International marketing concept refers to activities that promote goods and services between different countries. Due to increasing competition, customer preferences, and demands, companies have embraced other techniques to promote international trade. According to the article, “FDI surge expected as full foreign ownership allowed in more sectors,” by Arjay, an essential concept of trade is explored. Typically, the author elaborates how the Philippines has rapidly grown due to allowing a foreign direct investment (FDI) in different sectors (Arjay, 1-4). Therefore, this paper describes FDI and its importance in international trade.
Firstly, it is vital to understand the FDI concept. The concept is fundamentally built upon establishing a long-lasting interest by obtaining a certain percentage of shares in a firm located in any country. The primary principle of FDI is getting total control which involves active to intent influence and management on a foreign firm operation (Samborskyi et al., 704-712). In other descriptions, FDI refers to the total of short-term capital and long-term capital in the balance of payments.
There are different types of FDI that investors embrace globally. The two major known types include vertical and horizontal FDI. Horizontal FDI occurs when a business entity enters a foreign market to expand its domestic production. On the contrary, the vertical approach involves businesses entering a different supply chain level to boost their sales in a foreign market (Arjay, 1-4). Additionally, two other minor types of FDI are conglomerate and platform, which explains introducing unrelated business ideology in a foreign country.
Besides, investors can expand their businesses by using different FDI methods. For instance, telecommunication industries from the United States opened their branches in the Philippines, illustrating the FDI concept. One of the methods used by foreign investors is acquisitions and mergers (Dinh et al., 173-176). Mergers are when separate entities join together to form a new company, while investment involves one entity taking over another. Additionally, investors reinvest their profits from overseas in developing new facilities or operations that would operate in a foreign country.
Also, the marketing concept has numerous advantages in international trade. Firstly, it creates or replaces trade in countries. FDI is trade creating since it opens up new markets for the home country, facilitating exports to the new host (Samborskyi et al., 704-712). Additionally, new market development creates new job opportunities for the residents of the foreign country, making FDI an outstanding marketing concept. This, in turn, results in a rise in income and stretches the consumer base improving the country’s overall economy.
Despite that, FDI establishes a healthy competitive market. This is achieved by FDI promoting the entry of foreign organizations into the local market place which disassembles domestic monopolies. A competitive and healthy environment would then push different forms to embrace new technologies and enhance their products and thus resulting in innovations. Besides, consumers also assess a diverse variety of products at a competitive price (Dinh et al., 173-176). Consequently, FDI is necessary due to its tax incentive nature. Most governments want to attract potential foreign investors who can change a country’s economy. Therefore, the governments offer lower taxes and tax holidays to retain foreign investors to enhance economic growth.
To conclude, FDI has a significant impact on developing host countries. However, the government and citizens should be aware of the possible limitations of the FDI marketing concept. From a government perspective, a high share of FDI illustrates the weaknesses of a country in terms of capital stability. Additionally, countries should be aware that FDI gives host countries total power and control, leading to excessive leverage. Besides, the FDI reversal process is challenging to achieve; hence countries should implement policies that can safeguard the country at all angles.
Works Cited
Arjay, L. B. “FDI surge expected as full foreign ownership allowed in more sectors, 1-4.” BusinessWorld Online, 3 Feb. 2022, www.bworldonline.com/fdi-surge-expected-as-full-foreign-ownership-allowed-in-more-sectors/.
Dinh, T. T., et al. “Foreign direct investment and economic growth in the short run and long run: Empirical evidence from developing countries.” Journal of Risk and Financial Management, vol. 12, no. 4, 2019, p. 176, doi:10.3390/jrfm12040176.
Samborskyi, O., et al. “Modeling of foreign direct investment impact on economic growth in a free market.” Accounting, 2020, pp. 705-712, doi:10.5267/j.ac.2020.6.014.
