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Foreign direct investment in Kenya(International Business)


Date Posted: 10/28/2020 9:23:42 AM

Posted By: Ayoo1  Membership Level: Bronze  Total Points: 32

Foreign direct investment in Kenya(International Business)

It consist of transactions that are carried out on national borders or trade with other countries and having access to their markets rather than the local markets.
In this case we are looking at foreign direct investment especially in Kenya and the sectors the government need to work on. In accordance we’ll have thrusts for business to enter international markets.

Foreign direct investment is largely dependent on conditions and characteristics in particular country. Key areas that the Kenyan Government should address in order to attract foreign direct investment.

The following are key areas the government should address to attract foreign direct investment in Kenya;

1) Transport and infrastructure
The key factor in the desirability of investment in Kenya is transport costs and level of infrastructure like airport and ports, adequate and reliable source of energy. A country may have low labor costs and if there is high transport cost to get the goods into the market it leads to a drawback in the investment.

2) Commodities
One reason for the existence of foreign direct investment is the existence of commodity. If the Kenyan government can work on this area by improving the manufacturing and production industries then there would be the commodity for investment.

3) Labour skills
The government can focus on areas that need higher skills example, pharmaceuticals and electronics. Multinationals will always invest in those countries that have high labour productivity and skills. Example; India has attracted significant investment in call centers because a high percentage speak English but the wages are low.

4) Export Processing Zones
Shaping the Export Processing Zones in a way that they spearhead into the domestic economy is important in attracting foreign direct investment. The government should avoid EPZ regulations discriminating against the creation of local supplier relationships.

5) Exchange rate
The government should put cheap exchange rate in Kenya

that is suitable for investment. A low exchange rate in the host country can attract more foreign direct investment because it will be cheaper for multinationals to purchase assets.

The main thrust to a firm engaging in international business.
Some of the main reasons why companies engage in international business;

1) To expand sales
Companies are dependent on consumers’ interest in product and services and the consumer’s willingness and ability to buy them. Over the years the number of consumers is increasing with their standards of living also rising.

2) To acquire resources
Manufacturers and distributors look for foreign capital, technology and information that they can use at home to reduce costs. Sometimes companies operate in other countries to acquire something that is not available in their countries.

3) Minimize Risk
Companies seek foreign markets to minimize swings in sales and profits arising in the daily business operation. Example, recession and expansion which occurs differently in different countries.

4) Lower cost of production
Companies go international to find alternative sources of labour. Labour in developing countries are much more cheaper compared to labour in developed countries. Firms look to international business for lower cost if manufacturing, technology assistance and other services in order to maintain a competitive advantage.

5) Broaden workforce
Companies go international to broaden their workforce and obtain new ideas. A workforce comprised of different background and cultures can bring fresh ideas and concepts to help a company grow.

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