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The global business environment is a phenomenon that has resulted to a change in the mindset of the way people interact and do business today. Facilitated by enhancement in technology and the corresponding commercial environment, the global business environment has made it much more easier and convenient find individuals and organisations alike to exchange resources and ideas in an unprecedented fashion.
The economic front, the global business environment has seen companies being exposed to opportunities taking advantage of such opportunities with little regard to geographical boundaries. Most companies can now easily expand, establish operations or invest in the securities market of countries other than their home countries and this is serving to greatly enhance the performance of such companies.
One economic phenomenon whose popularity can directly be attributed to globalization and the corresponding global business environment is Foreign Direct Investment (FDI). Foreign direct investment (FDI) is a term that is used to an investment model whereby a company opts to establish operations in another country other than its home country.
Foreign Direct Investment maybe in the form of acquisition whereby the company wishing to invest acquires another company in the target country, or it maybe in the form expanding its operations into this other country (Bora, 22). FDI differs with international portfolio investment in that FDI involves a holistic approach to investing in a foreign country while portfolio investment simply investing in the securities and other such financial instruments in another country (Bora, 36).
Depending on the perspective one chooses to look at it, FDI can take two forms and these are inbound FDI and outbound FDI. Inbound FDI refers to foreign direct investment from the perspective of the recipient country whereas outbound FDI refers to foreign direct investment from perspective of the country from which the investor comes from.
Foreign Direct Investment in the US
The United States is one of arguably the most industrialised countries in the world. The country is home to many companies both locally based and other multinationals headquartered in other countries.
Bora (49) argues that the US policy on Foreign Direct Investment has to a great extent influenced the growth of the country’s industrialisation initiatives. The US has undertaken deliberate measures aimed at attracting investors as part of its Foreign Direct Investment policy with such measures including: the creation of a favorable business environment, favorable tax policies, enhanced national security and enhanced marketing all of which have served to make it the number one investor destination in the world.
Bora (31) notes that almost each and every one of the country’s fifty states boost of an industry that is either locally based or foreign based. Oregon State being one such state that has greatly benefited from the country FDI policy has seen many established multinationals setting up operations in the state.
Oregon State is home to many companies, both local and multinational outfits. One of the local companies whose establishment in the state can be described as direct investment is Oil Can Henry’s Company.
Oil Can Henry’s is a company that has been in operations for many years. Over the years, the company has managed to establish operations in many parts of the world including in Oregon State. Oil Can Henry’s is an oil and gas company with its headquarters situated in Oregon State. It is indeed of the biggest companies in the global oil and gas industry in terms of its sheer size and market capitalisation.
The company employs thousands of employees who are involved in the day to day running of its operations. According to Bora (41) Oil Can Henry’s is involved in various aspects of its core business including oil exploration, oil; refinery, oil and gas marketing and distribution and power generation. Bora (42) notes that as of December 2012, the company had established operations in more than 80 countries and its daily production of oil stood at more than 3 million barrels per day.
Bora (42) asserts that the formation of Oil Can Henry’s can be traced back to 1909 when the company was company was first established as an oil exploration outfit and it. During its in years, the company main activity was to exploit and explore for oil production in several Middle Eastern countries.
In 1954, after having been in operation for a significant period of time, the company changed acquired its present day name ‘Oil Can Henry’s’ and expanded its activities beyond the Middle East to include Alaska and various other locations in the world (Bora, 45). The company continued with its activities forming mergers, establishing operations and acquiring other companies in various parts of the world and over the years, managed to establish itself as one of the biggest oil and Gas Company in the world.
Pros and Cons
There have been various impacts, both positive and negative, that have been brought about by the introduction of Oil Can Henry’s and other multinational organisations in Oregon State as a result of Foreign Direct Investment initiatives. Starting with the positive impacts, the introduction of Oil Can Henry’s in Oregon has seen the creation of many employment opportunities for the locals.
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It is generally accepted as part of ‘good practice’ approach with respect to Foreign Direct Investment that companies setting up operations in foreign countries reserve a significant number of the employment position for the local population (Foot, 38). In line with this requirement, Oil Can Henry’s establishment in Oregon State has employed a significant number of its workforce from the local population in Oregon and by extension, the local population ion the country.
An initiative in conjunction with similar initiatives from likeminded organisations has seen an overall drop in the unemployment rate in the State and by extension the country (Bora 50). A second benefit that has been felt directly by the local population in Oregon State relates to the Corporate Social Responsibility initiatives of the company.
As part of its corporate social responsibility initiatives, Oil Can Henry’s has undertaken various initiatives that are directly geared towards improving the lives of the local population. The company has spearheaded environmental conservation initiatives and assisted and contrived in other development initiatives by the state authorities which are all geared towards improving the overall quality of life among the locals (Foot, 47).
Finally, the introduction of Oil Can Henry’s in Oregon State has spurred up development in the state. This is attributable to the fact that the establishment of the company has seen other related companies offering complimentary goods and services being established in the area. This in itself has served to significantly improve the overall development in the area and enhanced the State’s status as a significant player in the country.
Having looked at the positive impacts that have come about as a result of the establishment of Oil Can Henry’s in Oregon, which is one of the country’s Foreign Direct Investment initiatives, it is important that an analysis of the negative impact of the same be carried out. According to Foot (46), a common negative impact associated with almost all industrialisation initiatives is pollution.
Environmental pollution increase with an increase in the number of industries in any given area and Oregon is not an exception. The introduction of Oil Can Henry’s and other such companies has seen the rate of pollution especially air pollution go up. In addition pollution, the second negative impact that has come about as a result of the introduction of Oil Can Henry’s and other established multinationals in Oregon State is the straggling of upcoming locally based outfits (Foot, 48).
It is indeed true that for each foreign based established multinational in an area, there are many locally based outfits struggling to find their place in the market. This, therefore, means that the introduction of many multinationals will mean that many of the upcoming locally based outfits might fail to establish their place in the market due to the lack of financial muscle to effectively compete with such multinationals.
Foreign Direct Investment initiatives are associated with a wide array of advantages and disadvantages. Oil Can Henry’s has ensured immense employment opportunities and Corporate Social Responsibility initiatives, which also includes environment conservation initiatives. However, the negative impacts associated with industrialization cannot be underrated. Pollution is a key factor and measures should be put in place to ensure that the problem is curbed.
Bora, Bijit. Foreign Direct Investment: Research Issues. Massachusetts: Routledge, 2002. Print.
Foot, Kenneth. Foreign Direct Investment. Chicago: University of Chicago Press, 2008. Print.