South American electronics plant

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The response address the queries posted in 1462 words with references.

//The given discussion is based on the establishment of the business in the new foreign country. Regarding this, in the first section of the discussion paper the rights of the business organizations related to the foreign business operations is described. The explanation is done in concern of the United States.//

Right of business in foreign country:

The results of a business after entering into a foreign country are the rewards or financial commitments. The protection of the investors or businesses is the key factor to improve the investment from a foreign firm. Various laws and regulations provide the facility to perform the business activities in a foreign country in less risky conditions (Keston, 2007). International business is carried on in multiplicity of environment in so far as the environment differs from one country to the other. Regulation not simply means the restrictions on foreign trade and investment but also an encouragement to them. The two divergent processes- restriction vis-à-vis encouragement, determine essentially the quantum and pattern of international trade and investment in two different directions.

Availability of scare foreign exchange, improvement in the balance of payments, accelerated rate of economic development through warranted rate of investment and through the creation of economic linkages, etc. In fact, these are the factors responsible for a favorable investment inflow policy adopted by the host country government. But at the same time, inflow of the investment is subjected to the checks because it often produces negative impact on the host economy, such as deterioration in balance of payment on account of larger imports & payment of dividend and other fees and also the continued dependence on the imported technology (Pagell & Halperin, 2000).

It may be mentioned that since the subsidiary often sources its input either from the parent unit or from a third country unit of the firm, FDI inflow fails to help in building the cluster. In such case of sourcing, transfer pricing is very common. This means over invoicing of import of the subsidiary that in turn channels out the scare foreign exchange from the country and entails upon the balance of payments. The host government encourages local sourcing. If foreign sourcing is indispensable, the government scrutinizes the invoicing procedure.

Again, it is true that high tariff wall motivates tariff-jumping FDA. But in such cases, the foreign ...