Resource_and_Efficiency_Seekers

Resource seekers Resource seekers look to invest abroad so as to acquire resources that are unobtainable or only available at much higher price at the home country. Typically such investments include primary products, especially energy resources, agricultural goods, minerals and raw materials. MNEs usually turn to this investment in order to export the commodities or materials that are produced to other countries or import them back to the home country. Therefore, the massive production of these primary products has become compulsory for multinational companies, as in the need of minimizing costs, this specific investment seems to be the most cost efficient. Additionally, if this specific transition move is organized and implanted properly, we observe that by acquiring domestic firms and land, MNEs exploit their comparative advantages and drive their competitors out of the market. Thus, transportation and acquisition costs seem minor in a long-term view. The profits that derive from this strategic move can dramatically alter MNE’s market share. Other recourses sought by foreign investors include cheap unskilled or semi skilled labor. Such investors come from countries with high labor cost that seek again to minimize their total costs. MNEs from these countries invested initially to the most advanced nations of East Asia and Latin America but as wage costs there rose gradually, they turned their investment to poor and underdeveloped nations. Despairingly, it is widely known that through the political instability in these countries, they implement persistently illegal practices like the tender issue of child labor. Efficiency seekers Efficiency seekers focus and concentrate different parts of their value chain in diverse locations, seeking to maximize the benefits from each location by sorting out costs and specialties. On a global scale, efficiency seekers try to take advantage of traditional differences in factor endowments and gain competitive advantages over their competitors. Progressively, the ultimate aim identified is the utilization of markets that their economic structure and income, give investors the opportunity and ability to exploit economies of scale and scope. All the concept of efficiency is unveiled by those economies. As the theory tells us, the reduction in cost per unit results from increased production, realized through the operational efficiencies. Hence, the cost advantages that a business obtains due to expansion, lead the company to a more stable financial environment with less risk. Efficiency seeking investment requires coordinated communication, production and a business environment where there are few or no barriers to cross-border activities. To come to the point, the motivation of efficiency seeking FDI is to rationalize the structure of established resource based or market-seeking investment in such a way that the investing company can gain from the common governance of geographically dispersed activities.