What is the primary purpose of Horizontal Foreign Direct Investment (FDI)?

The primary purpose of Horizontal Foreign Direct Investment (FDI) is to open a new market or build operations in another country. This type of investment involves a company expanding its operations into a foreign market by establishing or acquiring facilities that allow it to produce the same or similar goods and services it offers in its home country. The goal is to reach new customers, diversify market opportunities, and increase market share in a different geographic area.

By entering a new market, companies can capitalize on local demand, reduce transportation costs, customize their products for local preferences, and enhance their competitive edge. This strategic move helps businesses to mitigate risks associated with market fluctuation in their home country and can lead to better resource allocation globally.

The focus on establishing a physical presence in another country distinguishes Horizontal FDI from other forms of investment, such as vertical FDI, which typically involves investing in different stages of the production process.