Advantages and Disadvantages of foreign subsidiary?

Answer 1

advantages

- causes a flow of money into the economy which stimulates economic activity

- employment will increase

- long run aggregate supply will shift outwards

- aggregate demand will also shift outwards as investment is a component of aggregate demand

- it may give domestic producers an incentive to become more efficient

- the government of the country experiencing increasing levels of FDI will have a greater voice at international summits as their country will have more stakeholders in it

Disadvantages

- inflation may increase slightly

- domestic firms may suffer if they are relatively uncompetitive

- if there is a lot of FDI into one industry e.g. the automotive industry then a country can become too dependent on it and it may turn into a risk that is why countries like the Czech Republic are "seeking to attract high value-added services such as research and development (e.g.) biotechnology)"A

Answer 2

FDI or MNC can:

fill up the Nation Saving Gap

fill the Foreign exchange gap

fill the tax revenue

fill the management, entrepreneurship, technology and skill gap

An Overview of Advantages of FDI-

Foreign Direct Investment in India is allowed through four basic routes namely, financial collaborations, technical collaborations and joint ventures, capital markets via Euro issues, and private placements or preferential allotments.

FDI inflow helps the developing countries to develop a transparent, broad, and effective policy environment for investment issues as well as, builds human and institutional capacities to execute the same.

Benefits of Foreign Direct Investment-

Attracting foreign direct investment has become an integral part of the economic development strategies for India. FDI ensures a huge amount of domestic capital, production level, and employment opportunities in the developing countries, which is a major step towards the economic growth of the country. FDI has been a booming factor that has bolstered the economic life of India, but on the other hand it is also being blamed for ousting domestic inflows. FDI is also claimed to have lowered few regulatory standards in terms of investment patterns. The effects of FDI are by and large transformative. The incorporation of a range of well-composed and relevant policies will boost up the profit ratio from Foreign Direct Investment higher. Some of the biggest advantages of FDI enjoyed by India have been listed as under:

Economic growth- This is one of the major sectors, which is enormously benefited from foreign direct investment. A remarkable inflow of FDI in various industrial units in India has boosted the economic life of country.

Trade- Foreign Direct Investments have opened a wide spectrum of opportunities in the trading of goods and services in India both in terms of import and export production. Products of superior quality are manufactured by various industries in India due to greater amount of FDI inflows in the country.

Employment and skill levels- FDI has also ensured a number of employment opportunities by aiding the setting up of industrial units in various corners of India.

Technology diffusion and knowledge transfer- FDI apparently helps in the outsourcing of knowledge from India especially in the Information Technology sector. It helps in developing the know-how process in India in terms of enhancing the technological advancement in India.

Linkages and spillover to domestic firms- Various foreign firms are now occupying a position in the Indian market through Joint Ventures and collaboration concerns. The maximum amount of the profits gained by the foreign firms through these joint ventures is spent on the Indian market.

Answer 3

The benefits of having a foreign subsidiary includes penetration into new markets and the ability to borrow ideas that work in another subsidiary. Some disadvantages include having to cope with foreign laws and hostility from a host nation when profits are repatriated.

Answer 4

- inflation may increase slightly

- domestic firms may suffer if they are relatively uncompetitive

- if there is a lot of FDI into one industry e.g. the automotive industry then a country can become too dependent on it and it may turn into a risk that is why countries like the Czech Republic are "seeking to attract high value-added services such as research and development (e.g.) biotechnology)"

Answer 5

in india lot people based on the retailing market with this coming of this fdi they are loses their oppertunities

Answer 6

there is lack of control over the investment portfolio and there are tax consequences to buying and selling assets in the portfolio.

Answer 7

wholly owned business, direct management.