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122
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Benefit Segmentation Strategy for Foreign Direct Investor
Market an instrument for aligning FDI incentives (Conceptual
Study)
WM Rohan Laksiri and PEDD Silva
Abstract
Segmentation of foreign investors has not received considerable attention in the
literature For simplicity purpose most government and investment promotion
organisations differentiate foreign direct investors only in terms of their country
of origin and volume of investment Additional factors such as scale of
investment numbers employed export orientation or sectorindustry also
moderately considered in determining the entitlement to incentives Recognising
the importance of segmentation for destination marketers this conceptual study
attempts to discuss the ways to align incentives for investors By acknowledging
the importance of benefit segmentation theory and discussing its possible
application to the FD investor market this paper suggests that destination
incentives for FD investors should develop from an analysis of its past existing
and potential investment customersrsquo preferences on it The paper concludes with
a discussion on a theoretical model for developing incentives for foreign direct
investors
123
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Introduction
Foreign Direct Investment (FDI) is vital and essential to develop a country
whilst FDI inflows and outflows are likely to fluctuate overtime As such
attracting as well as retaining FDI is therefore utmost importance to a country
irrespective to its state of economic development However this is not an easy
task inasmuch as a growing number of countries compete to obtain FDI in the
global market The pace of global competition to attract FDI is not known but it
is widespread (Oman 2000) As a result countries tend to present themselves
unique to investors using different strategies Amongst these strategies
highlighting the possession of exceptional resources potential opportunities
superior infrastructure and other kinds of incentives offers ie tax holidays
import duty exemption permission to repatriate profit etc are just a few to
name
The competition for FDI may be higher amongst the countries that provide a
same set of incentives to foreign investors National and sub-national
governments are therefore inclined to reappraise investment policies as to
absorb and retain the ldquoright kindrdquo of FDI as described by prior scholarly works
(Dunning 2004) The choice of location for FDI seems to depend on several
factors However it may be difficult to measure or observe the impact of these
factors for investment decisions Traditional examination of FDI decisions tends
to emphasise several factors influence with this regards These forces are
undoubtedly important in explaining foreign investment decisions of
Multinational Enterprises (MNEs) Nevertheless this desk study is not aimed to
expand the existing list of such factors but to use marketing tool benefit
segmentation to conceptualize the FD investorsrsquo market As such our endeavour
124
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
is to present a conceptual framework which can be useful for developing FDI
incentive strategies and in so doing this paper contributes to the FDI literature
In the first section objectives and the conceptual framework of the study will be
presented That will continue to a set of operational definitions for the main
constructs in the conceptual framework in an attempt to minimise the potential
ambiguities That will follow to some of the theories and perspectives on
destination attractiveness market segmentation and FD incentives developed by
economists and marketers Finally discussion and conclusion will be made on
the conceptual framework its application to a given destination and potential
benefits of using the benefit segmentation to the FD investor market
Conceptual Framework
This paper attempts to organize three constructs that have been used in different
disciplines The dependent variables of destination attractiveness are mainly
presented in the literature concerned with tourism The construct ldquoincentives for
FD investorsrdquo are widely discussed in economics and international management
literature The construct ldquoinvestor segmentation strategyrdquo appears to be an
incremental uplift of the segmentation concept in marketing literature The
conceptual causal relationships amongst these three ie destination
attractiveness incentives for FD investors and investor segmentation strategy
are depicted in Figure 1 This framework is based on the premise that
interactions of inter-disciplinal constructs market segmentation and FD
incentives constitute predictable interrelated properties for explaining the
performance of the dependent construct namely destination attractiveness
Simply this model suggests that market segmentation concept in marketing
literature enables to provide valuable insights into the process of attracting
foreign direct investors to a destination
125
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Definition of Main Constructs
Destination Attractiveness
FD investors are in search of favourable destinations for investments This may
be a function of several factors Amongst these factors host destination image
psychic distance to home country relative competitive position for the
respective industry foreign direct incentives provided by the host government
are just a few to highlight Destination attractiveness is therefore defined in this
paper as ldquothe host countryrsquos power to attract foreign direct investorsrdquo
Incentives for FD Investors
FDI incentives have been defined as ldquoany measurable advantages offered to
specific enterprises or categories of enterprises by (or at the direction of) a
government in order to encourage them to behave in a certain mannerrdquo This
includes ldquomeasureshellipdesigned either to increase the rate of return of a
particular FDI undertaking or to reduce (or redistribute) its costs or risksrdquo
(Cass 2007) The major components of incentives for FD investors are outlined
in table 3
126
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 1 Conceptual Framework of the Stu
Investor Segmentation Strategy
In compliance with the existing marketing literature the investor segmentation
is defined in terms of ldquothe process of subdividing a foreign investor market into
distinct subsets that behave similar ways in response to a similar set of benefits
offered by (or at the direction of) the host governmentrdquo In this context
ldquoinvestor segmentation strategyrdquo refers to use of information about foreign
direct investor market segments to design a program(s) to appeal to a specific
existing market segment(s)
Destination Attractiveness
Destinations are places with some form of actual or perceived boundary such as
the physical boundary of an island political boundaries or even market-created
boundaries Destinations can be either micro or macro Macro destinations
contain thousands of micro destinations including regions states cities towns
and specific attractions (Kotler et al 2006) Destination marketing is
increasingly becoming competitive at the present world (Buhalis 1999)
Attracting tourists andor investors is great priority for many countries perhaps
IInncceennttiivveess ffoorr
FFDD IInnvveessttoorrss
IInnvveessttoorr
sseeggmmeennttaattiioonn
ssttrraatteeggyy
DDeessttiinnaattiioonn
AAttttrraaccttiivveenneessss
127
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
for all the countries in the globe Albeit destination marketing literature is full
with tourism related topics (eg Buhalis D 2000) less seems to be devoted to
investment field (eg Young 2005) In seeking foreign investments destinations
compete with each other in the process of seeking investments This competition
can prevail within different statesregionsprovinces of a single country or
among different countries in the same region Likewise this can be a
competition between continents in the world ie Asia Europe Africa etc in
addition to the individual country competition The destination attractiveness is
a means that host government can influence FD investorsrsquo decision making
(Young 2005)
Destination attractiveness is a relative rather than an absolute concept (Cesario
1973)It is defined in the literature of tourism as the state of touristsrsquo agreement
that a destination is a recommendable place to visit (Chen amp Hsu 2000) The
same definition would easily be applicable to the investment context by
substituting ldquotouristsrsquo to investorsrsquordquo and ldquovisit to investrdquo It would be possible
to point and list many reasons or factors to argue why particular destination is
more attractive than others either to tourists or to investors Such reasons or
factors can be considered as the motives for locational decisions and are listed in
Table 1 and 2 The attractiveness of a destination can adversely be affected by
violence political instability natural catastrophe adverse environmental factors
and overcrowding (Kotler et al 2006)
Segmentation
The concept of market segmentation has further been discussed in the literature
after the publication of pioneering article by Wendell Smith in1956 (Wind
1978 Peter amp Ginter 1987 Yankelovich amp Meer 2006) The current marketing
practice of customer segmentation is perhaps the cornerstone that facilitates for
128
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
profitable exchanges As to the economic language Smith (1956) ldquosegmentation
is disaggregative in its effects and tends to bring about recognition of several
demand schedules where only one was recognized beforehellip on the other hand
consists of viewing a heterogeneous market as a number of smaller
homogeneous markets in response to differing product preferences among
important market segmentsrdquo Continuing along with the same language as Smith
(1956) Peter and Ginter (1987) views market segmentations as heterogeneity
exists in demand functions that enable to disaggregate market demand into
segments in accordance with distinct demand functions Peter and Ginter
maintain a strong proposition that emphasises demand functions should be the
basis for a segmentation definition
As discussed by Peter and Ginter (1987) under the auspices of ideal conditions
the aggregate market may consist of subsets or segments and relatively small
differences tend to appear within-group in individual demand functions in
comparison with the between-group differences However various firms
conclusions about the number and properties of market segments can vary in
accordance with conceptual and analytic approaches used for this purpose As a
result competing firms are likely to have different perceptions associated with
the market segment structure that exhibits demand heterogeneity in a market
And perceptions of segments seem to provide a basis for marketing strategy
Accordingly such perceptions may be a determinant of competitive
performance As such the accuracy of the firms perception of market
segmentation is often seen as a critical determinant of competitive advantage
The underpinning rationale for segmentation is that customers who are grouped
on the basis of similar needs and buying behaviour are likely to demonstrate a
nearly similar response to marketing efforts and strategies (Ahmad 2003) As
per the argument of Peter amp Ginter (1987) the market segmentation is a market
condition or perceptions about it
129
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Segmentation studies use a basis such as demographic socio economic
psychographic and behavioural or a combination of these bases to segment
markets Once the alternative variables for segmentation have been identified
the main question would then seem to be the selection of the best basis for
segmentation (Haley 1984) The segmentation based only on demographic
variables lost its ability to guide companiesrsquo decisions by the early 1960s
(Yankelovich and Meer 2006) However in international segmentation studies
information at the country level such as geographic political economic and
cultural data has often been used as a prime basis for grouping countries
(Hofstede et al 1999) Highlighting the behavioral and psychological variables
importance in international context Hofstede et al use in their study the
consumer means-end chains (MECs) where the perceived means-end
relationships between attributes benefits and values are measured at the
individual level to recognize the market segments
The idea that all markets can be profitably segmented has received almost as
wide- spread acceptance as the marketing concept itself gained as early as the
1960s (Haley 1968) Just as some customers are different from each other so do
the investors irrespective to the investment timeframe (short-term or long-term)
investment objectives (more in tune with future direction than past portfolio) or
interdependence (insiders employees and alliance partners) Different classes
of investors have different appetites for growth profitability cash-flow
generation and risk (The Boston Consulting Group 2002)
There are many ways to segment investors Table 1 envisages some details
about past endeavours to segment investors Surprisingly many of these
segmentation researches on investors are concerned with the traditional
variables such as the types of ownership (Grinblatt and Keloharju 2000 Liu et
al 2008) investment period (Ngowi 2002) the types of industry (Ngowi
130
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
2002) and source country (Wei 1995 Ngowi 2002) Within the literature of
consumer market segmentations it is basically limited to demographic and
geographic segmentations As in the consumer market these demographic
variables may have less predictive ability than psychographic variables A group
of investors may share similar geographic and demographic characteristics
whilst their investment behaviour and the selection of investment location tend
to be very different from each other In this respect the use of psychographic
data in terms of their interests and opinions will enable destination marketers to
segregate investors more effectively Nevertheless several authors (see Sullivan
amp Miller 1996 Murphy and Soutar 2005 Lu et al 2007 Kasilingam and
Jayabal 2009 Lozada 2006) have tried to use psychological variables such as
motives and preferences for segmenting the investor market
Benefit Segmentation
The benefit segmentation is amongst many other ways of segmenting markets
The principal approaches as presented above includes geographic
demographic behavioural and psychological The benefits segmentation falls
under one of the methods of psychological segmentation and it is of particular
interest of marketers because it never fails to provide fresh insight into markets
(Haley 1995) The belief underlying this segmentation strategy is that the
benefits which people are seeking in consuming a given product are the basic
reasons for the existence of true market segments (Haley 1968 1983 Sullivan
amp Miller 1996) This approach is based on the assumption that consumer value
systems are able to measure in detail together with the product and its attributes
of interest While this concept seems simple enough it is very complex in
practice (Haley 1995) Although it is considered as a complex approach to
segmentation experience with this approach has shown that benefits sought by
consumers determine their behaviour much more accurately than do
131
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
demographic characteristics or volume of consumption (Haley 1968 1983
Sullivan and Miller 1996) In essence people differ not simply because they
live in an urban versus a rural setting but because their underlying needs and
wants are different (Sullivan and Miller 1996) Benefit segmentation is a
technique that segments customers on the basis of desired or sought benefit
(Ahmad 2003)
A market segment can be defined as a group of existing or potential customers
with some common characteristic which is relevant in explaining and
forecasting their response to a supplierrsquos marketing stimuli (Wind and Cardozo
1974) In benefit segmentation each segment is identified by the benefits that it
is seeking It is however the total configuration of benefits sought which
distinguishes one segment from another rather than the fact that one segment is
seeking one particular benefit and another a quite different benefit (Haley
1968)
132
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 1 Investor Market Segmentation
Author Year Basis
for segmentation
Context Segments
Grinblatt
amp
Keloharju
1998 Ownership Finland Stock Market Households
Nonprofit institutions
General Government
Finance amp Insurance
Institutes
Non Financial
Corporations
Foreign Investors
Sullivan amp
Miller
1996 MotivesBenefits
Informal Venture Capital
Market
Economic Investors
Hedonistic Investors
Altruistic Investors
Wei 1995 Source Country FDI Market Overseas Chineese
Domestic
Investors
Institutional
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
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segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
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Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
123
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Introduction
Foreign Direct Investment (FDI) is vital and essential to develop a country
whilst FDI inflows and outflows are likely to fluctuate overtime As such
attracting as well as retaining FDI is therefore utmost importance to a country
irrespective to its state of economic development However this is not an easy
task inasmuch as a growing number of countries compete to obtain FDI in the
global market The pace of global competition to attract FDI is not known but it
is widespread (Oman 2000) As a result countries tend to present themselves
unique to investors using different strategies Amongst these strategies
highlighting the possession of exceptional resources potential opportunities
superior infrastructure and other kinds of incentives offers ie tax holidays
import duty exemption permission to repatriate profit etc are just a few to
name
The competition for FDI may be higher amongst the countries that provide a
same set of incentives to foreign investors National and sub-national
governments are therefore inclined to reappraise investment policies as to
absorb and retain the ldquoright kindrdquo of FDI as described by prior scholarly works
(Dunning 2004) The choice of location for FDI seems to depend on several
factors However it may be difficult to measure or observe the impact of these
factors for investment decisions Traditional examination of FDI decisions tends
to emphasise several factors influence with this regards These forces are
undoubtedly important in explaining foreign investment decisions of
Multinational Enterprises (MNEs) Nevertheless this desk study is not aimed to
expand the existing list of such factors but to use marketing tool benefit
segmentation to conceptualize the FD investorsrsquo market As such our endeavour
124
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
is to present a conceptual framework which can be useful for developing FDI
incentive strategies and in so doing this paper contributes to the FDI literature
In the first section objectives and the conceptual framework of the study will be
presented That will continue to a set of operational definitions for the main
constructs in the conceptual framework in an attempt to minimise the potential
ambiguities That will follow to some of the theories and perspectives on
destination attractiveness market segmentation and FD incentives developed by
economists and marketers Finally discussion and conclusion will be made on
the conceptual framework its application to a given destination and potential
benefits of using the benefit segmentation to the FD investor market
Conceptual Framework
This paper attempts to organize three constructs that have been used in different
disciplines The dependent variables of destination attractiveness are mainly
presented in the literature concerned with tourism The construct ldquoincentives for
FD investorsrdquo are widely discussed in economics and international management
literature The construct ldquoinvestor segmentation strategyrdquo appears to be an
incremental uplift of the segmentation concept in marketing literature The
conceptual causal relationships amongst these three ie destination
attractiveness incentives for FD investors and investor segmentation strategy
are depicted in Figure 1 This framework is based on the premise that
interactions of inter-disciplinal constructs market segmentation and FD
incentives constitute predictable interrelated properties for explaining the
performance of the dependent construct namely destination attractiveness
Simply this model suggests that market segmentation concept in marketing
literature enables to provide valuable insights into the process of attracting
foreign direct investors to a destination
125
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Definition of Main Constructs
Destination Attractiveness
FD investors are in search of favourable destinations for investments This may
be a function of several factors Amongst these factors host destination image
psychic distance to home country relative competitive position for the
respective industry foreign direct incentives provided by the host government
are just a few to highlight Destination attractiveness is therefore defined in this
paper as ldquothe host countryrsquos power to attract foreign direct investorsrdquo
Incentives for FD Investors
FDI incentives have been defined as ldquoany measurable advantages offered to
specific enterprises or categories of enterprises by (or at the direction of) a
government in order to encourage them to behave in a certain mannerrdquo This
includes ldquomeasureshellipdesigned either to increase the rate of return of a
particular FDI undertaking or to reduce (or redistribute) its costs or risksrdquo
(Cass 2007) The major components of incentives for FD investors are outlined
in table 3
126
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 1 Conceptual Framework of the Stu
Investor Segmentation Strategy
In compliance with the existing marketing literature the investor segmentation
is defined in terms of ldquothe process of subdividing a foreign investor market into
distinct subsets that behave similar ways in response to a similar set of benefits
offered by (or at the direction of) the host governmentrdquo In this context
ldquoinvestor segmentation strategyrdquo refers to use of information about foreign
direct investor market segments to design a program(s) to appeal to a specific
existing market segment(s)
Destination Attractiveness
Destinations are places with some form of actual or perceived boundary such as
the physical boundary of an island political boundaries or even market-created
boundaries Destinations can be either micro or macro Macro destinations
contain thousands of micro destinations including regions states cities towns
and specific attractions (Kotler et al 2006) Destination marketing is
increasingly becoming competitive at the present world (Buhalis 1999)
Attracting tourists andor investors is great priority for many countries perhaps
IInncceennttiivveess ffoorr
FFDD IInnvveessttoorrss
IInnvveessttoorr
sseeggmmeennttaattiioonn
ssttrraatteeggyy
DDeessttiinnaattiioonn
AAttttrraaccttiivveenneessss
127
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
for all the countries in the globe Albeit destination marketing literature is full
with tourism related topics (eg Buhalis D 2000) less seems to be devoted to
investment field (eg Young 2005) In seeking foreign investments destinations
compete with each other in the process of seeking investments This competition
can prevail within different statesregionsprovinces of a single country or
among different countries in the same region Likewise this can be a
competition between continents in the world ie Asia Europe Africa etc in
addition to the individual country competition The destination attractiveness is
a means that host government can influence FD investorsrsquo decision making
(Young 2005)
Destination attractiveness is a relative rather than an absolute concept (Cesario
1973)It is defined in the literature of tourism as the state of touristsrsquo agreement
that a destination is a recommendable place to visit (Chen amp Hsu 2000) The
same definition would easily be applicable to the investment context by
substituting ldquotouristsrsquo to investorsrsquordquo and ldquovisit to investrdquo It would be possible
to point and list many reasons or factors to argue why particular destination is
more attractive than others either to tourists or to investors Such reasons or
factors can be considered as the motives for locational decisions and are listed in
Table 1 and 2 The attractiveness of a destination can adversely be affected by
violence political instability natural catastrophe adverse environmental factors
and overcrowding (Kotler et al 2006)
Segmentation
The concept of market segmentation has further been discussed in the literature
after the publication of pioneering article by Wendell Smith in1956 (Wind
1978 Peter amp Ginter 1987 Yankelovich amp Meer 2006) The current marketing
practice of customer segmentation is perhaps the cornerstone that facilitates for
128
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
profitable exchanges As to the economic language Smith (1956) ldquosegmentation
is disaggregative in its effects and tends to bring about recognition of several
demand schedules where only one was recognized beforehellip on the other hand
consists of viewing a heterogeneous market as a number of smaller
homogeneous markets in response to differing product preferences among
important market segmentsrdquo Continuing along with the same language as Smith
(1956) Peter and Ginter (1987) views market segmentations as heterogeneity
exists in demand functions that enable to disaggregate market demand into
segments in accordance with distinct demand functions Peter and Ginter
maintain a strong proposition that emphasises demand functions should be the
basis for a segmentation definition
As discussed by Peter and Ginter (1987) under the auspices of ideal conditions
the aggregate market may consist of subsets or segments and relatively small
differences tend to appear within-group in individual demand functions in
comparison with the between-group differences However various firms
conclusions about the number and properties of market segments can vary in
accordance with conceptual and analytic approaches used for this purpose As a
result competing firms are likely to have different perceptions associated with
the market segment structure that exhibits demand heterogeneity in a market
And perceptions of segments seem to provide a basis for marketing strategy
Accordingly such perceptions may be a determinant of competitive
performance As such the accuracy of the firms perception of market
segmentation is often seen as a critical determinant of competitive advantage
The underpinning rationale for segmentation is that customers who are grouped
on the basis of similar needs and buying behaviour are likely to demonstrate a
nearly similar response to marketing efforts and strategies (Ahmad 2003) As
per the argument of Peter amp Ginter (1987) the market segmentation is a market
condition or perceptions about it
129
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Segmentation studies use a basis such as demographic socio economic
psychographic and behavioural or a combination of these bases to segment
markets Once the alternative variables for segmentation have been identified
the main question would then seem to be the selection of the best basis for
segmentation (Haley 1984) The segmentation based only on demographic
variables lost its ability to guide companiesrsquo decisions by the early 1960s
(Yankelovich and Meer 2006) However in international segmentation studies
information at the country level such as geographic political economic and
cultural data has often been used as a prime basis for grouping countries
(Hofstede et al 1999) Highlighting the behavioral and psychological variables
importance in international context Hofstede et al use in their study the
consumer means-end chains (MECs) where the perceived means-end
relationships between attributes benefits and values are measured at the
individual level to recognize the market segments
The idea that all markets can be profitably segmented has received almost as
wide- spread acceptance as the marketing concept itself gained as early as the
1960s (Haley 1968) Just as some customers are different from each other so do
the investors irrespective to the investment timeframe (short-term or long-term)
investment objectives (more in tune with future direction than past portfolio) or
interdependence (insiders employees and alliance partners) Different classes
of investors have different appetites for growth profitability cash-flow
generation and risk (The Boston Consulting Group 2002)
There are many ways to segment investors Table 1 envisages some details
about past endeavours to segment investors Surprisingly many of these
segmentation researches on investors are concerned with the traditional
variables such as the types of ownership (Grinblatt and Keloharju 2000 Liu et
al 2008) investment period (Ngowi 2002) the types of industry (Ngowi
130
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
2002) and source country (Wei 1995 Ngowi 2002) Within the literature of
consumer market segmentations it is basically limited to demographic and
geographic segmentations As in the consumer market these demographic
variables may have less predictive ability than psychographic variables A group
of investors may share similar geographic and demographic characteristics
whilst their investment behaviour and the selection of investment location tend
to be very different from each other In this respect the use of psychographic
data in terms of their interests and opinions will enable destination marketers to
segregate investors more effectively Nevertheless several authors (see Sullivan
amp Miller 1996 Murphy and Soutar 2005 Lu et al 2007 Kasilingam and
Jayabal 2009 Lozada 2006) have tried to use psychological variables such as
motives and preferences for segmenting the investor market
Benefit Segmentation
The benefit segmentation is amongst many other ways of segmenting markets
The principal approaches as presented above includes geographic
demographic behavioural and psychological The benefits segmentation falls
under one of the methods of psychological segmentation and it is of particular
interest of marketers because it never fails to provide fresh insight into markets
(Haley 1995) The belief underlying this segmentation strategy is that the
benefits which people are seeking in consuming a given product are the basic
reasons for the existence of true market segments (Haley 1968 1983 Sullivan
amp Miller 1996) This approach is based on the assumption that consumer value
systems are able to measure in detail together with the product and its attributes
of interest While this concept seems simple enough it is very complex in
practice (Haley 1995) Although it is considered as a complex approach to
segmentation experience with this approach has shown that benefits sought by
consumers determine their behaviour much more accurately than do
131
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
demographic characteristics or volume of consumption (Haley 1968 1983
Sullivan and Miller 1996) In essence people differ not simply because they
live in an urban versus a rural setting but because their underlying needs and
wants are different (Sullivan and Miller 1996) Benefit segmentation is a
technique that segments customers on the basis of desired or sought benefit
(Ahmad 2003)
A market segment can be defined as a group of existing or potential customers
with some common characteristic which is relevant in explaining and
forecasting their response to a supplierrsquos marketing stimuli (Wind and Cardozo
1974) In benefit segmentation each segment is identified by the benefits that it
is seeking It is however the total configuration of benefits sought which
distinguishes one segment from another rather than the fact that one segment is
seeking one particular benefit and another a quite different benefit (Haley
1968)
132
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 1 Investor Market Segmentation
Author Year Basis
for segmentation
Context Segments
Grinblatt
amp
Keloharju
1998 Ownership Finland Stock Market Households
Nonprofit institutions
General Government
Finance amp Insurance
Institutes
Non Financial
Corporations
Foreign Investors
Sullivan amp
Miller
1996 MotivesBenefits
Informal Venture Capital
Market
Economic Investors
Hedonistic Investors
Altruistic Investors
Wei 1995 Source Country FDI Market Overseas Chineese
Domestic
Investors
Institutional
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
124
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
is to present a conceptual framework which can be useful for developing FDI
incentive strategies and in so doing this paper contributes to the FDI literature
In the first section objectives and the conceptual framework of the study will be
presented That will continue to a set of operational definitions for the main
constructs in the conceptual framework in an attempt to minimise the potential
ambiguities That will follow to some of the theories and perspectives on
destination attractiveness market segmentation and FD incentives developed by
economists and marketers Finally discussion and conclusion will be made on
the conceptual framework its application to a given destination and potential
benefits of using the benefit segmentation to the FD investor market
Conceptual Framework
This paper attempts to organize three constructs that have been used in different
disciplines The dependent variables of destination attractiveness are mainly
presented in the literature concerned with tourism The construct ldquoincentives for
FD investorsrdquo are widely discussed in economics and international management
literature The construct ldquoinvestor segmentation strategyrdquo appears to be an
incremental uplift of the segmentation concept in marketing literature The
conceptual causal relationships amongst these three ie destination
attractiveness incentives for FD investors and investor segmentation strategy
are depicted in Figure 1 This framework is based on the premise that
interactions of inter-disciplinal constructs market segmentation and FD
incentives constitute predictable interrelated properties for explaining the
performance of the dependent construct namely destination attractiveness
Simply this model suggests that market segmentation concept in marketing
literature enables to provide valuable insights into the process of attracting
foreign direct investors to a destination
125
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Definition of Main Constructs
Destination Attractiveness
FD investors are in search of favourable destinations for investments This may
be a function of several factors Amongst these factors host destination image
psychic distance to home country relative competitive position for the
respective industry foreign direct incentives provided by the host government
are just a few to highlight Destination attractiveness is therefore defined in this
paper as ldquothe host countryrsquos power to attract foreign direct investorsrdquo
Incentives for FD Investors
FDI incentives have been defined as ldquoany measurable advantages offered to
specific enterprises or categories of enterprises by (or at the direction of) a
government in order to encourage them to behave in a certain mannerrdquo This
includes ldquomeasureshellipdesigned either to increase the rate of return of a
particular FDI undertaking or to reduce (or redistribute) its costs or risksrdquo
(Cass 2007) The major components of incentives for FD investors are outlined
in table 3
126
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 1 Conceptual Framework of the Stu
Investor Segmentation Strategy
In compliance with the existing marketing literature the investor segmentation
is defined in terms of ldquothe process of subdividing a foreign investor market into
distinct subsets that behave similar ways in response to a similar set of benefits
offered by (or at the direction of) the host governmentrdquo In this context
ldquoinvestor segmentation strategyrdquo refers to use of information about foreign
direct investor market segments to design a program(s) to appeal to a specific
existing market segment(s)
Destination Attractiveness
Destinations are places with some form of actual or perceived boundary such as
the physical boundary of an island political boundaries or even market-created
boundaries Destinations can be either micro or macro Macro destinations
contain thousands of micro destinations including regions states cities towns
and specific attractions (Kotler et al 2006) Destination marketing is
increasingly becoming competitive at the present world (Buhalis 1999)
Attracting tourists andor investors is great priority for many countries perhaps
IInncceennttiivveess ffoorr
FFDD IInnvveessttoorrss
IInnvveessttoorr
sseeggmmeennttaattiioonn
ssttrraatteeggyy
DDeessttiinnaattiioonn
AAttttrraaccttiivveenneessss
127
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
for all the countries in the globe Albeit destination marketing literature is full
with tourism related topics (eg Buhalis D 2000) less seems to be devoted to
investment field (eg Young 2005) In seeking foreign investments destinations
compete with each other in the process of seeking investments This competition
can prevail within different statesregionsprovinces of a single country or
among different countries in the same region Likewise this can be a
competition between continents in the world ie Asia Europe Africa etc in
addition to the individual country competition The destination attractiveness is
a means that host government can influence FD investorsrsquo decision making
(Young 2005)
Destination attractiveness is a relative rather than an absolute concept (Cesario
1973)It is defined in the literature of tourism as the state of touristsrsquo agreement
that a destination is a recommendable place to visit (Chen amp Hsu 2000) The
same definition would easily be applicable to the investment context by
substituting ldquotouristsrsquo to investorsrsquordquo and ldquovisit to investrdquo It would be possible
to point and list many reasons or factors to argue why particular destination is
more attractive than others either to tourists or to investors Such reasons or
factors can be considered as the motives for locational decisions and are listed in
Table 1 and 2 The attractiveness of a destination can adversely be affected by
violence political instability natural catastrophe adverse environmental factors
and overcrowding (Kotler et al 2006)
Segmentation
The concept of market segmentation has further been discussed in the literature
after the publication of pioneering article by Wendell Smith in1956 (Wind
1978 Peter amp Ginter 1987 Yankelovich amp Meer 2006) The current marketing
practice of customer segmentation is perhaps the cornerstone that facilitates for
128
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
profitable exchanges As to the economic language Smith (1956) ldquosegmentation
is disaggregative in its effects and tends to bring about recognition of several
demand schedules where only one was recognized beforehellip on the other hand
consists of viewing a heterogeneous market as a number of smaller
homogeneous markets in response to differing product preferences among
important market segmentsrdquo Continuing along with the same language as Smith
(1956) Peter and Ginter (1987) views market segmentations as heterogeneity
exists in demand functions that enable to disaggregate market demand into
segments in accordance with distinct demand functions Peter and Ginter
maintain a strong proposition that emphasises demand functions should be the
basis for a segmentation definition
As discussed by Peter and Ginter (1987) under the auspices of ideal conditions
the aggregate market may consist of subsets or segments and relatively small
differences tend to appear within-group in individual demand functions in
comparison with the between-group differences However various firms
conclusions about the number and properties of market segments can vary in
accordance with conceptual and analytic approaches used for this purpose As a
result competing firms are likely to have different perceptions associated with
the market segment structure that exhibits demand heterogeneity in a market
And perceptions of segments seem to provide a basis for marketing strategy
Accordingly such perceptions may be a determinant of competitive
performance As such the accuracy of the firms perception of market
segmentation is often seen as a critical determinant of competitive advantage
The underpinning rationale for segmentation is that customers who are grouped
on the basis of similar needs and buying behaviour are likely to demonstrate a
nearly similar response to marketing efforts and strategies (Ahmad 2003) As
per the argument of Peter amp Ginter (1987) the market segmentation is a market
condition or perceptions about it
129
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Segmentation studies use a basis such as demographic socio economic
psychographic and behavioural or a combination of these bases to segment
markets Once the alternative variables for segmentation have been identified
the main question would then seem to be the selection of the best basis for
segmentation (Haley 1984) The segmentation based only on demographic
variables lost its ability to guide companiesrsquo decisions by the early 1960s
(Yankelovich and Meer 2006) However in international segmentation studies
information at the country level such as geographic political economic and
cultural data has often been used as a prime basis for grouping countries
(Hofstede et al 1999) Highlighting the behavioral and psychological variables
importance in international context Hofstede et al use in their study the
consumer means-end chains (MECs) where the perceived means-end
relationships between attributes benefits and values are measured at the
individual level to recognize the market segments
The idea that all markets can be profitably segmented has received almost as
wide- spread acceptance as the marketing concept itself gained as early as the
1960s (Haley 1968) Just as some customers are different from each other so do
the investors irrespective to the investment timeframe (short-term or long-term)
investment objectives (more in tune with future direction than past portfolio) or
interdependence (insiders employees and alliance partners) Different classes
of investors have different appetites for growth profitability cash-flow
generation and risk (The Boston Consulting Group 2002)
There are many ways to segment investors Table 1 envisages some details
about past endeavours to segment investors Surprisingly many of these
segmentation researches on investors are concerned with the traditional
variables such as the types of ownership (Grinblatt and Keloharju 2000 Liu et
al 2008) investment period (Ngowi 2002) the types of industry (Ngowi
130
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
2002) and source country (Wei 1995 Ngowi 2002) Within the literature of
consumer market segmentations it is basically limited to demographic and
geographic segmentations As in the consumer market these demographic
variables may have less predictive ability than psychographic variables A group
of investors may share similar geographic and demographic characteristics
whilst their investment behaviour and the selection of investment location tend
to be very different from each other In this respect the use of psychographic
data in terms of their interests and opinions will enable destination marketers to
segregate investors more effectively Nevertheless several authors (see Sullivan
amp Miller 1996 Murphy and Soutar 2005 Lu et al 2007 Kasilingam and
Jayabal 2009 Lozada 2006) have tried to use psychological variables such as
motives and preferences for segmenting the investor market
Benefit Segmentation
The benefit segmentation is amongst many other ways of segmenting markets
The principal approaches as presented above includes geographic
demographic behavioural and psychological The benefits segmentation falls
under one of the methods of psychological segmentation and it is of particular
interest of marketers because it never fails to provide fresh insight into markets
(Haley 1995) The belief underlying this segmentation strategy is that the
benefits which people are seeking in consuming a given product are the basic
reasons for the existence of true market segments (Haley 1968 1983 Sullivan
amp Miller 1996) This approach is based on the assumption that consumer value
systems are able to measure in detail together with the product and its attributes
of interest While this concept seems simple enough it is very complex in
practice (Haley 1995) Although it is considered as a complex approach to
segmentation experience with this approach has shown that benefits sought by
consumers determine their behaviour much more accurately than do
131
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
demographic characteristics or volume of consumption (Haley 1968 1983
Sullivan and Miller 1996) In essence people differ not simply because they
live in an urban versus a rural setting but because their underlying needs and
wants are different (Sullivan and Miller 1996) Benefit segmentation is a
technique that segments customers on the basis of desired or sought benefit
(Ahmad 2003)
A market segment can be defined as a group of existing or potential customers
with some common characteristic which is relevant in explaining and
forecasting their response to a supplierrsquos marketing stimuli (Wind and Cardozo
1974) In benefit segmentation each segment is identified by the benefits that it
is seeking It is however the total configuration of benefits sought which
distinguishes one segment from another rather than the fact that one segment is
seeking one particular benefit and another a quite different benefit (Haley
1968)
132
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 1 Investor Market Segmentation
Author Year Basis
for segmentation
Context Segments
Grinblatt
amp
Keloharju
1998 Ownership Finland Stock Market Households
Nonprofit institutions
General Government
Finance amp Insurance
Institutes
Non Financial
Corporations
Foreign Investors
Sullivan amp
Miller
1996 MotivesBenefits
Informal Venture Capital
Market
Economic Investors
Hedonistic Investors
Altruistic Investors
Wei 1995 Source Country FDI Market Overseas Chineese
Domestic
Investors
Institutional
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
125
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Definition of Main Constructs
Destination Attractiveness
FD investors are in search of favourable destinations for investments This may
be a function of several factors Amongst these factors host destination image
psychic distance to home country relative competitive position for the
respective industry foreign direct incentives provided by the host government
are just a few to highlight Destination attractiveness is therefore defined in this
paper as ldquothe host countryrsquos power to attract foreign direct investorsrdquo
Incentives for FD Investors
FDI incentives have been defined as ldquoany measurable advantages offered to
specific enterprises or categories of enterprises by (or at the direction of) a
government in order to encourage them to behave in a certain mannerrdquo This
includes ldquomeasureshellipdesigned either to increase the rate of return of a
particular FDI undertaking or to reduce (or redistribute) its costs or risksrdquo
(Cass 2007) The major components of incentives for FD investors are outlined
in table 3
126
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 1 Conceptual Framework of the Stu
Investor Segmentation Strategy
In compliance with the existing marketing literature the investor segmentation
is defined in terms of ldquothe process of subdividing a foreign investor market into
distinct subsets that behave similar ways in response to a similar set of benefits
offered by (or at the direction of) the host governmentrdquo In this context
ldquoinvestor segmentation strategyrdquo refers to use of information about foreign
direct investor market segments to design a program(s) to appeal to a specific
existing market segment(s)
Destination Attractiveness
Destinations are places with some form of actual or perceived boundary such as
the physical boundary of an island political boundaries or even market-created
boundaries Destinations can be either micro or macro Macro destinations
contain thousands of micro destinations including regions states cities towns
and specific attractions (Kotler et al 2006) Destination marketing is
increasingly becoming competitive at the present world (Buhalis 1999)
Attracting tourists andor investors is great priority for many countries perhaps
IInncceennttiivveess ffoorr
FFDD IInnvveessttoorrss
IInnvveessttoorr
sseeggmmeennttaattiioonn
ssttrraatteeggyy
DDeessttiinnaattiioonn
AAttttrraaccttiivveenneessss
127
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
for all the countries in the globe Albeit destination marketing literature is full
with tourism related topics (eg Buhalis D 2000) less seems to be devoted to
investment field (eg Young 2005) In seeking foreign investments destinations
compete with each other in the process of seeking investments This competition
can prevail within different statesregionsprovinces of a single country or
among different countries in the same region Likewise this can be a
competition between continents in the world ie Asia Europe Africa etc in
addition to the individual country competition The destination attractiveness is
a means that host government can influence FD investorsrsquo decision making
(Young 2005)
Destination attractiveness is a relative rather than an absolute concept (Cesario
1973)It is defined in the literature of tourism as the state of touristsrsquo agreement
that a destination is a recommendable place to visit (Chen amp Hsu 2000) The
same definition would easily be applicable to the investment context by
substituting ldquotouristsrsquo to investorsrsquordquo and ldquovisit to investrdquo It would be possible
to point and list many reasons or factors to argue why particular destination is
more attractive than others either to tourists or to investors Such reasons or
factors can be considered as the motives for locational decisions and are listed in
Table 1 and 2 The attractiveness of a destination can adversely be affected by
violence political instability natural catastrophe adverse environmental factors
and overcrowding (Kotler et al 2006)
Segmentation
The concept of market segmentation has further been discussed in the literature
after the publication of pioneering article by Wendell Smith in1956 (Wind
1978 Peter amp Ginter 1987 Yankelovich amp Meer 2006) The current marketing
practice of customer segmentation is perhaps the cornerstone that facilitates for
128
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
profitable exchanges As to the economic language Smith (1956) ldquosegmentation
is disaggregative in its effects and tends to bring about recognition of several
demand schedules where only one was recognized beforehellip on the other hand
consists of viewing a heterogeneous market as a number of smaller
homogeneous markets in response to differing product preferences among
important market segmentsrdquo Continuing along with the same language as Smith
(1956) Peter and Ginter (1987) views market segmentations as heterogeneity
exists in demand functions that enable to disaggregate market demand into
segments in accordance with distinct demand functions Peter and Ginter
maintain a strong proposition that emphasises demand functions should be the
basis for a segmentation definition
As discussed by Peter and Ginter (1987) under the auspices of ideal conditions
the aggregate market may consist of subsets or segments and relatively small
differences tend to appear within-group in individual demand functions in
comparison with the between-group differences However various firms
conclusions about the number and properties of market segments can vary in
accordance with conceptual and analytic approaches used for this purpose As a
result competing firms are likely to have different perceptions associated with
the market segment structure that exhibits demand heterogeneity in a market
And perceptions of segments seem to provide a basis for marketing strategy
Accordingly such perceptions may be a determinant of competitive
performance As such the accuracy of the firms perception of market
segmentation is often seen as a critical determinant of competitive advantage
The underpinning rationale for segmentation is that customers who are grouped
on the basis of similar needs and buying behaviour are likely to demonstrate a
nearly similar response to marketing efforts and strategies (Ahmad 2003) As
per the argument of Peter amp Ginter (1987) the market segmentation is a market
condition or perceptions about it
129
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Segmentation studies use a basis such as demographic socio economic
psychographic and behavioural or a combination of these bases to segment
markets Once the alternative variables for segmentation have been identified
the main question would then seem to be the selection of the best basis for
segmentation (Haley 1984) The segmentation based only on demographic
variables lost its ability to guide companiesrsquo decisions by the early 1960s
(Yankelovich and Meer 2006) However in international segmentation studies
information at the country level such as geographic political economic and
cultural data has often been used as a prime basis for grouping countries
(Hofstede et al 1999) Highlighting the behavioral and psychological variables
importance in international context Hofstede et al use in their study the
consumer means-end chains (MECs) where the perceived means-end
relationships between attributes benefits and values are measured at the
individual level to recognize the market segments
The idea that all markets can be profitably segmented has received almost as
wide- spread acceptance as the marketing concept itself gained as early as the
1960s (Haley 1968) Just as some customers are different from each other so do
the investors irrespective to the investment timeframe (short-term or long-term)
investment objectives (more in tune with future direction than past portfolio) or
interdependence (insiders employees and alliance partners) Different classes
of investors have different appetites for growth profitability cash-flow
generation and risk (The Boston Consulting Group 2002)
There are many ways to segment investors Table 1 envisages some details
about past endeavours to segment investors Surprisingly many of these
segmentation researches on investors are concerned with the traditional
variables such as the types of ownership (Grinblatt and Keloharju 2000 Liu et
al 2008) investment period (Ngowi 2002) the types of industry (Ngowi
130
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
2002) and source country (Wei 1995 Ngowi 2002) Within the literature of
consumer market segmentations it is basically limited to demographic and
geographic segmentations As in the consumer market these demographic
variables may have less predictive ability than psychographic variables A group
of investors may share similar geographic and demographic characteristics
whilst their investment behaviour and the selection of investment location tend
to be very different from each other In this respect the use of psychographic
data in terms of their interests and opinions will enable destination marketers to
segregate investors more effectively Nevertheless several authors (see Sullivan
amp Miller 1996 Murphy and Soutar 2005 Lu et al 2007 Kasilingam and
Jayabal 2009 Lozada 2006) have tried to use psychological variables such as
motives and preferences for segmenting the investor market
Benefit Segmentation
The benefit segmentation is amongst many other ways of segmenting markets
The principal approaches as presented above includes geographic
demographic behavioural and psychological The benefits segmentation falls
under one of the methods of psychological segmentation and it is of particular
interest of marketers because it never fails to provide fresh insight into markets
(Haley 1995) The belief underlying this segmentation strategy is that the
benefits which people are seeking in consuming a given product are the basic
reasons for the existence of true market segments (Haley 1968 1983 Sullivan
amp Miller 1996) This approach is based on the assumption that consumer value
systems are able to measure in detail together with the product and its attributes
of interest While this concept seems simple enough it is very complex in
practice (Haley 1995) Although it is considered as a complex approach to
segmentation experience with this approach has shown that benefits sought by
consumers determine their behaviour much more accurately than do
131
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
demographic characteristics or volume of consumption (Haley 1968 1983
Sullivan and Miller 1996) In essence people differ not simply because they
live in an urban versus a rural setting but because their underlying needs and
wants are different (Sullivan and Miller 1996) Benefit segmentation is a
technique that segments customers on the basis of desired or sought benefit
(Ahmad 2003)
A market segment can be defined as a group of existing or potential customers
with some common characteristic which is relevant in explaining and
forecasting their response to a supplierrsquos marketing stimuli (Wind and Cardozo
1974) In benefit segmentation each segment is identified by the benefits that it
is seeking It is however the total configuration of benefits sought which
distinguishes one segment from another rather than the fact that one segment is
seeking one particular benefit and another a quite different benefit (Haley
1968)
132
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 1 Investor Market Segmentation
Author Year Basis
for segmentation
Context Segments
Grinblatt
amp
Keloharju
1998 Ownership Finland Stock Market Households
Nonprofit institutions
General Government
Finance amp Insurance
Institutes
Non Financial
Corporations
Foreign Investors
Sullivan amp
Miller
1996 MotivesBenefits
Informal Venture Capital
Market
Economic Investors
Hedonistic Investors
Altruistic Investors
Wei 1995 Source Country FDI Market Overseas Chineese
Domestic
Investors
Institutional
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
126
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 1 Conceptual Framework of the Stu
Investor Segmentation Strategy
In compliance with the existing marketing literature the investor segmentation
is defined in terms of ldquothe process of subdividing a foreign investor market into
distinct subsets that behave similar ways in response to a similar set of benefits
offered by (or at the direction of) the host governmentrdquo In this context
ldquoinvestor segmentation strategyrdquo refers to use of information about foreign
direct investor market segments to design a program(s) to appeal to a specific
existing market segment(s)
Destination Attractiveness
Destinations are places with some form of actual or perceived boundary such as
the physical boundary of an island political boundaries or even market-created
boundaries Destinations can be either micro or macro Macro destinations
contain thousands of micro destinations including regions states cities towns
and specific attractions (Kotler et al 2006) Destination marketing is
increasingly becoming competitive at the present world (Buhalis 1999)
Attracting tourists andor investors is great priority for many countries perhaps
IInncceennttiivveess ffoorr
FFDD IInnvveessttoorrss
IInnvveessttoorr
sseeggmmeennttaattiioonn
ssttrraatteeggyy
DDeessttiinnaattiioonn
AAttttrraaccttiivveenneessss
127
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
for all the countries in the globe Albeit destination marketing literature is full
with tourism related topics (eg Buhalis D 2000) less seems to be devoted to
investment field (eg Young 2005) In seeking foreign investments destinations
compete with each other in the process of seeking investments This competition
can prevail within different statesregionsprovinces of a single country or
among different countries in the same region Likewise this can be a
competition between continents in the world ie Asia Europe Africa etc in
addition to the individual country competition The destination attractiveness is
a means that host government can influence FD investorsrsquo decision making
(Young 2005)
Destination attractiveness is a relative rather than an absolute concept (Cesario
1973)It is defined in the literature of tourism as the state of touristsrsquo agreement
that a destination is a recommendable place to visit (Chen amp Hsu 2000) The
same definition would easily be applicable to the investment context by
substituting ldquotouristsrsquo to investorsrsquordquo and ldquovisit to investrdquo It would be possible
to point and list many reasons or factors to argue why particular destination is
more attractive than others either to tourists or to investors Such reasons or
factors can be considered as the motives for locational decisions and are listed in
Table 1 and 2 The attractiveness of a destination can adversely be affected by
violence political instability natural catastrophe adverse environmental factors
and overcrowding (Kotler et al 2006)
Segmentation
The concept of market segmentation has further been discussed in the literature
after the publication of pioneering article by Wendell Smith in1956 (Wind
1978 Peter amp Ginter 1987 Yankelovich amp Meer 2006) The current marketing
practice of customer segmentation is perhaps the cornerstone that facilitates for
128
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
profitable exchanges As to the economic language Smith (1956) ldquosegmentation
is disaggregative in its effects and tends to bring about recognition of several
demand schedules where only one was recognized beforehellip on the other hand
consists of viewing a heterogeneous market as a number of smaller
homogeneous markets in response to differing product preferences among
important market segmentsrdquo Continuing along with the same language as Smith
(1956) Peter and Ginter (1987) views market segmentations as heterogeneity
exists in demand functions that enable to disaggregate market demand into
segments in accordance with distinct demand functions Peter and Ginter
maintain a strong proposition that emphasises demand functions should be the
basis for a segmentation definition
As discussed by Peter and Ginter (1987) under the auspices of ideal conditions
the aggregate market may consist of subsets or segments and relatively small
differences tend to appear within-group in individual demand functions in
comparison with the between-group differences However various firms
conclusions about the number and properties of market segments can vary in
accordance with conceptual and analytic approaches used for this purpose As a
result competing firms are likely to have different perceptions associated with
the market segment structure that exhibits demand heterogeneity in a market
And perceptions of segments seem to provide a basis for marketing strategy
Accordingly such perceptions may be a determinant of competitive
performance As such the accuracy of the firms perception of market
segmentation is often seen as a critical determinant of competitive advantage
The underpinning rationale for segmentation is that customers who are grouped
on the basis of similar needs and buying behaviour are likely to demonstrate a
nearly similar response to marketing efforts and strategies (Ahmad 2003) As
per the argument of Peter amp Ginter (1987) the market segmentation is a market
condition or perceptions about it
129
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Segmentation studies use a basis such as demographic socio economic
psychographic and behavioural or a combination of these bases to segment
markets Once the alternative variables for segmentation have been identified
the main question would then seem to be the selection of the best basis for
segmentation (Haley 1984) The segmentation based only on demographic
variables lost its ability to guide companiesrsquo decisions by the early 1960s
(Yankelovich and Meer 2006) However in international segmentation studies
information at the country level such as geographic political economic and
cultural data has often been used as a prime basis for grouping countries
(Hofstede et al 1999) Highlighting the behavioral and psychological variables
importance in international context Hofstede et al use in their study the
consumer means-end chains (MECs) where the perceived means-end
relationships between attributes benefits and values are measured at the
individual level to recognize the market segments
The idea that all markets can be profitably segmented has received almost as
wide- spread acceptance as the marketing concept itself gained as early as the
1960s (Haley 1968) Just as some customers are different from each other so do
the investors irrespective to the investment timeframe (short-term or long-term)
investment objectives (more in tune with future direction than past portfolio) or
interdependence (insiders employees and alliance partners) Different classes
of investors have different appetites for growth profitability cash-flow
generation and risk (The Boston Consulting Group 2002)
There are many ways to segment investors Table 1 envisages some details
about past endeavours to segment investors Surprisingly many of these
segmentation researches on investors are concerned with the traditional
variables such as the types of ownership (Grinblatt and Keloharju 2000 Liu et
al 2008) investment period (Ngowi 2002) the types of industry (Ngowi
130
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
2002) and source country (Wei 1995 Ngowi 2002) Within the literature of
consumer market segmentations it is basically limited to demographic and
geographic segmentations As in the consumer market these demographic
variables may have less predictive ability than psychographic variables A group
of investors may share similar geographic and demographic characteristics
whilst their investment behaviour and the selection of investment location tend
to be very different from each other In this respect the use of psychographic
data in terms of their interests and opinions will enable destination marketers to
segregate investors more effectively Nevertheless several authors (see Sullivan
amp Miller 1996 Murphy and Soutar 2005 Lu et al 2007 Kasilingam and
Jayabal 2009 Lozada 2006) have tried to use psychological variables such as
motives and preferences for segmenting the investor market
Benefit Segmentation
The benefit segmentation is amongst many other ways of segmenting markets
The principal approaches as presented above includes geographic
demographic behavioural and psychological The benefits segmentation falls
under one of the methods of psychological segmentation and it is of particular
interest of marketers because it never fails to provide fresh insight into markets
(Haley 1995) The belief underlying this segmentation strategy is that the
benefits which people are seeking in consuming a given product are the basic
reasons for the existence of true market segments (Haley 1968 1983 Sullivan
amp Miller 1996) This approach is based on the assumption that consumer value
systems are able to measure in detail together with the product and its attributes
of interest While this concept seems simple enough it is very complex in
practice (Haley 1995) Although it is considered as a complex approach to
segmentation experience with this approach has shown that benefits sought by
consumers determine their behaviour much more accurately than do
131
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
demographic characteristics or volume of consumption (Haley 1968 1983
Sullivan and Miller 1996) In essence people differ not simply because they
live in an urban versus a rural setting but because their underlying needs and
wants are different (Sullivan and Miller 1996) Benefit segmentation is a
technique that segments customers on the basis of desired or sought benefit
(Ahmad 2003)
A market segment can be defined as a group of existing or potential customers
with some common characteristic which is relevant in explaining and
forecasting their response to a supplierrsquos marketing stimuli (Wind and Cardozo
1974) In benefit segmentation each segment is identified by the benefits that it
is seeking It is however the total configuration of benefits sought which
distinguishes one segment from another rather than the fact that one segment is
seeking one particular benefit and another a quite different benefit (Haley
1968)
132
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 1 Investor Market Segmentation
Author Year Basis
for segmentation
Context Segments
Grinblatt
amp
Keloharju
1998 Ownership Finland Stock Market Households
Nonprofit institutions
General Government
Finance amp Insurance
Institutes
Non Financial
Corporations
Foreign Investors
Sullivan amp
Miller
1996 MotivesBenefits
Informal Venture Capital
Market
Economic Investors
Hedonistic Investors
Altruistic Investors
Wei 1995 Source Country FDI Market Overseas Chineese
Domestic
Investors
Institutional
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
127
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
for all the countries in the globe Albeit destination marketing literature is full
with tourism related topics (eg Buhalis D 2000) less seems to be devoted to
investment field (eg Young 2005) In seeking foreign investments destinations
compete with each other in the process of seeking investments This competition
can prevail within different statesregionsprovinces of a single country or
among different countries in the same region Likewise this can be a
competition between continents in the world ie Asia Europe Africa etc in
addition to the individual country competition The destination attractiveness is
a means that host government can influence FD investorsrsquo decision making
(Young 2005)
Destination attractiveness is a relative rather than an absolute concept (Cesario
1973)It is defined in the literature of tourism as the state of touristsrsquo agreement
that a destination is a recommendable place to visit (Chen amp Hsu 2000) The
same definition would easily be applicable to the investment context by
substituting ldquotouristsrsquo to investorsrsquordquo and ldquovisit to investrdquo It would be possible
to point and list many reasons or factors to argue why particular destination is
more attractive than others either to tourists or to investors Such reasons or
factors can be considered as the motives for locational decisions and are listed in
Table 1 and 2 The attractiveness of a destination can adversely be affected by
violence political instability natural catastrophe adverse environmental factors
and overcrowding (Kotler et al 2006)
Segmentation
The concept of market segmentation has further been discussed in the literature
after the publication of pioneering article by Wendell Smith in1956 (Wind
1978 Peter amp Ginter 1987 Yankelovich amp Meer 2006) The current marketing
practice of customer segmentation is perhaps the cornerstone that facilitates for
128
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
profitable exchanges As to the economic language Smith (1956) ldquosegmentation
is disaggregative in its effects and tends to bring about recognition of several
demand schedules where only one was recognized beforehellip on the other hand
consists of viewing a heterogeneous market as a number of smaller
homogeneous markets in response to differing product preferences among
important market segmentsrdquo Continuing along with the same language as Smith
(1956) Peter and Ginter (1987) views market segmentations as heterogeneity
exists in demand functions that enable to disaggregate market demand into
segments in accordance with distinct demand functions Peter and Ginter
maintain a strong proposition that emphasises demand functions should be the
basis for a segmentation definition
As discussed by Peter and Ginter (1987) under the auspices of ideal conditions
the aggregate market may consist of subsets or segments and relatively small
differences tend to appear within-group in individual demand functions in
comparison with the between-group differences However various firms
conclusions about the number and properties of market segments can vary in
accordance with conceptual and analytic approaches used for this purpose As a
result competing firms are likely to have different perceptions associated with
the market segment structure that exhibits demand heterogeneity in a market
And perceptions of segments seem to provide a basis for marketing strategy
Accordingly such perceptions may be a determinant of competitive
performance As such the accuracy of the firms perception of market
segmentation is often seen as a critical determinant of competitive advantage
The underpinning rationale for segmentation is that customers who are grouped
on the basis of similar needs and buying behaviour are likely to demonstrate a
nearly similar response to marketing efforts and strategies (Ahmad 2003) As
per the argument of Peter amp Ginter (1987) the market segmentation is a market
condition or perceptions about it
129
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Segmentation studies use a basis such as demographic socio economic
psychographic and behavioural or a combination of these bases to segment
markets Once the alternative variables for segmentation have been identified
the main question would then seem to be the selection of the best basis for
segmentation (Haley 1984) The segmentation based only on demographic
variables lost its ability to guide companiesrsquo decisions by the early 1960s
(Yankelovich and Meer 2006) However in international segmentation studies
information at the country level such as geographic political economic and
cultural data has often been used as a prime basis for grouping countries
(Hofstede et al 1999) Highlighting the behavioral and psychological variables
importance in international context Hofstede et al use in their study the
consumer means-end chains (MECs) where the perceived means-end
relationships between attributes benefits and values are measured at the
individual level to recognize the market segments
The idea that all markets can be profitably segmented has received almost as
wide- spread acceptance as the marketing concept itself gained as early as the
1960s (Haley 1968) Just as some customers are different from each other so do
the investors irrespective to the investment timeframe (short-term or long-term)
investment objectives (more in tune with future direction than past portfolio) or
interdependence (insiders employees and alliance partners) Different classes
of investors have different appetites for growth profitability cash-flow
generation and risk (The Boston Consulting Group 2002)
There are many ways to segment investors Table 1 envisages some details
about past endeavours to segment investors Surprisingly many of these
segmentation researches on investors are concerned with the traditional
variables such as the types of ownership (Grinblatt and Keloharju 2000 Liu et
al 2008) investment period (Ngowi 2002) the types of industry (Ngowi
130
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
2002) and source country (Wei 1995 Ngowi 2002) Within the literature of
consumer market segmentations it is basically limited to demographic and
geographic segmentations As in the consumer market these demographic
variables may have less predictive ability than psychographic variables A group
of investors may share similar geographic and demographic characteristics
whilst their investment behaviour and the selection of investment location tend
to be very different from each other In this respect the use of psychographic
data in terms of their interests and opinions will enable destination marketers to
segregate investors more effectively Nevertheless several authors (see Sullivan
amp Miller 1996 Murphy and Soutar 2005 Lu et al 2007 Kasilingam and
Jayabal 2009 Lozada 2006) have tried to use psychological variables such as
motives and preferences for segmenting the investor market
Benefit Segmentation
The benefit segmentation is amongst many other ways of segmenting markets
The principal approaches as presented above includes geographic
demographic behavioural and psychological The benefits segmentation falls
under one of the methods of psychological segmentation and it is of particular
interest of marketers because it never fails to provide fresh insight into markets
(Haley 1995) The belief underlying this segmentation strategy is that the
benefits which people are seeking in consuming a given product are the basic
reasons for the existence of true market segments (Haley 1968 1983 Sullivan
amp Miller 1996) This approach is based on the assumption that consumer value
systems are able to measure in detail together with the product and its attributes
of interest While this concept seems simple enough it is very complex in
practice (Haley 1995) Although it is considered as a complex approach to
segmentation experience with this approach has shown that benefits sought by
consumers determine their behaviour much more accurately than do
131
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
demographic characteristics or volume of consumption (Haley 1968 1983
Sullivan and Miller 1996) In essence people differ not simply because they
live in an urban versus a rural setting but because their underlying needs and
wants are different (Sullivan and Miller 1996) Benefit segmentation is a
technique that segments customers on the basis of desired or sought benefit
(Ahmad 2003)
A market segment can be defined as a group of existing or potential customers
with some common characteristic which is relevant in explaining and
forecasting their response to a supplierrsquos marketing stimuli (Wind and Cardozo
1974) In benefit segmentation each segment is identified by the benefits that it
is seeking It is however the total configuration of benefits sought which
distinguishes one segment from another rather than the fact that one segment is
seeking one particular benefit and another a quite different benefit (Haley
1968)
132
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 1 Investor Market Segmentation
Author Year Basis
for segmentation
Context Segments
Grinblatt
amp
Keloharju
1998 Ownership Finland Stock Market Households
Nonprofit institutions
General Government
Finance amp Insurance
Institutes
Non Financial
Corporations
Foreign Investors
Sullivan amp
Miller
1996 MotivesBenefits
Informal Venture Capital
Market
Economic Investors
Hedonistic Investors
Altruistic Investors
Wei 1995 Source Country FDI Market Overseas Chineese
Domestic
Investors
Institutional
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
128
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
profitable exchanges As to the economic language Smith (1956) ldquosegmentation
is disaggregative in its effects and tends to bring about recognition of several
demand schedules where only one was recognized beforehellip on the other hand
consists of viewing a heterogeneous market as a number of smaller
homogeneous markets in response to differing product preferences among
important market segmentsrdquo Continuing along with the same language as Smith
(1956) Peter and Ginter (1987) views market segmentations as heterogeneity
exists in demand functions that enable to disaggregate market demand into
segments in accordance with distinct demand functions Peter and Ginter
maintain a strong proposition that emphasises demand functions should be the
basis for a segmentation definition
As discussed by Peter and Ginter (1987) under the auspices of ideal conditions
the aggregate market may consist of subsets or segments and relatively small
differences tend to appear within-group in individual demand functions in
comparison with the between-group differences However various firms
conclusions about the number and properties of market segments can vary in
accordance with conceptual and analytic approaches used for this purpose As a
result competing firms are likely to have different perceptions associated with
the market segment structure that exhibits demand heterogeneity in a market
And perceptions of segments seem to provide a basis for marketing strategy
Accordingly such perceptions may be a determinant of competitive
performance As such the accuracy of the firms perception of market
segmentation is often seen as a critical determinant of competitive advantage
The underpinning rationale for segmentation is that customers who are grouped
on the basis of similar needs and buying behaviour are likely to demonstrate a
nearly similar response to marketing efforts and strategies (Ahmad 2003) As
per the argument of Peter amp Ginter (1987) the market segmentation is a market
condition or perceptions about it
129
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Segmentation studies use a basis such as demographic socio economic
psychographic and behavioural or a combination of these bases to segment
markets Once the alternative variables for segmentation have been identified
the main question would then seem to be the selection of the best basis for
segmentation (Haley 1984) The segmentation based only on demographic
variables lost its ability to guide companiesrsquo decisions by the early 1960s
(Yankelovich and Meer 2006) However in international segmentation studies
information at the country level such as geographic political economic and
cultural data has often been used as a prime basis for grouping countries
(Hofstede et al 1999) Highlighting the behavioral and psychological variables
importance in international context Hofstede et al use in their study the
consumer means-end chains (MECs) where the perceived means-end
relationships between attributes benefits and values are measured at the
individual level to recognize the market segments
The idea that all markets can be profitably segmented has received almost as
wide- spread acceptance as the marketing concept itself gained as early as the
1960s (Haley 1968) Just as some customers are different from each other so do
the investors irrespective to the investment timeframe (short-term or long-term)
investment objectives (more in tune with future direction than past portfolio) or
interdependence (insiders employees and alliance partners) Different classes
of investors have different appetites for growth profitability cash-flow
generation and risk (The Boston Consulting Group 2002)
There are many ways to segment investors Table 1 envisages some details
about past endeavours to segment investors Surprisingly many of these
segmentation researches on investors are concerned with the traditional
variables such as the types of ownership (Grinblatt and Keloharju 2000 Liu et
al 2008) investment period (Ngowi 2002) the types of industry (Ngowi
130
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
2002) and source country (Wei 1995 Ngowi 2002) Within the literature of
consumer market segmentations it is basically limited to demographic and
geographic segmentations As in the consumer market these demographic
variables may have less predictive ability than psychographic variables A group
of investors may share similar geographic and demographic characteristics
whilst their investment behaviour and the selection of investment location tend
to be very different from each other In this respect the use of psychographic
data in terms of their interests and opinions will enable destination marketers to
segregate investors more effectively Nevertheless several authors (see Sullivan
amp Miller 1996 Murphy and Soutar 2005 Lu et al 2007 Kasilingam and
Jayabal 2009 Lozada 2006) have tried to use psychological variables such as
motives and preferences for segmenting the investor market
Benefit Segmentation
The benefit segmentation is amongst many other ways of segmenting markets
The principal approaches as presented above includes geographic
demographic behavioural and psychological The benefits segmentation falls
under one of the methods of psychological segmentation and it is of particular
interest of marketers because it never fails to provide fresh insight into markets
(Haley 1995) The belief underlying this segmentation strategy is that the
benefits which people are seeking in consuming a given product are the basic
reasons for the existence of true market segments (Haley 1968 1983 Sullivan
amp Miller 1996) This approach is based on the assumption that consumer value
systems are able to measure in detail together with the product and its attributes
of interest While this concept seems simple enough it is very complex in
practice (Haley 1995) Although it is considered as a complex approach to
segmentation experience with this approach has shown that benefits sought by
consumers determine their behaviour much more accurately than do
131
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
demographic characteristics or volume of consumption (Haley 1968 1983
Sullivan and Miller 1996) In essence people differ not simply because they
live in an urban versus a rural setting but because their underlying needs and
wants are different (Sullivan and Miller 1996) Benefit segmentation is a
technique that segments customers on the basis of desired or sought benefit
(Ahmad 2003)
A market segment can be defined as a group of existing or potential customers
with some common characteristic which is relevant in explaining and
forecasting their response to a supplierrsquos marketing stimuli (Wind and Cardozo
1974) In benefit segmentation each segment is identified by the benefits that it
is seeking It is however the total configuration of benefits sought which
distinguishes one segment from another rather than the fact that one segment is
seeking one particular benefit and another a quite different benefit (Haley
1968)
132
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 1 Investor Market Segmentation
Author Year Basis
for segmentation
Context Segments
Grinblatt
amp
Keloharju
1998 Ownership Finland Stock Market Households
Nonprofit institutions
General Government
Finance amp Insurance
Institutes
Non Financial
Corporations
Foreign Investors
Sullivan amp
Miller
1996 MotivesBenefits
Informal Venture Capital
Market
Economic Investors
Hedonistic Investors
Altruistic Investors
Wei 1995 Source Country FDI Market Overseas Chineese
Domestic
Investors
Institutional
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
129
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Segmentation studies use a basis such as demographic socio economic
psychographic and behavioural or a combination of these bases to segment
markets Once the alternative variables for segmentation have been identified
the main question would then seem to be the selection of the best basis for
segmentation (Haley 1984) The segmentation based only on demographic
variables lost its ability to guide companiesrsquo decisions by the early 1960s
(Yankelovich and Meer 2006) However in international segmentation studies
information at the country level such as geographic political economic and
cultural data has often been used as a prime basis for grouping countries
(Hofstede et al 1999) Highlighting the behavioral and psychological variables
importance in international context Hofstede et al use in their study the
consumer means-end chains (MECs) where the perceived means-end
relationships between attributes benefits and values are measured at the
individual level to recognize the market segments
The idea that all markets can be profitably segmented has received almost as
wide- spread acceptance as the marketing concept itself gained as early as the
1960s (Haley 1968) Just as some customers are different from each other so do
the investors irrespective to the investment timeframe (short-term or long-term)
investment objectives (more in tune with future direction than past portfolio) or
interdependence (insiders employees and alliance partners) Different classes
of investors have different appetites for growth profitability cash-flow
generation and risk (The Boston Consulting Group 2002)
There are many ways to segment investors Table 1 envisages some details
about past endeavours to segment investors Surprisingly many of these
segmentation researches on investors are concerned with the traditional
variables such as the types of ownership (Grinblatt and Keloharju 2000 Liu et
al 2008) investment period (Ngowi 2002) the types of industry (Ngowi
130
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
2002) and source country (Wei 1995 Ngowi 2002) Within the literature of
consumer market segmentations it is basically limited to demographic and
geographic segmentations As in the consumer market these demographic
variables may have less predictive ability than psychographic variables A group
of investors may share similar geographic and demographic characteristics
whilst their investment behaviour and the selection of investment location tend
to be very different from each other In this respect the use of psychographic
data in terms of their interests and opinions will enable destination marketers to
segregate investors more effectively Nevertheless several authors (see Sullivan
amp Miller 1996 Murphy and Soutar 2005 Lu et al 2007 Kasilingam and
Jayabal 2009 Lozada 2006) have tried to use psychological variables such as
motives and preferences for segmenting the investor market
Benefit Segmentation
The benefit segmentation is amongst many other ways of segmenting markets
The principal approaches as presented above includes geographic
demographic behavioural and psychological The benefits segmentation falls
under one of the methods of psychological segmentation and it is of particular
interest of marketers because it never fails to provide fresh insight into markets
(Haley 1995) The belief underlying this segmentation strategy is that the
benefits which people are seeking in consuming a given product are the basic
reasons for the existence of true market segments (Haley 1968 1983 Sullivan
amp Miller 1996) This approach is based on the assumption that consumer value
systems are able to measure in detail together with the product and its attributes
of interest While this concept seems simple enough it is very complex in
practice (Haley 1995) Although it is considered as a complex approach to
segmentation experience with this approach has shown that benefits sought by
consumers determine their behaviour much more accurately than do
131
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
demographic characteristics or volume of consumption (Haley 1968 1983
Sullivan and Miller 1996) In essence people differ not simply because they
live in an urban versus a rural setting but because their underlying needs and
wants are different (Sullivan and Miller 1996) Benefit segmentation is a
technique that segments customers on the basis of desired or sought benefit
(Ahmad 2003)
A market segment can be defined as a group of existing or potential customers
with some common characteristic which is relevant in explaining and
forecasting their response to a supplierrsquos marketing stimuli (Wind and Cardozo
1974) In benefit segmentation each segment is identified by the benefits that it
is seeking It is however the total configuration of benefits sought which
distinguishes one segment from another rather than the fact that one segment is
seeking one particular benefit and another a quite different benefit (Haley
1968)
132
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 1 Investor Market Segmentation
Author Year Basis
for segmentation
Context Segments
Grinblatt
amp
Keloharju
1998 Ownership Finland Stock Market Households
Nonprofit institutions
General Government
Finance amp Insurance
Institutes
Non Financial
Corporations
Foreign Investors
Sullivan amp
Miller
1996 MotivesBenefits
Informal Venture Capital
Market
Economic Investors
Hedonistic Investors
Altruistic Investors
Wei 1995 Source Country FDI Market Overseas Chineese
Domestic
Investors
Institutional
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
130
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
2002) and source country (Wei 1995 Ngowi 2002) Within the literature of
consumer market segmentations it is basically limited to demographic and
geographic segmentations As in the consumer market these demographic
variables may have less predictive ability than psychographic variables A group
of investors may share similar geographic and demographic characteristics
whilst their investment behaviour and the selection of investment location tend
to be very different from each other In this respect the use of psychographic
data in terms of their interests and opinions will enable destination marketers to
segregate investors more effectively Nevertheless several authors (see Sullivan
amp Miller 1996 Murphy and Soutar 2005 Lu et al 2007 Kasilingam and
Jayabal 2009 Lozada 2006) have tried to use psychological variables such as
motives and preferences for segmenting the investor market
Benefit Segmentation
The benefit segmentation is amongst many other ways of segmenting markets
The principal approaches as presented above includes geographic
demographic behavioural and psychological The benefits segmentation falls
under one of the methods of psychological segmentation and it is of particular
interest of marketers because it never fails to provide fresh insight into markets
(Haley 1995) The belief underlying this segmentation strategy is that the
benefits which people are seeking in consuming a given product are the basic
reasons for the existence of true market segments (Haley 1968 1983 Sullivan
amp Miller 1996) This approach is based on the assumption that consumer value
systems are able to measure in detail together with the product and its attributes
of interest While this concept seems simple enough it is very complex in
practice (Haley 1995) Although it is considered as a complex approach to
segmentation experience with this approach has shown that benefits sought by
consumers determine their behaviour much more accurately than do
131
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
demographic characteristics or volume of consumption (Haley 1968 1983
Sullivan and Miller 1996) In essence people differ not simply because they
live in an urban versus a rural setting but because their underlying needs and
wants are different (Sullivan and Miller 1996) Benefit segmentation is a
technique that segments customers on the basis of desired or sought benefit
(Ahmad 2003)
A market segment can be defined as a group of existing or potential customers
with some common characteristic which is relevant in explaining and
forecasting their response to a supplierrsquos marketing stimuli (Wind and Cardozo
1974) In benefit segmentation each segment is identified by the benefits that it
is seeking It is however the total configuration of benefits sought which
distinguishes one segment from another rather than the fact that one segment is
seeking one particular benefit and another a quite different benefit (Haley
1968)
132
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 1 Investor Market Segmentation
Author Year Basis
for segmentation
Context Segments
Grinblatt
amp
Keloharju
1998 Ownership Finland Stock Market Households
Nonprofit institutions
General Government
Finance amp Insurance
Institutes
Non Financial
Corporations
Foreign Investors
Sullivan amp
Miller
1996 MotivesBenefits
Informal Venture Capital
Market
Economic Investors
Hedonistic Investors
Altruistic Investors
Wei 1995 Source Country FDI Market Overseas Chineese
Domestic
Investors
Institutional
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
131
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
demographic characteristics or volume of consumption (Haley 1968 1983
Sullivan and Miller 1996) In essence people differ not simply because they
live in an urban versus a rural setting but because their underlying needs and
wants are different (Sullivan and Miller 1996) Benefit segmentation is a
technique that segments customers on the basis of desired or sought benefit
(Ahmad 2003)
A market segment can be defined as a group of existing or potential customers
with some common characteristic which is relevant in explaining and
forecasting their response to a supplierrsquos marketing stimuli (Wind and Cardozo
1974) In benefit segmentation each segment is identified by the benefits that it
is seeking It is however the total configuration of benefits sought which
distinguishes one segment from another rather than the fact that one segment is
seeking one particular benefit and another a quite different benefit (Haley
1968)
132
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 1 Investor Market Segmentation
Author Year Basis
for segmentation
Context Segments
Grinblatt
amp
Keloharju
1998 Ownership Finland Stock Market Households
Nonprofit institutions
General Government
Finance amp Insurance
Institutes
Non Financial
Corporations
Foreign Investors
Sullivan amp
Miller
1996 MotivesBenefits
Informal Venture Capital
Market
Economic Investors
Hedonistic Investors
Altruistic Investors
Wei 1995 Source Country FDI Market Overseas Chineese
Domestic
Investors
Institutional
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
132
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 1 Investor Market Segmentation
Author Year Basis
for segmentation
Context Segments
Grinblatt
amp
Keloharju
1998 Ownership Finland Stock Market Households
Nonprofit institutions
General Government
Finance amp Insurance
Institutes
Non Financial
Corporations
Foreign Investors
Sullivan amp
Miller
1996 MotivesBenefits
Informal Venture Capital
Market
Economic Investors
Hedonistic Investors
Altruistic Investors
Wei 1995 Source Country FDI Market Overseas Chineese
Domestic
Investors
Institutional
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
133
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Foriegn Countries
Ngowi 2002 Source Country Period of
Investment Type of the
industry Mode of Entry
FDI Market
Murphy amp
Soutar
2005 Preferences Australian Stock Exchange The Explorers
The Risk-Averse Investors
The Traders and
The Contrarian Investors
Liu et al 2007 Demographic
characteristics of
the individual
investor
Knowledge of
investment
Financial maturity
Psychological amp
Behavioural
variables
Individual Investor Market
Conceptual Study
Not clear
Kasilingam 2009 Motives Individual Investors in Tamil Family Oriented
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
134
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
amp Jayabal Nadu Self Support
Least Motivated
Lozada 2006 Motives FDI Firms which must invest and
whose only question is where
to go
Firms which may invest and
whose question is twofold
ldquohow and where to gordquo
Lu Liao amp
Yang
2008 Incentives International Logistic Zones Firms that preferred political
stability and location factors
Those which preferred low-
cost and port-related factors
and
Those which preferred
agglomeration effect and
resource factors
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
135
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Incentives for FD investors
The year 2008 marked the end of growth cycle in FDI that was started 2003
after a decline in the early 2000s as depicted in Figure 1 Despite radical
changes occurred during the last decade FDI played dominant role in both
developed and developing world in achieving their macro economic objectives
For the Governments of both developed and developing countries it is important
to promote destinations for attracting FD investors and to maintain an overall
favourable business and investment climate (Young 2005) In this regard
investment promotion incentives can play a proactive role in both retaining
existing foreign direct investors and attracting new investors The key is to
identify MNE requirements change the incentives to fill them
The major motives behind the growth of FDI remain on several factors
UNCTAD (2008) classifies them into three broad categories respectively in their
importance market-seeking and resource-seeking and efficiency-seeking
Existing literature on locational determinants has no general agreement Table 2
summarizes the locational determinants explained by previous researchers
Figure 1 Global FDI Inflows 1990-2008
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
136
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Source UNCTAD 2009
Table 2 Locational Determinants
Author Year Locational Determinants
Dunning JH 2004 The motivation for the FDI
The economic and the business
environment
The mode of entry or expansion of the
FDI
UNCTAD 1998 Policy framework for FDI
Economic Determinants
Business Facilitation Services
UNCTAD 2008 Market-seeking
Efficiency-seeking
Resource-seeking
Martin and Salomon
(in Henisz and
Macher 2004)
2003 Firmrsquos own past experience in the host
country
The tacitness of the technology
involved
The predictability of the policy
environment
Previous investment decisions of peer
firms
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
137
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Mopp
1998 Internal market size
Access to external markets
Skillstechnology
Infrastructure
Access to inputs
Quality of life
Political stability
Henisz and Macher 2004 Firm level factors
Experience
Technological Capabilities
Country level factors
Institutional environment
Technological environment
Kinoshita amp Campos 2004 Agglomeration
The degree of external liberalization
The quality of the bureaucracy
Delios amp Yang 2002 The Special Economic Zones (SEZs)
Opening Coastal Cities (OCCs)
Erdal amp Tatoglu 2002 The size of domestic market
Openness of the economy to foreign
trade
Infrastructure of the host country
Attractiveness of the domestic market
External and internal economic stability
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
138
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Blomstroumlm 2002 Market size
Real income levels
Skill levels
The availability of infrastructure and
other resource
Fitzgerald 2001 Regulatory incentives
Property rights and market access rules
Environmental protection
Labour standards
Lu Liao amp Yang 2008 Cost
Agglomeration
Resource
Port
Policy
Political stability
Location and transport
Economic
Holland amp Pain 1998 Past trade linkages
Indicators of privatisation and
Relative labour costs
Most of the Locational decisions presented in Table 2 are based on both
empirical and theoretical grounds concerned with two directions short run
controllable and short run uncontrollable to the host government or investment
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
139
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
promotion organizations Most controllable determinants to the host government
and investment promotion organisations tend to focus on offering tax incentives
to attract foreign direct investment This has become a global phenomenon and a
part of economic globalization as from the 1990s (Li 2006) Many countries
engage in either proactive or defensive incentive strategies aiming at attracting
foreign direct investments in the competition with other destinations
(Christiansen 2003) The types of incentives used by the countries may vary
along with several dimensions
Literature on incentives for attracting FDI is mainly confined with the taxfiscal
incentives (Morisset et al 1995) For countries wanting to attract foreign direct
investment (FDI) tax incentives may not be enough it may be necessary to
ensure that it has adequate fiscal as well as financial and other incentives to
attract the investors Table 3 shows the types of incentives offered to the foreign
direct investors as pinpointed in previous studies These incentives are further
classified (in table 4) into three main branches economic Incentives other
policy based incentives and entry- exit procedures ldquoEntitlement to incentives
can be based on criteria such as scale of investment numbers employed export
orientation or sectorindustryrdquo (Fergus 2006) At the same time there is a
disagreement wether the incentives should be provided or not so as to attract
FDI Morisset et al (1995) draw a conclusion ldquoincentives will generally neither
make up for serious deficiencies in the investment environment nor generate the
desired externalitiesrdquo This view is further supported by Blomstroumlm et al (2000)
concluding that incentives might have only a marginal role in the attraction of
FDI
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
140
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 3 Types of Incentives for FD Investors
Author Year Incentives
UNCTAD 1996 Tax Holidays
Accelerated depreciation
Investment Allowance
Import Duty exemption
Duty drawback
Oman 1999 Financial and fiscal incentives
Environmental and labour standards
Export processing zones
International regional-integration agreements
Privatisation of state-owned enterprises
Strengthened judicial systems
Blomstroumlm 2002 Fiscal lower taxes
Financial incentives such as grants and preferential
loans
Other incentives like market preferences and monopoly
rights
Rajan 2005 Tax Incentives
reduced corporate income taxes
tax holidays
investment allowances and tax credits
accelerated depreciation
exemptions from selected indirect taxes
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
141
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
export processing zones
Das amp Pant 2006 Fiscal incentives
Financial incentives
UNCTAD
2000
In
Cass
2007 Fiscal incentives
Full or partial holidays from tax
Reductions in the standard rate of tax
Tax reductions conditional on reinvestment of profits
Investment allowances and investment tax credits
Accelerated depreciation of assets
Preferential treatment of profit on exports
Tax deductions based on specific types of expenditure
(eg RampD)
Exemptions from import duties on capital goods or
other inputs
Financial incentives include
Cash grants
Provision of subsidized facilities such as factories or
sites
Provision of infrastructure related to new facilities
such as roads and links to utilities and direct subsidies
Export Processing Zones (EPZs)
Special Economic Zones (SEZs)
Free Trade Zones (FTZs)
Cass 2007 Company taxation rate
Tax holidays
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
142
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Tax credits
Grants
Subsidized locations
Free trade zones
Goumlrg 2004 Low exit costs
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
143
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Table 4 Incentives for FD Investors
Economic Incentives Other Policy Based Incentives Entry- Exit
Procedures Fiscal Financial Market Locations Regulations
Tax Holidays
full
partial
Tax reductions
Reductions in the
standard rate of tax
Tax reductions
conditional on
reinvestment of
profits
Investment allowances
and investment tax credits
Accelerated depreciation
of assets
Cash grants related
to
the value of
assets
invested
numbers
employed or
training costs
Provision of
subsidized facilities
Provision of
infrastructure
Market
preferences
Monopoly
rights
International
Market
Access
Subsidized
locations
Free trade
zones
Export
Processing
Zones
Special
Economic
Zones
Free Trade
Zones
Privatization
Environment standards
Labour standards and
laws
Property Right
Easy and
fast Entry
Low exit
cost
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
144
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Preferential treatment of
profit on exports
Tax deductions based on
specific types of
expenditure
Exemption from import
duties on capital goods or
other inputs
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
145
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Discussion
Being a theoretical paper on segmentation providing implementation guidance
is important As Dibb (1999) suggests the implementation guidance can be
given at three different stages of segmentation process These are before the
segmentation of FD investor market during the segmentation process and after
the segmentation process Our discussion is based on Figure 2 During the first
stage investorsrsquo expectations on benefits were identified
Step1 Understanding Expectations
Understanding of investor expectations can be done through a survey of
investors or interviews In this respect it is advisable to look at three basic
segments of investors past current and future potential (including past) This
will enable the destination marketers to understand why they loosed the past
investors how to keep andor stimulate the reinvestment of the current investors
and how to attract the potential investors Each destination should develop a
questionnaire or interview checklist based on the possible benefits that can be
offered to the investors The questionnaire should carefully be designed in order
to measure the investor values system to recognize the benefits sought Table 4
is expected to provide clear classification on type of potential benefits FD
investors may seek That can also be used to develop the questionnaire on
benefits sought These data may be obtained by asking the investors to rate their
level of agreement with specific statement that captures benefits intended
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
146
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Figure 2
Step 2 Segmenting Investor Market
Several alternative statistical approaches can be employed among them the so-
called Q technique of factor analysis multidimensional scaling and other
distance measures (Haley 1995) Applying the Haleyrsquos (1968 1995) idea to
investment context all of these methods relate to the ratings of each potential or
actual respondent to those of every other respondent and then seek clusters of
investors with similar rating patterns Factor analysis is important to summarize
a large number of investment incentives into a small number of underlying
dimensions called critical factors whilst cluster analysis is useful to distinguish
investorsrsquo critical incentive preferences and an analysis of variance (ANOVA)
is to segment investorsrsquo investment incentive preferences grouped according to
their preferences (Lu et al 2008) In view of the fact that the items rated are
potential investment benefits the clusters that emerge will be groups of
investors who attribute similar degrees of importance to the various benefits
The ultimate objective of statistical analysis is to generate investor segments
each representing a potentially productive focal point for determining the
destination incentive package Each FD investor segment should be identified
based on the benefits they seek
2 Segmenting investor Market
(analysing research data)
1 Understanding FD investorsrsquo
expectations on benefits
(Research)
4 Developing the Incentive
Package for the FD Investors
3 Selecting the most profitable
segments (Market Targeting)
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
147
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Step 3 Evaluating
The selection of best segments (target markets) receives widespread coverage in
marketing literature The underlining question in this stage is recognising
ldquowhich are the best market segments for the destinationrdquo Based on the
recognised FD investor segments destination marketers need to evaluate them
along with the volume of investment (substantiality) segment growth degree of
influence on achieving macro economic goals of the destination (eg
employment balance of payment and so on) Destination marketers at this step
end up with determining the most profitable segment of the FD investors for the
respective destination
Step 4 Developing Incentives Package
Any investment promotion strategy must be geared towards the following (a)
recognising the potential investor segments who perceive the host destination as
potential location for investment (b) recognising the set of benefits required to
attract prospective investor segments and (c) establishing the tailored incentives
to prospective and current investorsrsquo needs There is no ideal universal incentive
strategy on FDI Strategy has to suit the particular conditions of the country at
the particular times and the benefits seek by the investors Moreover it should
evolve as its needs change In other word destination marketers need to modify
their demand function through the modification of incentive packages
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
148
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Conclusion
This paper is used to put forward proposals with the intention of helping
destination marketers at a time Sri Lankan government endeavours to boost the
image of the island as an attractive destination for foreign investors having
completely defeated the Tamil tigers We present a conceptual framework casts
light on the critical issue that should be taken into account whilst developing
incentive package for FD investors with the aim of attracting potential and
keeping existing investors This conceptual framework can be modified through
the modification of demand function This study assumed that the each benefit
segment has different demand function and demand for FDI is a function of the
total benefit package offered From a theoretical point of view this paper
provides systematic guidance for benefit segmentation for FD Investors We
expect that this conceptual foundation will provide impetus to scholars to
conduct empirical studies using this framework and make proposals to improve
it
References
Ahmad R (2003) Benefit segmentation a potentially useful technique of
segmenting and targeting older consumers International Journal of Market
Research Vol 45 pp 373-388
Blomstroumlm M (2002) The Economics of International Investment Incentives
OECD
Buhalis D (2000) ldquoMarketing the competitive destination of the futurerdquo
Tourism Management Vol 21 pp 97-116
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
149
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Cass F ( 2006)Attracting FDI to transition countries the use of incentives and
promotion agencies UNCTAD Volume 16 ( 2) pp 77-122
Cesario (1973) Generalized Trip Distribution Model Journal of Regional
Science Vol 13 (2) pp 233-247
Changhui Z Delios A and Yang JY (2002) The location of Japanese foreign
direct investment in China Asia Pacific Journal of Management Vol 19(1)
pp63-86
Chen amp Hsu (2000) Measurement of Korean Touristsrsquo Perceived Images of
Overseas Destinations Journal of Travel Research 2000 38 411
Christiansen H (2003) Incentive Based Competition for FDI in Developing
Countries OECD httpwwwoecdorgdataoecd32192510409pdf (accessed
on 10th
March 2009)
Crittenden et al (2002) Segmenting the business to business marketplace by
product attributes and the decision process Journal of Strategic Marketing Vol
10 pp3-20
Das SK and Pant M (2006) Incentives for Attracting FDI in South Asia A
Survey International Studies 43 1 pp 1-27
Dibb (1999) Criteria guiding segmentation implementation reviewing the
evidence Journal of Strategic Marketing Vol 7 pp 107ndash129
Doyle amp Saunders (1985) Market Segmentation and Positioning in Specialized
Industrial Markets The Journal of Marketing Vol 49 (2) pp 24-32
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
150
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Dunning J (2004) Determinants of Foreign Direct Investments globalization
induced changes and the role of policies Annual World Bank Conference on
Development Economics-2003 The world Bank
Erdal F and Tatoglu E (2002) Locational determinants of foreign direct
investment in an emerging market economy evidence from Turkey
Multinational Business Review Vol 10 (1) pp21-8
Fish Barnes amp Aiken (1995) Artificial neural networks A new methodology
for industrial market segmentation Industrial Marketing Management Vol 24
(5) pp 431-438
Fitzgerald V (2001) Regulatory Investment Incentives
httpwwwoecdorgdataoecd32172510459pdf (accessed on 10th March
2009)
Goumlrg H (2004) Attracting foreign direct investment low exit cost may be as
important as tax incentives the Royal Economic Societyrsquos Annual Conference
Grinblatt M and Keloharju M (2000) The Investment Behaviour and
Performance of Various Investor Types a study of Finlandrsquos unique data set
Journal of Financial Economics Vol55 pp 43-67
Haley R I (1968) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 32 (3) pp 30-35
Haley R I (1968) Benefit Segmentation-20 Years Later Journal of Consumer
Marketing Vol 1(2) pp 5-13
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
151
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Haley R I (1995) Benefit Segmentation A Decision-Oriented Research Tool
Marketing Management Vol 4 (59) pp 59-62
Henisz W J and Macher JT (2004) Firm- and country-level tradeoffs and
contingencies in the evaluation of foreign investment the semiconductor
industry 1994ndash2002 Organization Science Vol15(5) pp 537ndash554
Hofstede et al (1999) International Market Segmentation Based on Consumer-
Product Relations Journal of Marketing Research Vol 36 (1) pp 1-17
Holland D and Pain N (1998) The Diffusion Of Innovations In Central And
Eastern Europe A Study Of The Determinants And Impact Of Foreign Direct
Investment httpwwwniesracukpubsdpsdp137pdf (accessed on 30th
March 2009)
Kasilingam R and Jayabal G (2009) A Study on the Characteristics of
Investors Using Motive-Based Segmentation Icfai University Journal of
Financial Economics Icfai Press vol 0 (1) pp 66-83
Kinoshita Yuko and Campos NF 2004 Estimating the Determinants of
Foreign Direct Investment Inflows How Important are Sampling and Omitted
Variable Biases BOFIT Discussion Papers
Kotler P Bowen JT and Makens JC (2006) Marketing for Hospitality and
Tourism 4th
Edition Prentice Hall
Li Q 2006 ldquoDemocracy Autocracy and Tax Incentives to Foreign Direct
Investors A Cross-National Analysisrdquo Journal of Politics Vol 68(1) pp 62-74
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
152
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Lozada H R (2006) To Brand or Not to Brand The Relevance of Branding in
Marketing a Country for FDI
httpwww2unitarorghiroshimaprogrammesief06materialsIEF06_Lozadap
df (accessed on 10th March 2009)
Lu et al (2008) Segmenting Manufacturersrsquo Investment Incentive Preferences
for International Logistic Zones International Journal of Operations amp
Production Management Vol28 (2) pp 106-129
Mopp PM (1998) Thoughts on an international marketing strategy for South
Africa httpwwwgcisgovzadocsgovcommconferencemarkethtm (accessed
on 10th
March 2009)
Morisset Jacques P and Nede P How Tax Policy and Incentives Affect
Foreign Direct Investment A Review(November 30 1999) World Bank Policy
Research Working Paper No 2509 Available at SSRN
httpssrncomabstract=632579
Murphy C M and Soutar G (2005) Individual investor preferences a
segmentation analysis The Journal of Behavioral Finance Vol 6 (1) pp6-14
Ngowi Honesty (2002) ldquoForeign Direct Investment Entry Modes in Tanzania
Types Driving Forces and Implicationsrdquo Tanzanet Journal Vol 3 (1) pp 1-12
Oman C P (2000) Policy Competition for Foreign Direct Investment Paris
OECD Development Centre
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
153
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Peter D R and Ginter J L (1987) ldquoMarket Segmentation Product
Differentiation and Marketing Strategyrdquo Journal of Marketing Vol 51 pp 1-
10
Rajan RS (2004) Measures to Attract FDI Investment Promotion Incentives
and Policy Intervention Economic and Political Weekly
Rajan S R (2005) FDI Trade and the Internationalization of Production in the
Asia-Pacific Region issues and policy conundrums
http20985129132searchq=cachelgTJi3E9Ch0JwwwsppnusedusgHand
lerashx3Fpath3DDataSiteSiteDocumentswp2005wp0501bpdf+Rajan+f
di+tax+incentivesampcd=6amphl=noampct=clnk (accessed on 10th
March 2009)
Reich Gordon amp Edwards (1973) A Theory of Labor Market Segmentation
The American Economic Review Vol 63 (2) pp 359-365
Smith W (1956) Product Differentiation and Market Segmentation as
Alternative Marketing Strategiesrdquo Journal of Marketing pp 3-8
Sullivan MK amp Miller A (1996) Segmenting the Informal Venture Capital
Market Economic Hedonistic and Altruistic Investors Journal of Business
Research Vol 36 pp 25-35
The Boston Consulting Group (2002) Treating Investors Like Customers
httpwwwbcgcompublicationsfilesTreating_Investors_Like_Customers_Jun
2002pdf (accessed on 15th
March 2009)
UNCTAD (1996) Incentives and Foreign Direct Investment Current Studies
Series A No 30 New York and Geneva United Nations
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
154
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
UNCTAD (1998) World Investment Report-1998 Trends and Determinantsrdquo
United Nations Publication Switzerland
UNCTAD (2008) World Investment Report-2008 Transnational Corporations
and the Infrastructure Challenge United Nations
UNCTAD (2009) Global FDI in Decline due to the Financial Crises and a
Further Drop Expected UNCTAD Investment Brief Vol 1
httpwwwunctadorgendocswebdiaeia20095_enpdf (accessed on 10th March
2009)
Vietorisz and Harrison (1973) Labor Market Segmentation Positive Feedback
and Divergent Development The American Economic Review Vol 63 (2) pp
366-376
Wei S (1995) Attracting Foreign Direct Investment Has China Reached Its
Potential China Economic Review 6(2) pp 187-99
Wind J (1978) Issues and advances in segmentation research Journal of
Marketing Research pp 317ndash337
Wind Y and Cardozo R N 1974 Industrial Marketing Segmentation
Industrial Marketing Management Vol 3 pp 153-166
Yankelovich D and Meer D (2006) Rediscovering Market Segmentation
Harvard Business Review pp 122-131
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346
155
Social Sciences and Humanities Review Volume 01 No 01 June 2013 ISSN 2279-3933
Young C 2005 Place marketing for FDI in Central and Eastern Europe in
Foreign Direct Investment and Regional Development in East Central Europe
and the Former Soviet Union (Turnock D) Ashgate Publishing British Isles
Zhou Changhui Delios Andrew and Yu Yang Jing Locational Determinants
of Japanese Foreign Direct Investment in China Available at SSRN
httpssrncomabstract=305346