School of Commerce And Management studies

CIA 3 (Power Point Presentation)

Topic : Foreign investment & business ethics

Class : B. B. A. – (Section: A )
Subject : Business environmental
Semester : 2st
Written By : vighnesh sohoni
PRN : 180102011006
Guided By : Harish padmanabhan
Foreign Investment

What is Foreign Investment

Foreign investment involves capital flows from one country to another, granting extensive
ownership stakes in domestic companies and assets. Foreign investment denotes that
foreigners have an active role in management as a part of their investment. A modern trend
leans toward globalization, where multinational firms have investments in a variety of
countries.
Other Types of Foreign Investment
There are two additional types of foreign investments to be considered: commercial loans and
official flows. Commercial loans are typically in the form of bank loans that are issued by a
domestic bank to businesses in foreign countries or the governments of those countries.
Official flows is a general term that refers to different forms of developmental assistance that
developed or developing nations are given by a domestic country.
Commercial loans, up until the 1980s, were the largest source of foreign investment throughout
developing countries and emerging markets. Following this period, commercial loan
investments plateaued, and direct investments and portfolio investments increased
significantly around the globe.
BREAKING DOWN Foreign Investment
Foreign investment is largely seen as a catalyst for economic growth in the future.
Foreign investments can be made by individuals, but are most often endeavors pursued by companies
and corporations with substantial assets looking to expand their reach. As globalization increases, more
and more companies have branches in countries around the world. For some companies, opening new
manufacturing and production plants in a different country is attractive because of the opportunities for
cheaper production, labor and lower or fewer taxes.
Direct vs Indirect Foreign Investments
Foreign investments can be classified in one of two ways: direct and indirect. Foreign direct investments
(FDIs) are the physical investments and purchases made by a company in a foreign country, typically by
opening plants and buying buildings, machines, factories and other equipment in the foreign country.
These types of investments find a far greater deal of favor, as they are generally considered long-term
investments and help bolster the foreign country’s economy.
Foreign indirect investments involve corporations, financial institutions and private investors buying stakes
or positions in foreign companies that trade on a foreign stock exchange. In general, this form of foreign
investment is less favorable, as the domestic company can easily sell off their investment very quickly,
sometimes within days of the purchase. This type of investment is also sometimes referred to as a foreign
portfolio investment (FPI). Indirect investments include not only equity instruments such as stocks, but also
debt instruments such as bonds.
Business Ethics

What Is Business Ethics?

Business ethics is the study of appropriate business policies and
practices regarding potentially controversial subjects including
corporate governance, insider trading, bribery, discrimination,
corporate social responsibility, and fiduciary responsibilities. The law
often guides business ethics, but at other times business ethics provide
a basic guideline that businesses can choose to follow to gain public
approval.
 Understanding Business Ethics
Business ethics ensure that a certain basic level of trust exists between consumers
and various forms of market participants with businesses. For example, a portfolio
manager must give the same consideration to the portfolios of family members and
small individual investors. These kinds of practices ensure the public receives fair
treatment.
The concept of business ethics began in the 1960s as corporations became more
aware of a rising consumer-based society that showed concerns regarding the
environment, social causes, and corporate responsibility. The increased focus on so-
called social issues was a hallmark of the decade.
Since that time period, the concept of business ethics has evolved. Business ethics
goes beyond just a moral code of right and wrong; it attempts to reconcile what
companies must do legally versus maintaining a competitive advantage over other
businesses. Firms display business ethics in several ways.

[Important: Business ethics are meant to ensure a certain level of trust between
consumers and corporations, guaranteeing the public fair and equal treatment].
Business Ethics Examples
Here are a few examples of business ethics at work as corporations attempt to balance
marketing and social responsibility. For example, Company XYZ sells cereals with all-natural
ingredients. The marketing department wants to use the all-natural ingredients as a selling
point, but it must temper enthusiasm for the product versus the laws that govern labeling
practices. Some competitors' advertisements tout high-fiber cereals that have the potential
to reduce the risk of some types of cancer. The cereal company in question wants to gain
more market share, but the marketing department cannot make dubious health claims on
cereal boxes without the risk of litigation and fines. Even though competitors with larger
market shares of the cereal industry use shady labeling practices, that doesn't mean every
manufacturer should engage in unethical behavior
References

 Book
 Wikipedia
 Investopedia.com