Topic: ‘Discuss IBM’s FDI Motives and OLI Advantages associated withthese Motives’Introduction:More and more companies nowadays are seeking to expand their business in foreign countries due to several reasons. It could be due to availability of better financial, physical and human resources abroad than the home country or it may be simply due to the desire of the company to attract more customers and go bigger. Whatever the motive may be, companies do see better opportunities beyond domestic borders as they try to achieve economies of scale. For all such aspiring companies, one question needs to be answered seriously: How are they going to enter a foreign market? [CITATION Bus16 \l 1033 ]Evaluation of IBM’s FDI Motives:For a company planning to expand its activities abroad, there are many options to choose from. Each strategy offers its own pros and cons. Most commonly used strategies are licensing, franchising, exporting, forming a strategic alliance or joint venture, acquisition, greenfield investment. The last three moves involve huge equity investments and are termed Foreign Direct Investments (FDI). Whether a company should go for FDI or not, OLI paradigm is often employed. OLI stands for Ownership-, Location-, and Internalization advantage. A company needs to possess all these three advantages in order to be able to successfully involve in FDI [ CITATION Bus16 \l 1033 ].
-OLI-Paradigm [ CITATION Bus16 \l 1033 ]For decision on FDI location, a key criteria is profitability of location as well as availability of resources such as raw materials or a specific labor force [ CITATION Cam03 \l 1033 ]. Existing academic and empirical studies also suggest that intensive regional cooperation and openness to trade have a positive effect to FDI inflow [ CITATION Mat09 \l 1033 ].Let’s explore IBM’s Foreign Direct Investment model for understanding how this works. According to the ‘Global Location Trends: 2019 Annual Report’ released by IBM , several historic changes have taken place in foreign investment. As a result of changing trade regimes, digital disruptions and other changes like Brexit, global foreign direct investment continues to decline. Until recently IBM was quite active at acquiring foreign companies and expanding globally. E.g, in 2017 the company