Market Entry Strategy Selection in China

According to Moosa (2002), “Hymer (1976) organized the industrial organization hypothesis. Kindleberger (1969), Caves (1982) and Dunning (1988) further explained the hypothesis. This theory assumes that the firms when it establishes an enterprizes in another country it suffers from many disadvantages in comparison to local investors. The cultural aspects, languages, legal system and other factors play an important role in determining FDI. But there is increase in FDI. The theory explains about why firms invest in foreign countries. But the theory fails to explain the motivation for choosing the locations. This theory explains the expansion of FDI is due to capital, management, technology, marketing, and access to raw materials, economies of

Many governments, especially in industrialized and developed nations, pay very close attention to foreign direct investment because the investment flows into and out of their economies can and does have a significant impact.

Even some changes are taking place, many tasks needed to be accomplished to construct the legal system which benefits market economy. The existing legal basis, legislation procedure and operating mechanism are not fully suitable with the requirements of market economy (Rongala, 2007 see in Tarun, 2012).

FDI allows the home country to invest into the host country to produce, advertise, and distribute products, in order to upsurge their market share and provides a long-term investment and enhancement. (Moosa, 2002)

The research this material accounts for mainly focuses on the pros and cons of FDI regarding corporations more than host countries, like what are the factors that attract multinational’s investment, what are the risk of expropriation, the extent of the development of stock markets, and what is the linkage between democracy and foreign investment (Bekaert, Harvey, & Lundblad, 2011; Busse & Hefeker, 2007; Eichengreen et al., 2011; Li, 2009). Indeed, this specific research tells little about the host countries in this international flux of investment rather than distinguishing between developed and less-developed countries (LDCs).

Thus, among all these theories, our thesis, we will mainly focus on location-specific advantages as according to the research conducted by Nayak and Rahul (2014,p.10), location advantages of different countries play a significant role in determining which country will be the recipient of FDI, Since the aim of the study is to analyze the impacts of the host country characteristics on FDI inflows, particularly that of Singapore and Hong Kong, we assume that firms already possess ownership and have internalized these advantages, making locational advantages very much country specific and are likely to vary according to changes in internal and external factors which will eventually influence a firm’s market potential and market risk. Thus, this renders the choice of locational advantage factors critical in influencing a country’s ability to attract

China has been a focus of many foreign investors, owing to various reasons which serve to create attractive business opportunities. For instance, the country has been experiencing rapid infrastructural developments, reducing cost of doing business within the society. It has also been remarkably stable in terms of both political and economical pillars of the state. It has also a wide market due to its high population, providing market for products and services of many businesses (Hill, 2014).

First of all, the investment flow into the host country does not produce an immediate effect but accrues benefits over a period of time and the level of the positive effect may vary from country to country. The conditions that FDI faces in the developing countries may slow down the process. The issue is that in order to make use of all benefits, which were discussed earlier, the host country has to have a certain level of education, technology, sufficient openness to trade and appropriate policy regulations. The restrictive policy or insufficient precondition state of economy of the host country will not bring the expected advantages. Moreover, the developing states having a low development level may experience certain disadvantage of the foreign direct

Asia countries are the predominant location for FDI. China and India remain the two big countries that receive FDI sources. Because of low labor cost and low input cost, many investors are shifting their attention from Malaysia to China. India, as

In modern world a lot of companies will start their business in other countries, to become an international enterprise with economic development and global popularity (TAST, 2014). International companies to carry out their business around the world, multinational corporations are an important driving force of internationalization and globalization, so that business will not be limited to one country, and increase the company 's sales, also conducive to global companies seeking cheaper labour on a global scale, they can find cheaper recourse, reducing the company 's production cost (TAST, 2014). At this time, the location decision is particularly important when the company open a new company in the overseas, the company has a lot of issues

The world is getting smaller and smaller as new technologies emerge that make domestic isolation a thing of the past, generating an environment of interconnectivity on every level resulting in countries and regions that are now more connected than ever before. As the world continues on its trend into total globalization, companies that wish to remain relevant in this modern era must react accordingly through expansion into foreign markets. The fDi Report 20141 from fDi Intelligence offers a clear picture of what drives industries to invest in particular geographic regions through extensive research into current FDI data. According to the report, the main motives include access to domestic markets and proximity to customers, business regulations climate, skilled workforce availability, and economic and

In the last few years, the emerging market countries such as China and India have become the most favoured destinations for FDI and investor confidence in these countries has soared. As per the FDI Confidence Index compiled by A.T. Kearney for 2005, China and

The factors involved in process of economic growth of nations have transformed overtime, from savings to trade, foreign investment and human capital base of the country. With opening up of the economies and the formation of multiple agreements among the countries, trade and FDI have become the major medium of accord among the economies. There has been surge in FDI inflows ever since the countries adopted liberalisation policies across the globe. The countries have been looking for policies to attract more FDI by boosting investment climate in their countries, to finance their process of growth and development.

In the recent time, significant rise of outward foreign direct investment (FDI) was witnessed from developing countries like China and India. The Organisation for Economic Co-operation and Development (OECD) defines FDI as an investment that reflects the objective of establishing a lasting interest or long-term relationship by a resident enterprise in one economy (direct investor) in an enterprise (direct investment enterprise) that is resident in an economy other than that of the

This paper thus will add value to the existing literature and find the impact of FDI particularly on the African countries. The further sections will develop on the existing literature in this regard, the importance and need for this research and the empirical strategy to evaluate the research question.