Scribd
Upload
50 views2 pages

Horizontal FDI

There are four main types of foreign direct investment: 1. Horizontal FDI occurs when a company expands abroad while maintaining the same core business activities. 2. Vertical FDI involves investing in a different part of the supply chain, either upstream (backward) or downstream (forward). 3. Conglomerate FDI takes place when investments are made in unrelated businesses across different industries. 4. Platform FDI is when a company establishes operations in one country primarily to export products to third countries.

Uploaded by

Anjali
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
Download as docx, pdf, or txt
50 views2 pages

Horizontal FDI

There are four main types of foreign direct investment: 1. Horizontal FDI occurs when a company expands abroad while maintaining the same core business activities. 2. Vertical FDI involves investing in a different part of the supply chain, either upstream (backward) or downstream (forward). 3. Conglomerate FDI takes place when investments are made in unrelated businesses across different industries. 4. Platform FDI is when a company establishes operations in one country primarily to export products to third countries.

Uploaded by

Anjali
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1/ 2

Foreign Direct Investment (FDI):

- When a company or an individual or an entity invests in another company in a foreign land


then the investment is a foreign direct investment (FDI). In other words, it is a cross-border
investment of a form/individual that establishes a long-term interest on another land.
- It can be done by either establishing business operations or acquiring business assets in the
other country
- There are many ways by which a foreign investor can make an FDI. Investors can expand
their business in another country by Mergers and acquisitions, Joint ventures etc.
- FDI helps bring in job opportunities, latest technology, expertise, and high quality
infrastructure.

Below are the different types of foreign investments

1. Horizontal FDI

- Whenever a business expands and enters a foreign country without changing its core activities
then it is considered as Horizontal FDI

- investor follows same type of business operation in the foreign country as it operates in its
home country. i.e business undertakes the same activities but in a foreign country.

- when a company is trying to penetrate a new market like a retailer for example, Zara may
invest in or aquire the Indian company Fab India, which also produces similar products as Zara
does. Since both the companies belong to the same industry of merchandise and apparel, the
FDI is horizontal FDI.

2. Vertical FDI

- Vertical FDI is another type of foreign investment. A vertical FDI is when an investment is made
within a typical supply chain in a company, which may or may not necessarily belong to the
same industry.

- In othefr words, a business expands into another country by moving to a different level of the
supply chain. So it means business undertakes different activities in foreign land but these
activities are related to the main business

- Vertical FDIs are further categorized as backward vertical integrations and forward vertical
integrations.

- For Eg: Coffee producer Nescafe may invest in coffee plantations in other countries such as
Brazil, Vietnam, etc. Since the investing firm purchases, a supplier in the supply chain, this type
of FDI is known as backward vertical FDI.
3. Conglomerate FDI

- When investments are made in two different companies from 2 different industries, then it is
known as conglomerate FDI

- business undertakes unrelated business activities in a foreign country. This type is not very
common and involves a lot of risks because of the difficulty of penetrating a new country and
entirely new market.

- For example, if a clothing outlet in one country, opens a food chain in another country.

4. Platform FDI

- Business expands into a foreign country but the products manufactured are exported to third
country.

- For instance, the French brand Chanel set up a manufacturing plant in the USA and export
products to other countries in Asia, and other parts of Europe.

You might also like