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Motives for foreign investment

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Motives for foreign investment include market, economic and strategic considerations.

Market motives

  • offensive market motives

Example:

 Amway, Avon and Mary Kay direct-selling in China
 (Direct marketing was later outlawed.)
  • defensive market motives

Economic motives

  • avoid taxation
  • reduce costs of labor
  • access natural resources
  • access capital

Achieve economies of scale

  • Reduce unit cost
    • through horizontal FDI
 Even out the effects of business cycles.
 
 Such as by rearranging destination of finished goods based on varying
market performance.
    • through vertical FDI
 Exploit local advantages in production costs.

Strategic motives

Take advantage of . . .

  • first-mover advantage
  • technology leadership
  • brand image
  • customer loyalty
  • competitive position

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