What are the 3 types of foreign direct investment?
Answers
1) horizontal
2) vertical
3) conglomerate
Answer:
Types of FDI Known in the Market
Horizontal: As the name suggests, this investment deals among many economies in a horizontal way; i.e., the investment made by a firm or an individual carries all the operations on the investing company on its soil. In this type of investment, it is imperative for investors to operate in the same industry but two different countries. For example, an IT firm of the US invests in IT firm of the UK.
Vertical: In this type of investment, the area of operation of the investor and the host is different but somewhere related. It is essential for the investor's primary business to acquire or establish shares of a firm in the host country. Thus, the fundamental difference between horizontal and vertical FDI is the difference between the area of operation of investor and host.
Conglomerate: It is most popular among investors due to the challenges it possesses for every firm investing in a foreign land. The purpose of this investment is to dominate an international market with a business different from that of the host. For example, if an automobile manufacturer of Japan invests in a mobile phone company in the US; the first challenge faced by the investor will be to gain operational control on foreign soil; and then secondly, to survive on a strange land dealing in a new industrial segment.
Greenfield: In this investment, the investor depends on another investing company to begin its operations in a foreign land.
Foreign Takeover: It operates on the name of an alien merger, acquisition or takeover working on foreign land.