Business & Marketing Research Paper: FDI Theories and International Entry Modes

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FDI Theories and International Entry Modes
The corona virus pandemic continues to leave devastating effects in many sectors and areas including foreign direct investments. Through FDI, international firms manage to acquire physical assets and ownership of companies in foreign countries and consequently, gain control of the management. As such, corona virus pandemic is eroding the efforts that technological advancements had enhanced and facilitated for the better part of the 21st century and which had opened up and transformed the world into a global village. German-based news article DW recently published an article that highlighted that FDI is set to reduce by 40% in 2020 with the developing and under-developed regions the hardest hit. With globalization, international trade had been normalized. Companies particularly from the developed regions such as the US had ventured extensively across borders and in far and wide countries for more markets for their commodities and services. These firms also used the opportunity to cut costs by sourcing for not only cheap sources of raw materials but also labor. It is also essential to note that international mergers and acquisitions is the other core driver of FDI flows. These cross-border M&A usually occur to allow the international firms to get a foothold of the new geographical markets. There are various entry modes that companies particularly those involved in the manufacture of intangible products use to penetrate new regions including contractual and investment entry modes. The research paper purposes to examine the DW article with focus on theories/reasons of FDI and international entry modes.
Overview of the News Article
The article published in DW explains vividly on the devastating impacts of the corona virus pandemic on foreign direct investments globally. It denotes that with no end in sight to the pandemic, FDI is set to drop by about 40% in 2020. According to DW.com, “FDI will shrink from its 2019 value of $1.54 trillion (€1.36 trillion) to less than $1 trillion for the first time since 2005, the United Nations Conference on Trade and Development (UNCTAD) said” (n.p). The last time it was that low was in 2005 during the financial crisis. Furthermore, the article shares that it is feared that developing nations and economies will suffer the greatest risk because they are highly dependent and reliant on FDI not only for production but also extraction of raw materials. The article delves further to highlight that the corona virus pandemic has brought to the spotlight China as a global manufacturing hub. With travel restrictions imposed by different nations to curb the spread of corona virus, many traders who depended on products from China and other Asian economies have been impacted significantly. The article concludes by noting that it is imperative that international investment is encouraged to alleviate nations from the devastating impacts of the pandemic.
Foreign Direct Investment Theories
The selected article published in DW provided ample information as to the benefits of foreign direct investment. It has highlighted that FDI is particularly essential for developing and under-developed...