Sometimes, investing in foreign markets is just as beneficial as (or maybe more than) doing the same in local markets. As an investor, you may actually improve your company’s portfolio through direct foreign investments (DFI). Initially, it may seem like a risky step, but your portfolio increases in the long run. Here are a few reasons investing in foreign markets should be on your list of plans for expansion and improvement.
Theoretically speaking, FDI benefits both the local and foreign organizations. Manufacturing costs in most developing countries are significantly lower than that of developed countries, and foreign trade also indirectly avoids currency devaluation. Established companies from a developed country like the U.S. may considerably lessen expenditures, and in turn reduce the price of the goods they sell. Companies like NCH Capital invest in foreign industries ranging from private equity to agricultural business to real estate, in countries like Ukraine, Romania, and Latvia.
Different countries have different FDI rules, but forming a company abroad or creating a joint venture (JV) between a local and foreign company can prove to be highly beneficial. The important thing is to take that diversity and make the most out of it. Some multinational companies even go as far as starting a business as their own in a foreign land first. This may sound like a huge challenge, but it’s doable. Others choose to form a JV through subsidiaries. Remember, though, that some countries limit the percentage allowed for an investor in a foreign subsidiary.
It’s Not a Quick Study
With the onset of technological advancements, globalization is easier now more than ever. Although diversifying abroad has its many benefits, there are still many important things to take into account. For one, make sure you’re investing in an opportunity that’s scarce in your homeland. Americans normally get the most from investments in natural resources widely available abroad like tea, coffee, and even rubber. If you’re investing in a subsidiary, check their performance records or conduct a thorough cost-benefit case study.
DFI goes both ways for good reason and these strategies create a win-win situation. Countries that are looking to attract foreign direct investments first capitalize in other countries. If you plan on following in the footsteps of people like the founders of NCH Capital George Rohr and Moris Tabacinic, consider investing in foreign markets.