Introduction
Foreign direct investment (FDI) is essential for the growth of industries and nations. According to Rahmonov et al. (2020, p. 2), it presents innovation to the firm, assists in boosting the economy, and improves local employment. Firms considering FDI usually look at firms in open economies that provide above-average growth and skilled labour force projections for the investor (Investopedia, 2021). Thus, FDI often goes past capital investment, which could entail the delivery of equipment, technology, and management. FDI can be created differently, entailing acquisition, merger, or joint venture with a foreign firm (Investopedia, 2021). Thus, the report explores the FDI of the United States and its analysis to determine how attractive it would be to Mindful Chef, a small UK-based business that offers healthy food to its clients for a healthier life.
Company Overview
Mindful Chef is a small UK-based retailer established in 2015 by three colleagues: Rob, Myles, and Giles (Mindful Chef, 2022). The business offers customers recipe kit boxes with fresh ingredients sourced from award-winning suppliers, ready-measured, and easily followed delicious recipes designed to make customers feel fantastic. The enterprise’s aim is to create simple healthy consumption. Thus, the recipe packages and ready food assortment offer customers the whole thing required to prepare tasty, nutritionally-balanced foods throughout the United Kingdom (Mindful Chef, 2022). Mindful Chef’s objective is to motivate consumers to live healthfully by lowering the number of refined meals eaten and reducing refined starches. Hence, the business partners with the British Heart Foundation and the English Institute of Sport were influenced to establish a new variety of recipes that could aid in boosting heart and circulatory health (Piper, 2022).
FDI issues that make Mindful Chef expand to the United States
Consumer market
The United States presents the most extensive customer base on the planet, with a Gross Domestic Product (GDP) of $23 trillion and a population of 333.9 million individuals as of July 2022 (Worldometer, 2022). This population is crucial for attracting foreign investors since it determines sales to promote the business’ revenue. Besides, according to Onyusheva et al. (2018, p. 4), one of the key reasons companies intend to expand globally is to increase sales by attracting a large consumer base. Thus, with the United States’ large customer base, foreign investors will likely be attracted to the country. Moreover, since the United States’ population is large, the demand for services and products is also high. Additionally, many consumers nowadays are health-conscious, implying that they are more concerned about their health and the food sources they consume (Mindful Chef, 2022). Hence, foreign business, particularly Mindful Chef, can attract many United States’ health-conscious consumers.
Business environment
The U.S. is among the best nations that offer a favourable business climate for foreign firms. According to the U.S. Department of Commerce (2022), the nation has strong security that enables foreign firms to invest in a safe and stable environment. According to Bah, Kefan, and Izuchukwu (2015, p. 5), for a nation to embrace FDI, it requires to offer a proper business climate and specific government rules. The nation also needs to guarantee a better infrastructure and superb security services for healthier investment since this might augment the number of investors from various nations (Bah, Kefan, and Izuchukwu, 2015, p. 5). Thus, these features make the U.S. attractive for FDI. Besides, the country aims at conducting better business and creating a healthy rapport with foreign investors (The U.S. Department of Commerce, 2022). As a result, many foreign investors have been attracted to the U.S., increasing the FDI in the nation. According to the 2020 report, foreign direct investment in the U.S. escalated from $187.2 billion in 2019 to $4.63 trillion in 2020 (Aversa, 2022). In 2022, it rose by $92.6 billion compared to a $95 billion increase in the former quarter. This shows the comfort capability of the investors in various businesses. Thus, Mindful Chef could utilize FDI in the U.S., that might assist the company in establishing its brand and improve the business’ economy.
A diligent workforce
The labour force in the U.S. is among the greatest diverse, trained, and diligent employees. According to Nguyen (2021, p. 2), the labour force is among the crucial elements for FDI attraction since it meets the requirements of foreign investors. Therefore, in nations with proper guidelines for training employees and keeping their health, such governments have a competitive edge and could attract FDI influxes (Nguyen, 2021, p. 2). Economic theory shows a positive relationship between FDI attraction and the workforce. This implies that increasing the number of employees and improving their training will generate FDI attraction in the nation. Nguyen (2021, p. 7) maintain that several nations in the initial growth steps largely utilize a competitive edge of rich and varied natural resources, young and cheap workforce, and several policy motivations to fascinate FDI streams. Nevertheless, such nations have discovered that an unskilled workforce is no more a competitive edge in fascinating FDI streams.
At the same time concurrently, because of the constant progress in customer demand, science, and technology, companies need FDI to transform technology lines in manufacturing, selling, and business governance, as Nguyen (2021, p. 7) asserts. Thus, a fast transformation from an unskilled workforce to an experienced workforce by shifting the development model and enhancing the quality of employees’ training assists in attracting FDI in the United States. Besides, the business, academia, and the government cooperate to offer employees the proficiencies to outshine in a progressively technical worldwide economy (The U.S. Department of Commerce, 2022).
Capital accessibility
Capital is among the crucial resources businesses require to expand in the international market. Bah, Kefan and Izuchukwu (2015) note that before the firm raises the idea of expanding into the United States market, the firm’s management team needs to assess the business’s financial strength to establish the potential of ventures in a foreign market. However, the United States holds the most advanced, variable, and proficient monetary markets on the planet. A wide variety of funding suppliers allow invention and development, providing firms in the state a competitive edge (Kose et al., 2017, p. 3). Capital accessibility makes it easy for Mindful Chef to access funds in the United States. Moreover, the country has adjusted its stance in the direction of foreign investment to fit the 21st-century frugality and stays free for global commercial investments, making it attractive to foreign investors.
An open investment regime
For years, and throughout presidential governments, the United States has maintained an open investment regime that offers firms national treatment irrespective of the state of origin (CEA, 2013, p. 5). The open investment regime of the United States is an assurance to handle all investors equitably and fairly under the regulation. In 2011, president Obama restated the U.S. obligation to an open Investment regime. Thus, access to the market is also a factor that considerably impacts Mindful Chef’s decision to expand to the United States. For instance, a strategy of creating where you sell permits the enterprise to understand how U.S. local customers will utilize the recipes and merchandise. It also allows the firm to realize how its products could differ considerably from a U.K. market (CEA, 2013, p. 5). Thus, the investment regime ensures that foreign firms and investors are given equal opportunities to invest and expand their businesses.
Mode of entry
Expanding to the United States will require Mindful Chef to employ a joint venture FDI entry mode. Shen, Puig, and Paul (2017, p. 2) describe a joint venture as a type of FDI entry mode where Mindful Chef forms a strategic alliance with the U.S. a local business. Thus, both companies agree to share equity in handling a partnership together. Depending on their agreement, Mindful could choose a controlling stake, equal stake, majority stake, or minority stake (Shen, Puig, and Paul, 2017, p. 4). Utilizing a joint venture presents Mindful Chef with many benefits. A joint venture reduces the necessity to begin from scratch in a new market which might be capital intensive and a risky operation. Mindful Chef will also benefit from the local business’s managerial competencies in the domestic market, enabling them to concentrate on creating recipes and ingredients appropriate for the local market (Bingöl and Begeç, 2020).
The joint venture is a multifaceted and sometimes lengthy procedure that makes particular firms avoid it. According to Bingöl and Begeç (2020), the necessity to adjust to foreign state guidelines and the process of abiding by compliant conditions with a native firm concerning the allocation of shares makes joint ventures lengthy. Shen, Puig, and Paul (2017, p. 4) note that many nations have rules that govern the creation of a joint venture between foreign firms and their local businesses. These rules ensure that the population and the nation’s economy benefit from the alliance since the joint venture will utilize supplies from the host nation. Thus, this especially becomes considerate when a host nation has a lower economy than the economy of a foreign business nation.
However, since Mindful Chef is a small-to-medium-sized enterprise (SMEs), expanding to the U.S. through a joint venture entry mode would be better to avoid some expenses. Besides, the U.S. has a large population, offering a large customer base (Worldometer, 2022). The joint venture implies that a foreign business exists in a market, which could generate results if foreign business positions and markets its product better to the people. Nevertheless, a joint venture has particular shortcomings. The most popular one is the difficulty of the exit plan if a foreign business later desires to exit the market. According to Bingöl and Begeç (2020), an exit plan is a very crucial aspect to ponder when a firm enters an international market. However, because of a joint venture’s nature, foreign firms find it hard to exit later since the government policies or the agreement between the two firms obscures the exit plan. Hence, this might cause a tragedy in an incident where a foreign firm in the venture fails to meet its goals and would desire to exit the market.
Recommendation
- Mindful Chef should employ a joint venture entry mode to the U.S. market. Using a joint venture offers Mindful Chef several advantages. Such benefits include reducing the necessity to begin from scratch in a new market that might be a capital-intensive and risky activity. Mindful Chef will also benefit from the local business’s managerial and technological competencies in the domestic market, enabling it to concentrate on developing ingredients and recipes appropriate for the new market.
- Mindful Chef should also agree with a United States’ local company to determine its stake. Since the local business knows the market and management, it could be better for Mindful Chef to consider equal share to benefit from the partnership.
Conclusion
Foreign direct investment is vital since it assists the business in improving the country’s economy and enhancing the employment rate in a host nation. Besides, it also aids in creating a good and healthy affiliation between firms and governments. This report has analyzed the FDI in the United States to determine how attractive it would be to Mindful Chef. The USA is famous for its strong security, large customer base, and innovation in technology and science, giving a better market to Mindful Chef to create an FDI. The business is a UK-based SME specialized in offering recipe kit boxes that entail fresh ingredients sourced from award-winning suppliers, ready-measured, and quickly followed delicious recipes designed to make customers feel fantastic. The report has also discussed a joint venture as a crucial FDI entry mode the business could employ in expanding to the United States. Thus, Mindful Chef might extend to the U.S. through a joint venture to develop its commercial. As many consumers are concerned about eating healthy food, the enterprise might enhance their commercial and the nation’s economy.
References
Aversa, J., 2022. Direct Investment by Country and Industry | U.S. Bureau of Economic Analysis (BEA). [online] Available at: https://www.bea.gov/data/intl-trade-investment/direct-investment-country-and industry#:~:text=The%20foreign%20direct%20investment%20in [Accessed 7 July. 2022].
Bah, A.O., Kefan, X. and Izuchukwu, O.O., 2015. Strategies and determinants of foreign direct investment (FDI) attraction. International Journal of Management Science and Business Administration, 1(5), pp.81-89.
Bingöl, D. and Begeç, S., 2020. Managing International Alliances: Joint Ventures: A Case Study. Open Journal of Social Sciences, 8(04), p.538.
CEA. 2013. Foreign direct investment in the U.S. [online] Available at: <https://obamawhitehouse.archives.gov/sites/default/files/docs/cea-doc_2013_foreign_direct_investment_in_the_us.pdf> [Accessed 7 July 2022].
Investopedia. 2021. Foreign Direct Investment (FDI). [online] Available at: <https://www.investopedia.com/terms/f/fdi.asp> [Accessed 5 July 2022].
Kose, M.A., Lakatos, C., Ohnsorge, F. and Stocker, M., 2017. The global role of the U.S. economy: Linkages, policies, and spillovers.
Mindfulchef.com. 2022. Find out about our recipe boxes and what we do | Mindful Chef. [online] Available at: <https://www.mindfulchef.com/about-us> [Accessed 5 July 2022].
Nguyen, C.H., 2021. Labor force and foreign direct investment: Empirical evidence from Vietnam. The Journal of Asian Finance, Economics, and Business, 8(1), pp.103-112.
Onyusheva, I., Ting, Q.Y., Kaewpradit, P. and Changjongpradit, E.E., 2018. KEY REASONS WHY ORGANIZATIONS ENTER FOREIGN MARKETS. The EUrASEANs: journal on global socio-economic dynamics, (5 (12)), pp.07-19.
Piper -. 2022. Piper – Our Previous Brands – Mindful Chef. [online] Available at: <https://www.piper.co.uk/our-brands/mindful-chef/> [Accessed 5 July 2022].
Rahmonov, T., Kalimbetov, X.K., Baymuratova, Z.A. and Sarsenbayev, B.A., 2020. Foreign Direct Investment: Importance For The Development Of The Country’s Economy. Solid State Technology, 63(6), pp.9804-9812.
Shen, Z., Puig, F. and Paul, J., 2017. Foreign market entry mode research: A review and research agenda. The International Trade Journal, 31(5), pp.429-456.
The U.S. Department of Commerce. 2022. Foreign Direct Investment in the United States. [online] Available at: <https://www.commerce.gov/data-and-reports/reports/2017/10/foreign-direct-investment-united-states> [Accessed 5 July 2022].
Worldometers.info. 2022. United States Population (2022) – Worldometer. [online] Available at: <https://www.worldometers.info/world-population/us-population/> [Accessed 5 July 2022].
write