The Strategy Choices Research Of Chinese Enterprises’ FDI

Under a new global economic situation of the debt crisis, national economies havea general increase in the degree of interdependence of national to the internationalinvestment and international trade. The one hand, multinational companies willparticipate in the fierce competition in the worldwide, the other hand, multinationalcompanies will face the broader market capacity, bringing opportunities to expand thescale of operation. Chinese enterprises that face enormous pressure of othermultinationals must actively participate in the competition in the international market,especially China’s foreign exchange reserves and they are facing a huge marketopportunity. The policy choice is particularly important to study the behavior of FDI.The study analyzed mechanism of new investment and M&A investment from themarket perspective and business perspective based on FDI development status in Chinaand focused on M&A which was the major investment of FDI. And the studyestablished game model through the method of real option with incomplete informationto solve for the optimal M&A timing and analyze the M&A decision-making. At last,we got the strategy selection of the M&A enterprise. The main contents of this paperwere as follows:1. Analysis of the current development of China’s FDI, the study compared theadvantages and disadvantages of the new investment and M&A investment from threeaspects of the impact mechanism about the crowding out of the market environment,market forces and the scale business based on the external market. Then the studyanalyzed mechanism of new investment and M&A investment and compared theadvantages and disadvantages from three aspects of the impact mechanism aboutproduction of enterprise management capabilities, the product life cycle and enterpriseinformation asymmetry based on the enterprise’s own view. Then the study compare thesize of the benefits for the different mechanisms in two ways of new investment andM&A investment,which derived the benefits of scale operation effect and got to theM&A scale operational efficiency greater than or equal to the new investment. Finally, the study gave advice on the choice of FDI of Chinese enterprises.2. For M&A of the major FDI, the first part, the paper studied the decision-makingproblem of M&A in a competitive environment to meet the revenue maximization andsuccessful M&A probability maximization from the game between Chinese enterprisesand the non-host country enterprises. The paper introduced the reality of the value of thecompensation value of the rival firm with incomplete information. Then, the paper usedreal option game with the revenue maximization and successful M&A probabilitymaximization as the goal to establish the decision model of M&A and solve for theoptimal M&A timing. Last, on the basis of the previous conclusions, the paper analyzesthe M&A decision-making.And by numerical comparison we got the strategy selectionof the M&A enterprise. The second part, this paper established a compound real optionmodel to study the decision-making research on two-way game M&A of enterprisesunder incomplete information. Based on the enterprise both sides did not know eachother a specific offer of reality prior to the takeover, the paper used the real option gamemethod with the value income maximization as the goal. It established the M&Adecision making model and solved the optimal M&A opportunity. On this basis, it hadM&A decision analysis.