What is important to the investor? What motivates an investor when making strategic decisions? What characteristics does an investor seek when choosing a country to invest in, or a company to partner with? These are some of the questions to bear in mind when searching for potential investors.
In order to attract potential investors, there are four key steps that must be followed. First, the interested party must research and understand the daily operations of the industry; second, target companies must be identified; third, a thorough research of the company must be conducted; and the fourth step involves identifying a target individual. The driving forces of the sector must be thoroughly understood as well. All these steps combined increases the chances of successfully attracting an investor.
When attracting potential investors, it’s not just about competing with another company, but also against other countries with similar market structure, characteristics and benefits as Belize. You need to determine what are the ‘must have’ and ‘nice to have’ factors for success.
Motivating factors for an investor include:
- Market seeking: Investors always consider access to the market and proximity to customers. For example, an investor contemplating Belize will think about the country’s market potential, but also the ease of access to Central America or the Caribbean region if they would be interested in exporting their products or services.
- Cost reduction: Labour costs play an important role as investors seek markets that will help them maximize their returns.
- Efficiency seeking: Investors also look at the centralization of their activities and availability of new technology. How accessible is new technology in this market? How capable is the labor force when implementing new technology?
- Raw materials, components, sub-supplier seeking
- Profit seeking: Incentives and taxation are two things that investors will definitely inquire about. Investors want to ensure that an incentive package is available that will help them to partially offset their costs of entering a new market.
- Asset seeking: What is the existing production capacity?
- Resource seeking: Is agricultural land available? What are the mineral resources?
Do your research! With an in-depth understanding of the industry and its key factors, you can open doors that you once thought were closed.
For more information, kindly contact the Business & Investment Facilitation Unit at firstname.lastname@example.org or at 822-0175.
August 17, 2012 at 3:07 pm
For the most part your summary is fairly accurate, but having represented multi-national corporations in a number of industry sectors, in markets around the world, and having worked directly with governments trying to attract them, we feel we are qualified to expand on your statements.
The attraction of FDI, and the targeting of specific industries, and even companies, should begin with a detailed audit of what advantages your country possesses that differentiates it from its competitors (which is every other country in the region, and in some cases the world). Too many IPAs develop targeting roadmaps that are simply wishlists. “Nicaragua has been successful in attracting call centers so we can be too”. Much too often, target sectors are developed by seeking to achieve what your neighbours have achieved, or through the direction of someone (often a senior government official) without proper information who simply likes the sound of that industry sector in their country. The “ICT” sector, for example, is thrown around so often by many different countries who want to attract it, but do you even know what ICT means? Do you understand how massive a sector this is, and how many hundreds of sub-sectors it actually represents?
Most countries believe they possess all of the requirements to attract, say, a call center, but the IPAs charged with actually creating that attraction model and interacting with these companies, have very little understanding of the drivers that will attract these operations. As an analogy, if you open a store without a very clear understanding of what your customer wants to buy, then you will ultimately spend a lot of time and money and fail as a business. We have too often seen IPAs try to attract a call center by expounding on their technology infrastructure, their available real estate, or their access to NA markets, when in fact the investor is really interested in sustainable bilingual labour markets, linkages to domestic expansion, education and training, or other key decision factors critical to their business model.
So we recommend the following:
1. Identify what industry sectors you can truly compete in by knowing very clearly what matters to the investor. Get the advice of experts in the field to develop this strategy.
2. Audit yourself and define very clearly what advantages your country can offer that no others can: identify your differentiators!
3. Design your incentives to mean something to your target industries and give you an advantage over your competitors;
4. Target your marketing activities accordingly…don’t waste time and money attending conferences and events where your investor targets do not participate;
5. Engage partners who advise your targeted investors in order to expand your direct marketing effectiveness and introduce best practices.
By learning the true motivational factors that will increase your FDI attractiveness, you will succeed in time.