Foreign direct investment occurs when a company takes controlling ownership of business operations in another country and directly manages day-to-day activities. Foreign direct investments are commonly made in countries with skilled workforces, economic growth, and benefits like tax incentives and lower labor costs. There are two types of foreign direct investment: horizontal, where a company expands the same operations abroad, and vertical, where a company conducts related but different activities in the supply chain of its main business overseas.

2. Foreign direct investment (FDI) is when a company
takes controlling ownership in a business entity in
another country. With FDI, foreign companies are
directly involved with day-to-day operations in the
other country.

3. Where is FDI made?
Foreign Direct Investments are commonly made in
open economies that have skilled workforce and growth
prospect. FDIs not only bring money with them but also
skills, technology and knowledge.

4. Benefits of Foreign Direct Investment
1.Market diversification
2.Tax incentives
3.Lower labor costs
4.Preferential tariffs
5.Subsidies

5. Types of Foreign Direct Investment
Horizontal: a business expands its domestic
operations to a foreign country. In this case, the
business conducts the same activities but in a
foreign country. For example, McDonald’s
opening restaurants in Japan would be
considered horizontal FDI.

6. Vertical: a business expands into a foreign country
by moving to a different level of the supply chain. In
other words, a firm conducts different activities
abroad but these activities are still related to the
main business. Using the same example,
McDonald’s could purchase a large-scale farm in
Canada to produce meat for their restaurants.

7. https://www.spiipe.org/