Historically the most common reason for ‘going’ global was an effort to follow clients and customers as the world economy developed in the 18th and 19th centuries. In this the early part of the 21st Century if you were considering in an investment abroad what would be some of the economic and financial elements that you would look at in making a decision?
Many companies consider expanding globally as essential to attain success in the 21stcentury. However, determining the best strategy is hard, and it may change depending on the resource levels and business goals. Hence, it is important to consider financial and economic factors as described below.
The efficiency and functioning of local businesses in the countries considered for investment should be assessed. The business management team should find out if the available local industries are functioning well in the host country. If they are not, it should research the problems behind their poor performance and know if they can be resolved. One should also determine if the business can bring in new strategies and energy to turn around the existing market.
Privatization and trading policies are also essential factors to consider (Townsend, Yeniyurt, & Talay, 2019). Countries like China contains strict trade policies that undermine potential investors from establishing industries in the country. Failure to assess such trade policies may cause great damage to businesses that rely heavily on raw materials importation.
Companies should also consider the treatment standards of foreign companies compared to nationals of the host countries. Such treatments may be identified through various government impartial regulations or customers. This is an essential factor since it can easily break the business’s revenues if not properly assessed.
Companies should consider business facilitation measures availability, including investment and incentives, in the host countries. For example, countries may have export processing zones that are mainly free of custom duties.
It is also vital to evaluate a country’s economic growth to determine if it is declining or growing. This enables a business to see how the economic movements of the host country will affect their investment.
The business should also consider the currency used in the desired country and know how to appropriately price products. It is also advisable to check banking options that can assist in the new currency’s management.
When considering investing abroad, there are many economic and financial factors that must be considered when making this decision. Economic factors I would keep in mind when considering investment options is the country’s political stability, growth rate, and sectors for growth. As for financial factors to keep in consideration, the many factors creating this element of abroad investment would be exchange rate, historical returns, interest rate, and liquidity. You should also consider the host country’s bond and equity market as well as banks and financial institutions, as this will play a role in safe guarding investments and increasing confidence in the country for future investments.
For companies that want to invest in production or sales overseas, the timing of market entry is very important, because it not only involves the continuous investment of a large amount of capital, but also involves the extension or reorganization of the supply chain, and the cultivation and retention of human resources , Brand cultivation and promotion, government relations, supplier relations cultivation and maintenance, etc. The learning cycle of an enterprise is quite long, and the requirements for the ability of the local person in charge are high, and the risks and uncertainties are great. Because of the high initial investment and high risk, it is recommended that small companies avoid direct investment-type entry methods and try to do so with the help of partners. For those who wish to register a company overseas or manage personal assets, when choosing a place of registration, the first factor to consider is political and economic stability, which will directly affect the company’s future operations and development.