MODES OF ENTRY INTO INTERNATIONAL MARKETS:Demand factors, Political factors

International Marketing MKT630

Lesson # 26

MODES OF ENTRY INTO INTERNATIONAL MARKETS

Factors Influencing FDI

Foreign direct investment not only brings in capital, it also brings in latest technologies and modern

management practices. Such investments are crucial to ensue that any country's industries would be

able to create products and services in future that can be sold in international markets. As such FDI is

important not just for the developing countries, it is also equally important for developed nations.

Industrialized nations are among the largest recipient of FDI.

Factors that are important for a country to attract FDI are give in the following;

Supply factors:

Lower production costs for certain products / industries compared with other countries attract

foreign investment in those industries

Better logistics, warehousing and transportation infrastructure and systems (by air, sea or over

land) also attract foreign direct investment

Abundant availability of natural resources and other factors of production lead to cheaper prices

of these resources and may attract foreign direct investment

Firms also make foreign direct investment in foreign countries to access to key technologies

Demand factors:

Closer and good customer access also factors to bring in foreign direct investment

Advantages in marketing, being closer to customers, may also bring in FDI

Firms may need to establish operations in foreign markets for exploiting of competitive

advantages

Companies that have strong global brands may want to have full control over their brands in

world markets and my engage in FDI for preservation of brand names and trade marks

Customers of firms are also often traveling / moving to foreign countries. Firms may also need to

establish operations in foreign countries due to their customers mobility

Political factors:

Firms may also invest in foreign countries for avoidance of any trade barriers posed by the home

of host countries

Home country or foreign country government may provide economic development incentives for

FDI, encouraging firms to invest overseas.

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