The Types of Investment inForeign Direct Investment – Foreign Direct Investment is widely practiced in several countries and some investors are getting curious about this kind of direct investment. If you are interested in having Foreign Direct Investment for yourself, you should know what is meant by FDI itself and the types of this investment. Here are the Foreign Direct Investment’s types that you should know.
Type 1: Horizontal Foreign Direct Investment
The first type of Foreign Direct Investment is horizontal FDI. This type considers as the most used type of direct investment by investors who do the Foreign Direct Investment. The investor will invest in the company with the same interest in product or service which is owned by the investor. This investment attracts many people attention, just as many as people get interested to play online slot.
This particular investment aims to make the company stronger in the market. This can be used as a good strategy to make the competition less competitive in the global market. Usually, the investor within the type of horizontal FDI has the same or similar industry with the company where he/she invest to, for example, a motorcycle company in Indonesia invests in a motorcycle company in India.
Type 2: Vertical Foreign Direct Investment
This investment aims to make more rates to the chain. In this direct investment, the investor merges with another business in another country with the purpose to give more growth to the business. As the example would be a company invests in another company abroad so that they can have a supplier for the basic materials of their products.
The vertical foreign direct investment is classified into more types. They are forward vertical and backward vertical foreign direct investment. The forward vertical Foreign Direct Investments can be defined as the investment which can bring the product to the customers, for example, is the electronic manufacturing in Indonesia invests in the electronic wholesale company in India.
On the other hand, backward vertical foreign direct investment can be defined as the type of investment where the investor invests in the company in a foreign country which takes the sourcing sector of the current product owned by the investor’s company. In this backward vertical foreign direct investment, we can take the example for the motorcycle manufacturing in Indonesia invests to the tire company in India.
In general, there are two types of Foreign Direct Investment or FDI. They are a horizontal direct investment and vertical direct investment. For further, the vertical foreign direct investment is classified into two types, they are forward vertical and backward vertical foreign direct investment.