Essay on Investment in International Business

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Investment in International Business:
An international business refers to the one which involves many transactions across more than two countries across the globe. It involves carrying trade and maintaining international relations across the different national boundaries. It has a huge scope of investment due to the globalization of all the industries and operations. Investment in an international business refers to holding of finance through different commodities or other forms that have the potential to generate multiple revenues on a long run from the invested market. As per the researchers, with the advancement in technology and other new methods of production and distribution, the scope of investing in international business throughout the world would be increasing. The researchers have always argued among the different locations that tend to be the ideal place for carrying international business and making huge investments in them (Ajami, Cool, Goddard, & Khambata, 2014).
There are various factors to be considered while carrying an investment in an international business and these factors are:
Type of investment to be made
It includes the medium through which investments would be made in international business and they may be in the form of foreign direct investments, joint ventures, licensing, franchising and financial Contracts. It is a very important factor while evaluating any international location for making investments. There are many theories that consider the rules, policies and legal framework regarding the type of investment that is to be selected for carrying the business (Morgan & Katsikeas, 1997).
Source of generating revenues
The different sources of generating income have to be considered while developing a firm ground on the basis of which investment is to be made. These sources are in the form of direct cash flows, shares, debentures, mutual bonds, memorandum of understanding, revenue from the people and large number of incentives given by the government for investing in specific fields like the Solar, Tidal and other such sources with unexplored potential (Ajami, Cool, Goddard, & Khambata, 2014).
Trading Policy and policy of privatizing the business:
The condition of trade and international relations differ from one country to another and hence, special consideration has to be made on the trading policy of each and every country that you invest in. There is a huge scope of investment when the trading policies and legal framework are in the favor of the business (Ajami, Cool, Goddard, & Khambata, 2014).
Investment in China
There has been a tremendous shift in the investment that China has grossed from the international market. It tends to be the fastest growing economy of the world. Hence, there are many investment opportunities in investing in a business in China. It has witnessed many ups and downs in its economy while absorbing huge amount from a large number of international businesses (Wall, 2013). It is very important to consider the feasibility of making an investment decision of about $100 million in either China or India. There are many factors that are to be considered for developing the decision of making investment in China and they have been discussed below.
• The fast growing economy of China provides many opportunities and unlocks new doors for the potential investments (Wall, 2013).
• China has a high consumption per capita then all the other emerging countries.
• Huge potential and exposure in the manufacturing industry that has been open to all the countries of the world (Lu, Liu, Wright, & Filatotchev, 2014).
• It has been stated by the research scholars and business analysts that China would be having a good growth in its economy which would be increasing by almost 7% to 9% every year (Kim, 2012).
• There has been a consistent increase in the FDI that has been developed in China.
• There are huge possibilities of growth and expansion due to the involvements of a large number of people in the manufacturing sector of their market.
• In the beginning of 2016, there has been a tremendous fall of about 12% in the stock market of China and this has affected its relation with the investing countries that have stocked their financial resources in China (Rapoza, You’re Investing In China All Wrong, 2016).
• There has been a continuous decrease in the GDP growth of China. It involves failing of the state structure to boost its economy (Lu, Liu, Wright, & Filatotchev, 2014).
• There are hardly any legal laws and framework to protect the rights of the investors and guarantee them with a specific amount of return on investment.
• Excessive government control and hence, there are not huge and large scale investing stakeholders, investors and sponsors (Kim, 2012).
• Improper surveillance and control over the quality of labor and its conditions (Lu, Liu, Wright, & Filatotchev, 2014).
• Despite of the marginal growth shown in the private sector of the Chinese market, there are no signs of growth in the state government where a large number of investors are eager to invest in the same and they have been suffering a big loss.
• There is a huge pressure on the Chinese economy due to the falling economy since last few years.
Investment in India
India is one of the biggest market for international business after Japan and China. It has a splurging population of 1.25 billion that have the potential to absorb different investments through a large number of industries that are being developed for imbibing development in the fields of architecture, infrastructure, technology, automobile, banking, education and business studies, manufacturing related products and services (Dzever & Jaussaud, 2016).

• There has been a considerable increase in the growth of the Indian economy through its gold, stocks and real estate market. This trend has been shown in the below figure:

(Dzever & Jaussaud, 2016)
• It has a huge potential in terms of the youth population available in it as it has the highest youth population in the world, leaving behind even China.
• Tremendous growth in its GDP that has been consistently growing since last few years. It is projected to grow up to 85 in 2016 (Rapoza, 2015).
• Large number of reforms have been made that provide many incentives and develop favorable conditions for investing in Indian market and its products as well as services.
• The return of investment rates of investing in India is high and this creates a number of opportunities for different kind of businesses to develop a firm grip in the global market (Rapoza, 2015).
• There are different risks involved while investing in India and few of them are due to the large diversity that it offers (Deva, 2012).
• The lack in the functioning of the state government in ordinance with the union government. This is the reason for hindrance in the development across the country.
• There is a decreasing value of Indian Rupee against the USD. This largely affects the global level credibility of India. The decline in the values of INR per 1 USD is shown in the figure below:

Risk considerations
There are many risks that have to be considered while establishing an investment in any of the two countries, that is, India or China. These risks have been mentioned below:
• Internal risks
• Strategic
• Operational
• Political
• Technological
• Environmental
• Economic
• Social
• Security risk
• External
• Internal stock market
• Threat to terrorism (Covin & Miller, 2014).
All the above mentioned factors have been faced by both the countries and they are to be evaluated while starting any business.
Developing a solution regarding the investment decision:
There are many factors that are contributing to the decision of investing the sum of $100 million in an international business from among China and India
Growth in GDP:
The tremendous and consistent growth in the GDP of India’s economy as compared to a continuous decline in the China’s GDP as shown makes India more favorable to generate potential returns of the investments that would be made in it.

Figure: GDP growth in China for 2004-2014 taken from (Dzever & Jaussaud, 2016)

Figure: GDP growth in India for 2004-2014 taken from (Dzever & Jaussaud, 2016)
The other factors that involve a large number of reforms that are taking place in India carve a path for the development of any kind of investment that would be made across any business in India. Hence, though the returns of investing in both the countries are almost similar on the long run, it is more favorable to make an investment of $100million in India on the basis of risk considerations carried for both of them.

Ajami, R., Cool, K., Goddard, J. G., & Khambata, D. M. (2014). International business: Theory and practice. . Routledge.
Covin, J. G., & Miller, D. (2014). International entrepreneurial orientation: conceptual considerations, research themes, measurement issues, and future research directions. . Entrepreneurship Theory and Practice, 38(1), , 11-44.
Deva, S. (2012). Socially responsible business in India: Has the elephant finally woken up to the tunes of international trends?. . Common Law World Review, 41(4), , 299-321.
Dzever, S., & Jaussaud, J. (2016). China and India: Economic Performance and Business Strategies of Firms in the Mid 1990s. . Springer.
Kim, K. (2012, December 12). Investing in China? 8 Things That’ll Cause You Misery. Retrieved from
Lu, J., Liu, X., Wright, M., & Filatotchev, I. (2014). International experience and FDI location choices of Chinese firms: The moderating effects of home country government support and host country institutions. . Journal of International Business Studies, , 428-449.
Morgan, R. E., & Katsikeas, C. (1997). Theories of international trade, foreign direct investment and firm internationalization: a critique. Wales: Cardiff Business School,.
Rapoza, K. (2015, March 5). Five Reasons To Invest In India. Retrieved from
Rapoza, K. (2016, January 17). You’re Investing In China All Wrong. Retrieved March 05, 2016, from
TECHBUSY.ORG. (2011, September 22). Indian Rupee (INR) vs United States Dollar (USD). Retrieved from
Wall, E. (2013, March 18). Investing in China: the pros and cons. Retrieved March 05, 2016, from


Posted on

March 9, 2018

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