Market Entry

There are strategic issues which come into dire consideration before a multinational enterprise (MNE) dives into a foreign direct investment (FDI). In the background of globalisation, the economic values of international business strategies have to consider both for the host and home countries. Notwithstanding the role of country competitiveness and its factors, MNE considers strategic issues such as country of investment (where), whether to be a debutant company (timing), choosing the manner of FDI (how), investment size on the foreign firm and survival maneuvers. The survival maneuvers will detail expansion plans, recession plans and even a possible fold up plans in the event of a disastrous outing.

Managers of MNEs consider many factors in choosing locations of FDI. Some of the factors commonly considered are; accessibility (eg sea ports), availability of both cheap labour and knowledge workers, presence of raw materials, consumer population, the host countries policy and possible emerging factors. These can still be grouped into cost and tax, demand regulations, sociopolitical and other strategic factors. The importance of each of these factors to a specific firm depends on the firm's objectives and the business nature of the FDI project (Shenkar and Luo 2007). Cost and tax factors in more details include transportation cost; wage rate; availability and cost of land; construction costs; cost of raw materials and resources; investment incentives and profit repatriation. Navigable sea ports with deep water, secured from sea pirates, make harbours such as Rio de Janeiro in Brazil, Cape Town in South Africa and Nagasaki in Japan alluring to the investors. Many world shipbuilders and shipyards are in favour of easy export following manufacturing. This will solve the inconveniences of knockdown products transportation. For a similar reason, steel and iron industries are sited close to iron ore mining. Analyzing further, transportation leverage alone does not determine cost and tax factors let alone the whole of the location factors, other categories of factors come into play.

There is also the issue of demand factors in choosing the firm location. Market size and growth along with presence of customers and local competition are what will influence the siting decision through demand factors. Exemplary, MTN a South African IT company has FDI in Nigeria. The company is unarguably the largest and fastest growing IT company in Africa. This is because Nigeria has the consumer population and contributes one of every four African populace with more than 60million adults living in Nigeria. It is not surprising that many MNEs in IT such as Etisalat, Globacom and Airtel are competitive early followers organisations in Nigeria.

Strategic factors that contribute in FDI location are investment infrastructure, manufacturing concentration, industrial linkages, workforce productivity, inbound and outbound logistic. Expectedly with MTN in Nigeria, Nokia and Samsung phone factories may be doing feasibility studies in Nigeria.

Sociopolitical