Types of International Production
International investment in production and distribution has to be seen within the context of the company's attempts to increase or maintain profits in an increasingly competitive global environment. According to Dicken, 1992 there are two types of international production, market-oriented investments and supply- or cost-oriented investments.
Market-oriented Investments
Most foreign direct investment in both manufacturing and service industries has been, and remains, of this type. Companies locate a facility in a particular overseas market to serve that market directly. Often, the good or service produced overseas is quite identical to the product produced in the home country, but there may be modifications to suit the specific tastes or requirements of the local market. Such specifically market-oriented investments are a form of horizontal expansion across national borders.
Supply- or Cost-oriented Investments
Supply considerations are the dominant motivation for companies in the natural resource industries. Such companies must locate at the sources of supply, which tend to be highly localised geographically. Often, such investments are the first stage of vertically integrated operations and the later stages may be located quite separately from the source of supply. In many cases final processing occurs close to the market.