IKEA ORGANISATION

IKEA Organisation Perspectives

IKEA Organisation Perspectives

3) A comparative analysis of the advantages and disadvantages of investment opportunities into each of the two countries. This should demonstrate your understanding, knowledge and critical awareness of the current economic, political, social and legal issues within each country. In particular what are the potential risks and what are the benefits by way of financial incentives or market development/ access. Good answers will pick on appropriate key issues e.g.: risk/ infrastructure/ employment relations/ wage differentials/ FDI incentives etc & relate these to the company and chosen sector or Industry. You should also make reference to appropriate theories in your analysis e.g. Porters diamond.

Investment opportunities are policies implemented by IKEA on local, regional, national, and supranational levels to induce new investors to establish a presence, or to make existing business expand into India and Mexico. The general aim of investment incentives is to influence the locational decision of the investor and thus to reap the positive effects of foreign direct investment (FDI). Investment incentives may also be provided to shape the benefits from foreign direct investment by stimulating foreign affiliates to operate in desired ways or to direct them into regions or industries considered in need of investment. For example, investment incentives may refer to grants to locally based companies for investing into advanced technologies or to subsidies to foreign firms investing in the locality (Blomstrom, 2002, pp: 166).

The three main categories of investment incentives: financial incentives such as various grants and loans, fiscal incentives such as tax holidays and reduced tax rates, and other incentives such as subsidized infrastructure, market preferences, and regulatory concessions. The incentives may be selective and discriminate on the basis of size of the investment or its origin. Generally India economy in transition frequently employ financial incentives, whereas Mexico prefer fiscal measures. The Mexico have established free-trade zones where normal domestic regulatory requirements do not apply (Blomstrom, 2002, pp: 169).

Investment incentives, however, seem to play a rather limited role in determining the locational pattern of FDI into India and Mexico. Nevertheless, they may play an important role in an investor's decision on the margin, for instance, if a corporation has to decide between more or less similar location alternatives for investment. FDI allows IKEA Corporation to invest directly in India and Mexico by buying into local firms. In particular, it defines the process through which a firm located in a country, known as the home country, buys 10 percent or more of the stock of a firm in a foreign country (the host country, generally a developing country). Usually, IKEA involved in FDI buy the necessary amount of stock to give them full or partial control over the firms in the host country, which thus become their affiliates or their branches.

This type of FDI is called acquisition. When a new legal entity is created by the inflow of foreign capital, the operation is described as a merger. In other cases, FDI takes the form of a Greenfield investment, whereby a completely ...