Question

Why do Multi-National Enterprises (MNEs) undertake foreign direct investment (FDI) instead of exporting to the nation? What are the different levels of FDI in terms of financial investment/commitment between exporting and a totally owned subsidiary and what factors influence which level of FDI a MNE would choose when doing FDI?

Answer 1

Multinational enterprises undertake FDI instead of exportìng to the nation because, FDI in smaller countries provide much favourable factors of production to MNCs than in their own countries like low labour cost, low cost of raw materials, low taxes etc. Such factors enhnace production and increase profits due to low cost of production.