Various concepts of distance are used in international busin

Various concepts of distance are used in international business. Define and explain at least five concepts of distance, and discuss how each might affect bilateral foreign direct investment (FDI) flows between countries.

Solution

The concept of distance used in international business are as follows:

1. Time saves with less distance to be covered in any business.

2. More the distance more is the cost of transportation as it involves utilisation of fuel in the mode of transaport.

3. Increase in expenditure for the firm as the time increases.

4. More investment is made by the firms for vendors over long distances.

5. More supply more profit as the distance increases.

These concept of distance might affect bilateral foreign direct investment (FDI) flow between countries as it would increase the supply of the product which shows an increase in the demand. This would tend to increase the price of the products. It would create more revenues for the firm.