Navigating a New Economy With Green-Field InvestmentsMay 12, 2023
There are multiple strategies a company can take to expand beyond the boundaries of their country. They can open a branch in another country or acquire an already established firm. They can also play the long game. How? By setting up a Green-Field Investments.
A green-field investment is a type of foreign direct investment where a company looking to step into a new economy establishes a subsidiary and builds it from the ground up by opening up a factory or retail outlet to adapt to the new environment.
The most common reason a company prefers to invest in a subsidiary in a new market is financials. Benefits like Tax breaks, subsidies, cheaper resources, etc., are the prominent motivators for this move. But there are other advantages to green-field investment too, like
- Extensive customisation: Opening an autonomous branch in a different market offers the business opportunity to customise every aspect of the structure of the subsidiary to strike a balance between the company’s by-rules and the law of the host country.
- Easy Expansion: Green-field investment opens the door to new markets, audiences, and resources that help the organization expand faster and more efficiently. This also enables them to innovate and diversify their brand.
- Greater control: Having their own operation in another country offers the business better control of the new venture, whereas acquiring a company’s securities would have resulted in an inflexible management style with two opposing ideas.
- Strong presence: Setting up a foothold in the new market indoctrinates the brand to the audience, creating a presence of the company in the new market and helping them boost sales with targeted ads and creative campaigns
But, like any plan, the idea is not foolproof. This kind of investment is a long-term commitment; thus, a business has to plan even the minute aspects of the venture with great attention to detail. Missing even one part of the strategy can unravel the whole yarn. With so much care to be put into the investment, the plan becomes capital intensive, too, having to keep the overseas business afloat while it finds its footing and at least reaches the break-even point.
In some scenarios, the positives outweigh the risks, making the decision a highly profitable one. But, it’s important to play it safe in the beginning, and as a newcomer to the economy, it is advisable to seek help before going ahead. That’s where Corporate Leaps comes in.
We provide various services to help you avoid a rough landing in countries like India and Dubai, where company laws are extensive and strict. With our help, navigating the legal aspect of entrepreneurship and fulfilling all compliances becomes easy, making your entry into the ever-changing climate a smooth one.