Access to New Markets: Companies invest abroad to enter new markets and expand their customer base.
Example: A smartphone company investing in sales and distribution networks in emerging markets.
Resource Seeking:
Access to Raw Materials: Firms invest to obtain resources that are not available domestically.
Example: A mining company investing in mineral-rich regions abroad.
Efficiency Seeking:
Lower Costs: Firms invest to take advantage of lower labor costs, tax benefits, or economies of scale.
Example: A manufacturing firm relocating production to a country with lower labor costs.
Strategic Asset Seeking:
Acquisition of Strategic Assets: Firms invest to acquire technological know-how, brands, or other strategic assets.
Example: A pharmaceutical company acquiring a biotech firm with a strong R&D portfolio.
Benefits of FDI
For Host Countries:
Economic Growth: FDI can stimulate economic growth by providing capital, technology, and expertise.
Employment Opportunities: Creation of jobs and development of human capital.
Technology Transfer: Introduction of new technologies and practices.
Improved Infrastructure: Investments often lead to the development of local infrastructure.
For Home Countries:
Increased Revenues: Profits from foreign operations contribute to the investor’s revenue.
Market Expansion: Access to international markets can lead to increased sales and diversification.
Resource Access: Securing access to resources not available domestically.
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