Foreign Investment Decision

From the past few years there has been a new concept in the modern world of doing business which states that industries which are generating a good amount of return on their investments should diversify globally to be more productive as well as more profitable in long term. The multinational firms that have been generating good revenue are changing their strategy and there are going in less developed and emerging markets like Pakistan, India, Malaysia and Singapore.

The concept in business world is that when companies diversify in different countries with their product and services the have a higher probability to earn more as serving to only developed markets. Serving in less developed and emerging markets also gives more opportunities to different companies as there is less competition and products and services are limited. Other factor is the cheap labor and also less cost of doing business as compared to developed countries like USA and UK where production cost is very high as compared to Pakistan and India as they have a cheap labor which provides an ultimate benefit to foreign companies.

Going in less developed and emerging markets also provides companies to provide different product and services according to the culture of that country and add values in the life on consumers. Q2. There is an important difference between less developed and emerging markets. Less developed markets are those markets where there are opportunities but there is no infrastructure and chances of growth are very rare and sometimes there is no long term profit.

In emerging markets Like China there is a lot of growth opportunities as well as chances of doing business in long run increases. Competition allows firms to provide quality services at affordable level. SOURCES 1. John Downes, Jordan Elliot Goodman. 2006. Barron’s Finance ; Investment Handbook. Barron’s Educational Series. 2. Gene Siciliano. 2003. Finance for Non-Financial Managers: A Briefcase Book. McGraw-Hill Professional. 3. Richard A. Brealey, Stewart C. Myers. 1984. Principles of corporate finance. McGraw-Hill.