Driving Forces for Foreign Direct Investment by Beiersdorf East Africa Limited in Kenya

Abstract

Foreign direct investment (FDI) occurs when a firm invests directly in facilities to produce or market a product in a foreign country. FDI takes on two forms, the first is green investment, which involves establishing a new operation in a foreign country. The second form involves Mergers and/or acquisitions. (M & As) account for the bulk of FDI but their initial impact is less powerful than a Greenfield investment since they normally involve merely a change of ownership of existing assets. New technology and management skills may be introduced and linkages to the global market may be enhanced. Beiersdorf East Africa is an affiliate of Beiersdorf AG, which has its headquarters in Hamburg, Germany and the world‟s leader in skin care products. It has a manufacturing plant here in Kenya which serves both Eastern and Central Africa markets. The organization has employed foreign direct investment in Kenya as its entry mode to the above mentioned markets. The study used interview guide to gather the information and data required. Objectives of the study was to determine the driving forces for foreign direct investment in Kenya and establishing the impacts of direct investment in Kenya by Beiersdorf.The respondents comprised managers from Operations, Quality, Environment and Safety, Customer service, Maintenance, Warehousing and Distribution, Sales and Marketing, Finance and General Administration departments. The study established that the major driving forces for foreign direct investment in Kenya by Beiersdorf East Africa were: availability of good market which is growing, availability of cheap labour which is highly skilled, good infrastructure and openness of the economy due to favourable government policies for attracting foreign investment. The study concluded that Beiersdorf used the above driving forces as the main criteria to invest in Kenya and also established that its investment in Kenya has impacted positively to the country‟s economy by creating job opportunities, enhancing working force skills, technology transfer and providing market to local enterprises.