Expanding a business is a dream for many entrepreneurs. Stepping into a foreign country makes it even more appealing. However, it can be challenging to manage without knowing about the operations behind it. Green field investments are a great way to understand how you can transform your business into a multinational one.
Fortunately, Shikana Group has the best legal team to help you throughout this process. We are exceptionally skilled at creating green field investment franchising strategies and working with you towards a better goal.
What is a Green Field Investment?
This is one of the foreign direct investments (FDI). Foreign direct investments refer to physical investment and purchases in another country. It is where the parent company decides to have more control over its foreign subsidiaries to increase its global status.
The new company must be built from scratch in green field investments. Big businesses that can achieve economies of scale use a green field investment strategy (GIS) to proceed with access to foreign markets.
Even though green field investments can be more expensive than simply buying or leasing an existing building, this can adequately retain the company’s image. The firm can have more creative control and freedom by adding new facilities and value to the company’s franchise.
What are some advantages of Green Field Investments?
1. The owner has complete control:
Franchises and green field investments can be tricky to handle. It is tough to observe the company’s operations while being away from the preferred location.
The owner has to exert effort, time, and money to hire trusted employees and staff to ensure that the subsidiary stabilizes during its tenure in the foreign country. The struggle taken to create a new building for the franchise can be equally tiring.
However, with green field investments, the owner can have more advantages. This is possible because the firm’s entrepreneur has complete control and holds on to everything.
From the building to the product, the owner has enough capability and strength to see through the operations independently. Unlike leasing and borrowing, owners can find themselves at ease as they work towards a better goal.
2. The subsidiary can get additional help from the parent company:
When the subsidiary gets help from the parent company, they can gain more confidence and support. When the parent overlooks operations in the foreign market, exchange of ideas and opportunities becomes easier.
Extensive help from the parent achieves more revenue and income as the communication between the two branches remains strong. It’s better when companies do this because they can withstand the cultural differences while keeping the company’s base within its hold.
How Can It Matter?
Businesses can see further improvement in their operations through green field investments. Companies can get plenty of other benefits such as positive economies of scale (which highly boost the company’s worth), access to modern technologies and equipment, and better customer marketing.
Let’s Invest in East Africa Together!
The Shikana Group understands East African economies’ increasingly complex regulatory and commercial frameworks. As leading lawyers and investment advisors in Tanzania, we present comprehensive guidance around strategic business decisions.
Our legal team advises on some of the most common strategies for market entry, including Exporting, Licensing, Partnering joint ventures, Green field investment franchising, and turnkey projects.
Contact us so we can help you make the right decisions.