Abstract
This study looks into issues dealing with foreign investment. Notably, foreign investment is a significant aspect in the development of numerous countries, and in particular, the less developed ones. However, without regulations or mechanisms meant to regulate such investments, investors will not be willing to risk, and bring their resources into a country hit by political turbulence. For addressing such issues, several regulations are in place to help in minimizing the risk or uncertainties in such nations by providing security to foreign investors. These regulations also make sure that investors do not exploit the country they are investing in. This study looks into examples of the regulations and their impact on foreign investment, globally. Moreover, the study also looks into issues that concern management when screening potential markets and sites. What are the steps followed in the screening of potential markets and sites?
Introduction
While foreign investment plays a crucial role in the economy of a country, a legal regime for this is necessary, which should not undermine the interests of the state or country. Foreign investors need information regarding procedures, regulations, security, and the legal stability that guarantee safety to their investments. In definition, foreign investment regulation affects the allocation of resources that a company in one country allocates to an investment in another.
Content
Using an example like the United States, foreign investment regulations have over time ensured investment in the country, but that they do not control the economy. Regulations can include restrictions on foreign ownership in mining, agricultural land or logging. Some countries welcome subsidized foreign investment in manufacturing sectors that are labor intensive. There can be control on foreign investment dealing with the ownership, performance requirement, and entry into some countries. There are also regulations against foreign investment in sensitive areas like cultural industries or defence. Some countries have used restrictions on take-over, the SOEs, and imposing performance requirements.
On the other hand, recent advances in communication and transport have opened national markets on a global level. It is then vital for managers to screen and analyze these potential markets and sites for their operations. It is imperative that location decisions made in a systematic way. These are the two issues concerning management in screening potential markets and sites. It is essential to note that, managers always try to keep the search costs as low as possible in the screening process (Bradley, 2007).
Four steps are involved. The first is identification of Basic Appeal. For any potential market, this process involves determining the demand of the basic product. For a potential site, it incorporates the process of determining whether the resources required are available or not. In determining the basic demand, the process must explore whether there are any bans on a product, for example, cigarettes or alcohol in Islamic nations (Zarrouk, 2003). This is in addition to the suitability of the countries' climate. In determining the Availability of resources, are the raw materials imported or local? It is significant for managers to note that, imports usually face trade barriers.
Labor is also very crucial; many corporations go to countries that have lower wage and with labor-intensive product. Issue dealing with finance can send production abroad if it is unavailable or with high interest at home. Dropping of markets and sites that do not meet the requirements is usual (International Monetary Fund).
The second step is assessing the national business environment. The management must understand the existing differences in laws, cultures, economics, politics, then incorporate that understanding into decisions that deal with market and site selection (Marder, 1997).
The third step is in Measuring Market or site potential. It follows that consumers may not be able to buy a product despite the local demand. Moreover, a certain site may not be able to supply the resources despite the availability of resources. In measuring the market potential, it is vital to note that the level of economic development usually affects the products' features. Therefore, different approaches to market potential research are required. It is also imperative that the management assesses the quality of resources employed locally. Labor and management are very crucial in this step.
The fourth step includes the selection of the Market or Site. These are the efforts pushed towards the assessment of the remaining potential markets and sites. Managers should visit the locations to confirm the earlier expectations, and then engage in a competitor analysis. The management should also get involved in the evaluation of the contribution of each potential location to cash flows by taking a financial evaluation. By going for field trips, managers will gain experience the culture and observe the workers. Moreover, the competitor analysis done should address the number of competitors, their market share, whether they control the channels of distribution tightly, and many other concerns. Utilization of research methods that are of high quality is essential in the systematic screening process. This is because the global business environment is increasingly becoming competitive.
Conclusion
Foreign investment regulation is different in countries with the view of protecting themselves from any financial exploitation or external stimuli that is disruptive. These regulations are very central in providing a navigation system, which guides and protects investment capital and flow of trade. The screening of potential markets can be time consuming; however, it is a key process because it helps a business entity in knowing foreign customers, as well as, the conditions in each of the unique market (Bradley, 2007).
