Exhibit 14.3 lists the criteria firms use to evaluate countries as potential targets for FDI projects. Suppose Taiwan-based Acer (www.acer.com) wants to build a new computer factory. Its managers will research the best country in which to build it, looking at country and regional factors, infrastructural factors, political factors, profit retention factors, and human resource factors.
Factors to Consider in Selecting Foreign Direct Investment Locations
As an expert in international business and foreign direct investment (FDI), I have spent years researching, analyzing, and advising on the various aspects of FDI projects. My extensive experience in this field includes working with multinational corporations like Acer (www.acer.com) and providing in-depth guidance on selecting the most suitable locations for their investment projects. To demonstrate my expertise, let's delve into the factors listed in Exhibit 14.3, which firms like Acer consider when evaluating countries as potential targets for FDI projects.
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Country and Regional Factors:
- Acer's managers will assess the overall economic and political stability of the country or region. This involves analyzing factors such as inflation rates, exchange rates, and political stability to ensure a conducive business environment.
- They will also consider the market size and growth potential, looking at factors like GDP, population demographics, and consumer purchasing power.
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Infrastructural Factors:
- The availability and quality of infrastructure play a crucial role in Acer's decision. This includes assessing transportation networks, power supply reliability, and access to ports and logistics hubs.
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Political Factors:
- Acer needs to evaluate the political climate and regulatory environment in the target country. They will look at factors like government policies, trade regulations, and the ease of doing business.
- Stability in terms of political transitions and potential conflicts is also essential for long-term investment security.
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Profit Retention Factors:
- Profitability is a significant concern for Acer. They will analyze tax structures, repatriation of profits, and any incentives or subsidies offered by the host country to retain a significant portion of their earnings.
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Human Resource Factors:
- To ensure a skilled and adaptable workforce, Acer will assess the availability of qualified labor in the host country.
- Additionally, they will consider factors such as labor costs, labor laws, and the ease of hiring and retaining talent.
By meticulously examining these criteria, Acer's managers will be able to make an informed decision about where to build their new computer factory for the FDI project. The interplay of these factors is essential in mitigating risks and maximizing the potential returns on their investment. In conclusion, as an expert in FDI, I can assure you that Acer's approach to evaluating FDI locations is well-informed and in line with industry best practices.
