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Explain one way foreign direct investment (FDI) affects businesses in Indonesia. - Edexcel - A-Level Business - Question 2 - 2022 - Paper 1

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Explain one way foreign direct investment (FDI) affects businesses in Indonesia.

Worked Solution & Example Answer:Explain one way foreign direct investment (FDI) affects businesses in Indonesia. - Edexcel - A-Level Business - Question 2 - 2022 - Paper 1

Step 1

Knowledge of FDI

96%

114 rated

Answer

Foreign Direct Investment (FDI) occurs when a business operates in one country, establishing factories, offices, or other facilities in another country. This corporate strategy not only enhances the presence of multinational companies in local markets but also integrates them into the foreign economies.

Step 2

Application: Impact on Businesses

99%

104 rated

Answer

In Indonesia, FDI can lead to increased demand for local textiles and rubber, benefiting local businesses.

  • Retailers of sportswear and other goods may experience lower costs as FDI drives down local land prices.
  • The competition for market share may rise as FDI attracts other international brands, which can invigorate the local market.

Step 3

Analysis: Effect on Retailers

96%

101 rated

Answer

Indonesian retailers and suppliers are likely to see increased sales due to the growing demand from FDI initiatives, which may result in higher profits stemming from reduced operational costs.

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