Business environment Essay Example | Topics and Well Written Essays - 2000 words

Business environment - Essay Example International trade is a significant representative of Gross Domestic Product in many countries. International trade has social, economic and political benefits and these have been realized in most industrialized countries in the recent times. Other factors that have contributed enormously to the development of the international trade are globalization, advanced transport systems around the world, emergence of multinational corporations and practice of outsourcing by many countries. In general, international trade is globalization and it is a branch of economics. When economics is incorporated into international trade, a larger branch called international economics is formed. Foreign Direct Investment has contributed greatly to international trade. This type of trade occurs when an investor acquires an asset from a country other than their own with intentions of managing the property. FDI has been categorized into three classes namely: Equity capital - this refers to the value which a multinational corporation has invested in shares of an enterprise in a foreign country. It includes both mergers and acquisitions and Greenfield investments made by the multinational company in a foreign country. Reinvested earnings- This represents the value of shares that Multinational corporations have invested in affiliate earnings as dividends. The retained profits by the affiliates are assumed by the multinational company to be reinvestment in the affiliate. This can represent up to 60 per cent of outward FDI in the United Kingdom. It is imperative for countries around the world to engage in bilateral FDI arrangements due to enormous growth in institutional, economic and legal interlinkages between countries. FDI has boosted economy all over the world. There is increment in the annual global flow of around $250 billion as experienced between 1985 and 1995. United