International business: acquiring existing companies

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International business
Why have most foreign direct investments gone into acquiring existing companies rather than establishing new ones?
Multinational corporations are a welcome source of foreign direct investment to many countries. When multinationals are seeking to invest in new markets, they may choose to do so through mergers with existing indigenous establishment or take over such establishments through direct acquisitions (Ball 64). This is a means for accessing new markets in foreign countries by multinational corporations.
The term used to refer to such entry into new markets is foreign direct investment. This is made possible by the capital portfolio and economies of scale. This was witnessed greatly in the 1990’s as motor vehicle manufacturers sought to clinch new markets as the global completion for international market share increased steadily (Ball 64). However, this trend is on the decline in developed and developing countries as nations try to protect their strategic sectors of their economies from foreign control.
Sequential market entry is another means with which multinational corporations acquire access to foreign markets. The electronics manufacturer, Sony based in Japan was able to enter into the US market by initiating the establishment of a small assembly plant in California. It began by producing television sets which strengthened the corporation’s brand image such that indigenous companies had to fight for the market share that Sony had easily won. Today Sony is a major multinational in the US.
They main reason as to why multinational corporations prefer to acquire indi...