Foreign Direct Investment

Categories: BusinessInvestment

Case Conversation Questions:

1. Why, traditionally, has the level of FDI in Japan been so low? The fairly low FDI stock in Japan is partially the outcome of a history of official inhibitions on FDI. In some industries, inward FDI penetration, as measured by the share of employment accounted for by foreign affiliates, in Japan in truth is on par with the United States. Nevertheless, a big number of “sanctuaries” with almost no foreign participation stay, so that FDI penetration overall is still extremely low.

While to some level, this can be explained by Japan’s fairly separated geographical place, historic factors play an essential function. Throughout the centuries and until quite recently, Japan’s rulers have actually seen foreign involvement in the economy as a danger and consequently put up numerous barriers to FDI.

2. What are the potential benefits to the Japanese economy of higher FDI? The possible benefits to the Japanese economy of higher FDI are the ones noted below:

– Faster earnings growth than domestic companies;
– Considerably higher profitability and sales margins than domestic firms;
– Greater capital financial investment per worker than domestic firms;
– Greater total factor efficiency than domestic firms;

– Higher costs on research study and advancement per employee than domestic companies; and
– Higher typical wages than domestic firms.

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3. How did the entry of Wal-Mart into the Japanese retail sector benefit that sector? Who lost as a result of Wal-Mart’s entry?

It helped restructure Japan’s retail sector- boosting productivity, gaining market share, and profiting in the process.

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Wal-Mart implemented its cutting edge information systems, adopted tight inventory control, leveraging its global supply chain to bring low cost goods into Japan, restraining employees to improve customer service, and extending opening hours. It was more difficult than Wal-Mart had hoped. Wal-Mart’s entry prompted local rivals to change their strategies.

4. Why has it been so hard for Wal-Mart to make a profit in Japan? What might the company have done differently?

The company’s global marketing strategy has many flaws. Wal-Mart failed to grasp the consumer and retail environment in Japan. With a population of 127 million, the highest per capita income and the second largest economy in the world, Japan is a very attractive market for retailers. Perhaps more research into their cultural values and patterns could have helped avoid some of these mishaps.

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Foreign Direct Investment. (2016, Jun 02). Retrieved from

Foreign Direct Investment

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