Foreign Direct Investment (FDI) is one measure of foreign investments for growing economic globalization. Greenfield investment and international M&A are the main style for FDI. As the society developing, new acquisition opportunities are created by improving the financial situation of TNCs, ongoing corporate and industrial restructuring (World Investment Report, 2010). These conditions make new trend that M&A hold more proportion than Greenfield investment around the world. The World Investment Report also revealed the trend of geography that China which increased nearly 12 billion from 2008 to 2009 became the second largest foreign investment recipients in the world in 2009.
There are some main reasons attracting FDI prefer choose entry into China, such as low labor price, stable policy environment and huge consumable market. Best Buy which is the largest US electronic retailer entered into China according to bid a local company in Shanghai in 2006, then first retail store opened in Shanghai. Since 2006, the Best Buy expands the market share slowly in China, comparing its main competitors, GOME Electrical Appliances Holding and Suning Appliance Chain Store Co. Ltd. Furthermore, Best Buy announced that they closed all of their retail shops in China on February 2011. They could not find a useful mode to satisfied demand of customers. They pay more attention on service, not the price of goods, which costs too much spending for the company. The situation of continuing loose compelled they move out the Chinese electronic market.
Best Buy have to concern more situations about local consuming and do not all copy the management method from their parent company. A multinational company have to get more known about the local culture and their core competitors if they want to increase their profitability from foreign market. Some of companies invest from developed, not only European and North-American countries, trend to developing countries. Even though they owed advanced technology and management experience, they still loose their profit in developing countries.
TNCs of FDI has some advantages for both parent companies and investment recipient countries, such as rising the value of their shareholder through the expand in foreign countries, improving the export for recipient countries and proving the economic growth for recipient countries. FDI has played an important role of a number of countries' economic fortunes around the world.
Hi there, from my understanding of your comments, you highlighted how FDI's help the economies of the host countries, what about the multinational companies such as Best Buy did they not also gain something?
ReplyDeleteAlso could you enlighten more on the issue of the company Best Buy, did they close down solely because of strong competition or the mere fact that they were fast becoming a liquidised company as they could not keep up changes which could have gained them a competitive edge?
But over all i agree with you that FDI definately does contribute highly to ''economic fortunes of the host countries.
Hi Stacey! Could you elaborate a bit more on the issue of Best Buy? What's the reason behind the closure of stores in China? Would it be possible the reason behind the closure of all Best Buy stores is because of Best Buy failed to integrate a suitable synergy between the two companies or poor communication problem existed or even a cultural incompatibility between the two companies after Best Buy purchase the local company?
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