Attracting Foreign Direct Investment Through Advertising

Aug 08, 2012, 11:07 ET from American Marketing Association

CHICAGO, Aug. 8, 2012 /PRNewswire-USNewswire/ -- A recent benchmarking study on the use of advertising to attract foreign direct investment (FDI) finds that upper-middle income countries appear to be stuck in the middle when it comes to promoting their location advantages in advertising.

The study's authors identified 546 advertisements, which provided information to foreign investors about the country or created an attractive image of the country as a place for foreign investment. The ads appeared in the most widely read business magazines in the United States over a 55-month period from January 2007 through July 2011: Business Week, Forbes, Fortune, and The Economist. Ads from 31 countries were content analyzed for the presence of 24 items known to influence multinational managers' motivations when allocating their business operations internationally.

The study, which appears in the June issue of the American Marketing Association's Journal of International Marketing, finds that the advertisements from upper-middle income countries, such as China, Mexico, and Turkey, tend to be less focused. This country income group seems to be trying to differentiate itself from lower-middle income countries, which are characterized by economic and political instability, while at the same time trying to emulate high-income countries, which possess an abundance of knowledge-created assets and sound infrastructure. The end result is advertising that attempts to communicate too much.

Regardless of a country's income categorization, the study's authors, Rick T. Wilson and Daniel W. Baack, offer the following suggestion. "Good advertising, whether for a country or a product, begins with a solid understanding of its advantages, disadvantages, and competitive position. FDI promotion is no different. Our research offers country managers a framework in which to understand their location advantages and a method to benchmark their existing advertising program."

In addition to finding that FDI advertising varied significantly according to a country's income classification, the study also revealed that advertising is nearly absent during the third quarter, especially during July and August. Also of note are high-income countries, such as Australia, Germany, and Japan, which were found to use more sophisticated advertising strategies such as varied executions and multiple campaigns when compared to other income groups. No advertisements were found for low-income countries.

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SOURCE American Marketing Association