Question Tag: Strategic Reasons

Eiteman, Stonehill, and Moffet (1992) in their book, Multinational Business Finance, set out five main strategic reasons for engaging in FDI, as follows:

• Market Seeking: Firms may be purely exporting to markets overseas or producing in foreign markets to meet local demand. Examples include overseas car manufacturers in Ghana and communication firms in Ghana.
• Raw Material Seeking: Firms in industries like oil, mining, plantation, and forestry extract raw materials where they are found, whether for export or further processing and sale in the host country.
• Production Efficiency seeking
  Here firms locate production where one or more factors of production are cheap
  relative to their productivity. A common place example is the utilization of low cost
  labour in the Far East (Taiwan, Malaysia and Mexico)