Porters Diamond and Oli on Vodafone in India

Identify any ‘home’ country and its respective MNE that is a source of FDI in your country. Draw upon John Dunning’s OLI framework and any other models that may help to explain why you think this company is engaging in this type of investment. Consider more generally the advantages and possible disadvantages of FDI for your ‘host’ state.

Introduction

What is Foreign Direct Investment (FDI)? It is an investment by an enterprise based in one country into a company based in another or foreign country. In other words, FDI is a direct investment by a corporation in a commercial venture in another country. This is usually done either by way of merging and acquiring a home based company or making alliances or by expanding operations of an existing business in that country. ‘If a firm chooses FDI as a means by which to serve its overseas markets it is considered to become a multinational enterprise, defined as a firm that “acquires a substantial controlling interest in a foreign firm or sets up a subsidiary in a foreign country.” ( Maruksen, 1995)

Post Liberalization era, since 1991, Indian economy has shown high rate of growth and development and thus far FDI has been the main source of investment in the country. FDI has been a dominant determinant of investment in the country because it brings capital inflow, technology inflow, employment opportunities and increases competition domestically. A survey by Ernst & Young (2012) says, foreign investors see India as an attractive investment option, notwithstanding the uncertain global economic climate where the number of FDI projects has increased by 25% over the past twelve months. Factors such as huge market potential, FDI attractiveness, Labor competitiveness and macro-economic stability are the reasons why India is preferred destination for business.

Vodafone as a Foreign Direct Investmnet in India

India has opened up its economy in various sectors and has allowed MNE’s to invest in the country. This report...