland is friendlier while japan discourages inward FDI. Ireland has better FDI because it has well educated and cheap workforce as compared to japan who is more expensive .this makes investors consider Ireland as the country to go to due to its easier path and more successful for the long term.it then explains the difference in FDI inflows.
Question 4
The great advancement in technology has been a cause for the growth of FDI over the last 30 years. The great achievement in telecommunication and transportation industries has made it easier to do business across long distances and even overseas. It is possible to manage and monitor business easily despite the distance. The emerging of telephone lines that can allow more calls and even provide a chance to host meetings online has to lead to the growth of FDI. The drop in the cost of air travel has also made it easy for investors to travel easily from one point to another. Even the exploration of opportunities has become easier .as people travel through the world. The advancement in communication has greatly driven the desire to promote economic integration.
The actuation of financial liberation has prompted the growth of FDI as well over the last 30 years. The removal of the strict limits on the rights of companies and individuals to invest outside their motherland nations was a green light to the growth of the FDI. The restrictions were put in place in the 1930s, during the great economic depression. With restrictions and limits gone, it is easier for the movement of capital across nations. Financial liberation has been one of the greatest factors in the growth of FDI in recent years.
The lure of getting higher profits as been a contributing factor to the growth of FDI in recent years. The desire of investors to get a better green pasture has made them move the capital to other countries, with cheap raw material and cheap labor to increase their earnings. Investors realize that they can make higher returns outside their motherland, then they move out to explore the opportunity in other countries where they see those prospects.
Work cited
White, Roger. “Public Opinion on Foreign Direct Investment Inflows: Variation in the Importance of Cultural Distance by Relative Economic Development.” Public Opinion on Economic Globalization. Palgrave Macmillan, Cham, 2017. 231-267.
Kalinova, Blanka, Angel Palerm, and Stephen Thomsen. “OECD’s FDI restrictiveness index: 2010 update.” (2010).
Raff, Horst, Michael Ryan, and Frank Stähler. “The choice of market entry mode: Greenfield investment, M&A and joint venture.” International Review of Economics & Finance 18.1 (2009): 3-10.