Question

identify and explain the relationship between regional integration efforts and the strategic direction for companies pursuing foreign direct investment.

Answer 1

Foreign direct investment refers to an investment that includes long term interests and relationship by the foreign direct investor. In a layman term, it is an investment by a foreign enterprise to the host country or the host economy. It refers to investment in another economy.

There are many factors that impact the flow of foreign direct investment. Regional integration is one of the most important factors in this regard. Impacts of regional integration on foreign investment vary from different factors such as competitiveness of the host firm, the aim, and goal of investment and the geographical importance of the host country. Regional integration is very important in order to increase the flow of foreign direct investment as the increasing number of trading agreement also increases the flow of foreign investment in a particular country.

Integration on a regional basis comes when there is an interest of different countries in coming together for a business purpose and having a keen interest towards each other for some specified goals. Regional integration always has a positive and suitable impact on foreign investment that comes with a combining factor of investment criterion and diversification.

Offering a better climate for foreign companies to invest in host countries is one of the important factors that must be in mind which turns out to be a useful tool to increase the share of foreign direct investment. Proper and hassle-free certification and licensing of a foreign company are effective in attracting a good amount of foreign direct investment. Providing good incentive and opening up economy to the globe is always a better option for increasing foreign investment.

Less regulation and immediate processing of the permission is also an ideal tool to attract foreign direct investment. Those foreign enterprises willing to invest in a particular country must be aware of the market of that country and the behavior of those consumers of that country. A particular country has a distinct choice and different behavior of its consumers is vital for the foreign enterprise that is willing to invest in a host country. A proper strategy for the foreign enterprise is a must in order to achieve a high rate of success in the host economy.