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Cross Border Investment

Cross Border Investment is characterized as a investment by a foreign direct investor in an enterprise resident in an economy other than that in which the foreign direct investor is based

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Why Cross Border Investment is required

To become an multinational Market seekers Raw material seekers Production Efficiency seekers Knowledge seekers Political safety seekers
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Modes of cross border investment

Joint Ventures Wholly Owned subsidiaries Greenfield Investment Brownfield Investment Mergers and Acquisitions
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Strategic alliances

Joint Venture

It is defined as Shared ownership in business. It is between a MNE and a host country. The MNE investing in another company is known as a Foreign Affiliate.

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Wholly owned subsidiaries

A company that is 50 % or more owned (and therefore controlled) by the parent company is known as foreign subsidiary.

Where 100% ownership comes it is known as wholly owned subsidiary

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Greenfield investments

Greenfield Investments means the expansion of existing facilities or a direct investment in new facilities (in an area where no previous facilities exist).

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Brownfield Investment

In this the investment is done on a existing resource or platform.

No need of starting from scratch. Time-saving.

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Mergers and Acquisitions

Transfers of existing assets from local firms to foreign firms takes place.

This is the primary kind of foreign direct investments.

Foreign (or cross-border) mergers occur when the assets and operation of firms from
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different countries are integrated to establish a

Joint Venture

Kinetic Honda

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Wholly Owned Subsidiary

Infosys Technologies(Australia) Pvt Ltd Infosys Technologies(China) Pvt Ltd Infosys Technologies(Sweden) Pvt Ltd Infosys Do Brasilia.

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Greenfield Investments

Volkswagen

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Brownfield Investments

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Strategic Alliances

TATA Motors and FIAT

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Greenfield or Brownfield Investment

Vodafone-Hutchison-Essar

Vodafone wanted to enter the prospective Indian telecom market

But starting from scratch(Greenfield) would be time-consuming.

They offered to Buy Hutchisons

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stake(Brownfield) to enter India.

Advantages of cross border investments

Globalization Newer and better Resources Better intellectual absorption Access to new markets

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Issues in Cross-border investments

Political Support Cultural Gap Integration of Managements Resource acquisitions Rules and regulations of different nations
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